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1 What is marketing?
Michael J. Baker

The enigma of marketing is that it is one of mankind’s oldest practices, but the most recent of the business disciplines.
(Baker 1976)

Marketing is also an enigma in the sense that while some people see it as a force for good, others
see it as a force for evil. As with most things, the reality is that it may be either or both depending
upon the uses to which people put marketing ideas and practices.
There are many misconceptions about marketing so we will only deal with 4, which we have
encountered most frequently in more than 50 years’ experience as both practitioner and academic.
These misconceptions are:

1 marketing is a modern or ‘new’ approach to business;

2 that it is essentially a functional activity;
3 that it is concerned principally with advertising and high-pressure selling;
4 and that this is largely irrelevant.

The first misconception is that marketing first developed in the US in the early to mid-twentieth
century. A useful benchmark for judging whether a subject or practice is of sufficient substance
to justify formal study is to establish when it first began to be taught in leading universities. Using
this criterion, we know that the first chair of marketing was established at the Wharton Business
School in the 1880s and, by the turn of the century, the subject was being offered in most lead-
ing American universities. However, the subject taught then was very different from the modern
marketing concept, which began to emerge in the aftermath of the Second World War and is the
foundation of what is known today as the marketing management school of thought.
So marketing is a relatively new academic discipline with strong roots in America. The problem
is that, as a practice, marketing has existed since time immemorial and so is very old indeed. As
we shall see, it would not be extravagant to claim that modern civilisation owes its origins to the
discovery that task specialisation and exchange (marketing) increases productivity and enhances
both the standard of living and the quality of life. History also suggests that successful entrepreneurs
and businesses have always understood the principles of effective marketing even if they did not
describe their practices in quite the same language as we use today.
Prior to the industrial revolution, buyers and sellers enjoyed close contact with one another
with the result that sellers often knew precisely what their individual customers wanted and did
their best to satisfy them. Industrialisation and the development of the factory system were to
change all that as they created both a physical and psychological distance between the producer
4 Michael J. Baker

and the consumer. As a result, it became necessary to develop new techniques to track the precise
nature of consumer demand, to let consumers know about the availability of goods and services
and to ensure the widest possible distribution to reach as many potential customers as possible.
Early industrialists, like Josiah Wedgwood, were extremely successful at this and pioneered many
techniques in the eighteenth century, such as market segmentation, branding, celebrity advertising,
sales promotion, etc. long before any business schools came into existence. And so, the reality is
that marketing is the oldest of the business practices, but among the newest, if not the newest, of
the business disciplines.
The question as to whether marketing is a philosophy or function, frequently expressed in
terms of statements along the lines, ‘Marketing is a concept or way of thinking about the way
organisations should interact with their customers’, compared with the bald statement, ‘Marketing
is a practice’, has already been partially answered a moment ago when it was claimed that market-
ing is probably the oldest of business practices but among the newest, if not the newest, of the
business disciplines.
As taught in business schools, marketing is presented as a body of knowledge derived from
observation of experience and theorisation about cause and effect in commercial exchange
processes. Persons familiar with this body of knowledge should then be able to diagnose the inter-
action between sellers and buyers in the market place and propose future strategies for enhancing
and improving these interactions by means of strategic marketing planning. Clearly, the emphasis
is very much upon theory as a basis for successful practice.
However, many practitioners dismiss the relevance of theory and argue that marketing is a skill
acquired through practice. And, in support of this view, there is plenty of evidence that academic
research into marketing has very little direct impact upon successful practice.
But just as marketing is both old and new, so it is also about learning from experience, as well as
capturing the nature of that experience, and careful research and analysis in order to better inform
future decision-making. Where the mismatch occurs, if it does, is that theorising results in what
at the Harvard Business School we used to call currently useful generalisations. But these can rarely
provide precise answers to explicit questions of the kind that practising marketing managers are
grappling with. It is because marketing problems are usually highly specific in an often unique
context that useful generalisation cannot provide an exact answer. On the other hand, as we shall
see, theories very often provide an analytical framework with which we can diagnose our problem,
so that we can then draw on our practical knowledge and experience to solve it.
The third and fourth misconceptions are closely related. Many regard marketing as an unneces-
sary extra or ‘trapping’, which is really irrelevant as conveyed by the opinion that, ‘Organisations
got on fine before anyone mentioned marketing’.
Such misunderstanding about marketing is because, like an iceberg, the most visible part repre-
sents only a very small proportion of the total marketing effort. Information about products for sale
is everywhere – on display in retail outlets, through advertising on television and radio, in print and
in posters and, increasingly, in social media. But, as research shows, it is only when we experience
an unfilled need or want that we catch sight of the tip of the iceberg and become aware of sellers
who claim to have the answer to our need. To be in that happy position they will have to have
identified a marketing opportunity and designed a product or service to satisfy it. They will then
have to have acquired the plant, equipment, labour, supplies and all the other resources required
to create a product and, apart from things that are made to order, they will then have to make and
stock the product before letting it be known that it is available for sale – the tip of the iceberg! This
is illustrated in Figure 1.1.
 What is marketing? 5

Advertising
Promotion
Public Relations

Selling

Market
Testing

Innovation and
New Product Development

Identification of
Marketing Opportunities

Market Intelligence
Researching Customer Needs

Figure 1.1 The marketing iceberg

The reality is summarised in the quotation, ‘Marketing is essential to the long-term success of the
organisation’, which is from Peter Drucker (1954), probably the most influential of all the manage-
ment gurus, which is making the point that if you don’t get the product right, then all the costs
that you have incurred would have been wasted and no amount of advertising and promotion will
be able to put that right. Yes, advertising and promotion are important, but never as influential
as some people make them out to be. It is much easier and cheaper to change a product than to
change people’s minds about it.
It is beyond doubt that modern civilisation owes its existence to the practice of marketing.
Even in the subsistence economies of prehistory, when life was ‘nasty, brutish and short’, market-
ing offered a better standard of living than could be achieved through attempts at self-sufficiency.
Long before the discovery of agriculture, or the domestication of animals, gender encouraged role
specialisation with males responsible for hunting and security, and females for gathering and child
rearing. However, the real breakthrough in human development occurred when specialisation
extended to the performance of the many tasks necessary for survival. The benefit of task speciali-
sation is that it increases output or productivity, so there is more of everything to go around. But,
for this to happen, the specialist must be able to exchange what they have to offer for goods and
services provided by others. The gains from task specialisation will soon be dissipated if we have to
spend a lot of time trying to make contact with persons who have a coincidence of wants – we each
have something the other needs, so we can negotiate an exchange. Obviously, we need a central
place where anyone with something to exchange can meet up with other like-minded individuals,
and this place is the market.
Over time, increased specialisation encouraged permanent settlement in locations with natural
advantages and trade between them. To manage this trade, the medium of exchange (money)
had to be created, as had writing and accounting to keep a record of stocks and transactions.
This occurred in Phoenicia around 4000 BC. In time, the search for greater variety and choice
6 Michael J. Baker

prompted trade between nations, exploration and wars. However, the great breakthrough in eco-
nomic growth came in the eighteenth century with the Industrial Revolution in Great Britain.

The origins of ‘modern’ marketing

The Industrial Revolution, which gave birth to modern society and the practice of marketing as
we know it today, was the consequence of three major developments:

1 the application of science and technology to production and distribution;

2 the division of labour;
3 entrepreneurial management.

The division of labour was described eloquently by Adam Smith in his Wealth of Nations (1970
[1776]). Smith’s description of the development of a primitive production line for the manufacture
of pins identified at least ten different tasks:

One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth
grinds it at the top for receiving the head; the head requires two or three distinct operations;
to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to
put them into the paper.

Two points are of particular significance in this step forward. First, organisation is required to bring
together the men, provide a workplace and source raw materials. Second, the enormous increase
in output reduces the price of the product, necessitates the development of channels of distribution
to make it available to those with a demand for it, and leads to the exploitation of a much larger
market. It also means that the ‘factory’ tends to produce standardised products and no longer makes
to the order of individual customers.
While international trade has also existed since time immemorial, the development of manufac-
turing industry greatly accelerated its growth. Mass production demanded ever-increasing quantities
of raw materials, and overseas colonies and plantations were soon established in less-developed
countries to supply these. In turn, employment generated income and income transformed a latent
demand for manufactured goods into expanding export markets.
To begin with, manufacturing was concentrated in Europe and North America, where there
was a skilled workforce and the necessary infrastructure to support it, with the rest of the world
concentrating on mineral extraction and the supply of raw materials for conversion into manufac-
tured goods. This distinction between advanced industrialised economies and the less-developed
primary producers was to continue well into the twentieth century and accounts for what has
become known as the ‘three eras’ conceptualisation.
Robert Keith (1960) first proposed the idea of three eras in the evolution of the marketing
concept based on his analysis of the evolution of the Pillsbury Company in the US. Pillsbury was,
and is, a manufacturer of bakery products, a category of which are generically termed ‘fast moving
consumer goods’ or FMCG. In the mid-nineteenth century its emphasis was on increasing supply
and reducing costs, which are the primary characteristics of a production orientation. As new
companies entered the market and competition intensified, more emphasis was given to selling
differentiated products, but this differentiation was based on what the firm could make using its
existing technology and assets. So, the distinguishing features of the sales orientation is, ‘selling
what we can make’.
 What is marketing? 7

As a result of rapid economic growth, the potential for excess supply developed and it became
clear that selling harder needed to be replaced by selling smarter. Selling smarter means that, before
committing yourself to the sale of a new product in the hope of maintaining competitiveness, you
need first to establish what it is the customer wants. In the days of craft industry, this was relatively
simple – the potential customer discusses their wants with you, and you produce what they specified.
But, with industrialisation and the concentration of production in factories, this contact was broken.
So long as demand exceeds supply, customers cannot afford to be too choosy and have to buy what is
available. However, as variety and choice increase, customers will prefer those sellers whose offering
most closely matches their needs – usually those who are closest to the customer – and others will go
out of business for lack of custom. In order to restore and maintain competitiveness, a new strategy is
called for, which is based on determining what the customer wants and then making what we can sell.
It is this that we call a marketing orientation.
It is generally agreed that the need for a new marketing orientation occurred in the 1950s, and
the first person to describe and analyse this was Harvard Business School professor, Ted Levitt.
In an article called ‘Marketing myopia’, published in the Harvard Business Review in 1960, Levitt
opened by stating, ‘Every major industry was once a growth industry’, but he then went on to
point out that many such industries were in a state of stagnation or decline. The reason for this
stagnation, he claims, was due to, ‘a failure of management’.
Simply put, Levitt’s thesis is that new industries come into existence, because innovators and
entrepreneurs discover new and better ways of meeting people’s needs. As this becomes known, cus-
tomers gradually switch their allegiance from the old to the new, and the old industry declines while a
new one grows to take its place. Thus, like biological organisms, every product and every industry has
a life cycle. In my view, this insight is both an original and powerful idea, the appreciation of which
is vital to the avoidance of failures of management due to myopia.
As to what causes myopia, Levitt’s diagnosis was that it was largely due to the fact that management
was focused on the product it sold to the neglect of the customers to whom it was selling. To illustrate
his point, Levitt enquired why the American railroad system was on the verge of collapse in the 1950s
when in 1900 its stock was considered the bluest of blue-chip investments on the American stock
exchange. His answer was that those responsible for the railroad business had failed to address the most
basic question of all, ‘What business are we in?’ If the answer is that we are in the railroad business,
then this will remain our focus and all our efforts will be concentrated on making railroads better. But,
if we define the business we are in in terms of the basic need that we serve, then the answer would be,
‘We are in the transportation business’ and, if we see this as our mission, then we will constantly seek
new and better ways of providing transportation. In 1900 the internal combustion engine was at a very
early stage of development and not considered to be any threat to the railroads. In reality, the horseless
carriage was a much better solution to local transportation needs that were not served by trains run-
ning between fixed points. Over time, cars and lorries replaced horse-drawn vehicles and encouraged
the development of a road network. It is interesting to speculate what would have happened if those
responsible for running the railroads had welcomed the development of cars and lorries and incorpo-
rated them into an integrated transportation system, rather than ignoring them and later discovering
that they were their main competitors! A marketing orientation would have avoided this failure.

Defining marketing
It has been said that there are as many definitions of marketing as there are people willing to make
one! For our purposes, we will have to be content with only a small selection that reflect some of
the key ideas that define marketing and the way that these have changed over time.
8 Michael J. Baker

There’s probably no better place to start than with Peter Drucker, who is widely recognised as
one of the most influential management thinkers. In 1954 he wrote:

Marketing is not only much broader than selling, it is not a specialised activity at all. It encom-
passes the entire business. It is the whole business seen from the point of view of its final result,
that is, from the customer’s point of view. Concern and responsibility for marketing must
therefore permeate all areas of the enterprise . . . Marketing is the distinguishing, the unique
function of the business.

In 1972 Philip Kotler, author of the world’s bestselling marketing textbook and generally regarded
as the father of the marketing management school of thought, observed, ‘Marketing is the set of
human activities directed at facilitating and consummating exchanges’.
In 1976, as one of the first professors of marketing in the UK, I proposed the definition,
which I still believe captures the essential essence of marketing in the most economic way,
namely, ‘Marketing is concerned with the creation and maintenance of mutually satisfying
exchange relationships’. In 1983 Ted Levitt also suggested a succinct definition when he said,
‘The purpose of the business is to create and keep a customer’.
The latter two definitions both anticipate the most recent attempt to capture the role and nature
of marketing, as proposed by American academics, Vargo and Lusch, in what they call a new
‘service-dominant logic’ in which they argue that value is created through interaction between
buyer and seller, i.e. co-created, and consists of a combination of both physical (product) attributes
and service activities.
Finally, the definitions proposed by the two major professional marketing bodies are as follows:

Marketing is 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.
(Approved October 2007 AMA Board of Directors)

Marketing is the management process responsible for identifying, anticipating and satisfying
customer requirements profitably.
(Chartered Institute of Marketing)

Based upon an analysis of more than 50 definitions of marketing in the 1970s, Keith Crosier (1975)
suggested that they could all be accommodated within one of three approaches.
The view of marketing as a process dominated thinking in the late nineteenth century through
to about 1930. It was strongly associated with the land grant universities in the USA, with a concern
for the selling and distribution of primary agricultural products, along with the new business schools,
mainly endowed by wealthy industrialists who had a strong interest in industrial products, and what
we now call business-to-business marketing or B2B. Individual consumers were of limited interest,
and economic concepts of competition and market forces commanded most attention.
As we have seen, the production era reflected a situation when the nature of basic demand was
fairly obvious, and the challenge was to create a supply to satisfy this. As supply began to catch up
with basic demand, producers had to sell more aggressively, and we moved into the sales era with
an emphasis upon demand stimulation through advertising and personal selling. However, this only
provided temporary relief as firms came to realise that they needed a much better understanding
of the final consumer’s needs if they were to succeed in an increasingly competitive marketplace.
 What is marketing? 9

Therefore, the marketing era was born as the theory of perfect or monopolistic competition began
to give way to the theory of imperfect competition. Fundamentally, this meant dropping the
assumption that consumers are homogeneous and accepting the fact that they are heterogeneous
with different needs and a willingness to pay for differentiated products that match such needs
better. In turn, this recognition directed attention towards the behavioural sciences, and particu-
larly psychology and sociology, as marketing became to be seen as a business philosophy founded
on the notion of consumer sovereignty.
Acceptance of this idea required a radical rethinking of the firm’s basic strategy from one focused
on production and selling, i.e. the firm itself, to one focused on the market and customers. In other
words, the firm’s primary orientation was to be marketing, which, from being a support function,
now moved to centre stage and became the dominant managerial orientation, giving rise to the
marketing management school of thought.
Since then, our understanding of marketing has continued to evolve as reflected in my own
definition that seeks to integrate and synthesise the three approaches and sees marketing as
concerned with mutually satisfying exchange relationships that require the coordination of all
three approaches.

The marketing management school of thought

The marketing management school of thought dominated the teaching and practice of marketing
for around 30 years from 1960 to 1990 and was epitomised by the writings of Eugene McCarthy
and Philip Kotler. It was McCarthy (1966) who introduced the four Ps of marketing – products,
price, place and promotion – which provided structure to most textbooks and courses and is still
evident today.
McCarthy’s four Ps is a simplified version of a more complex model conceived by Professor
Neil Borden (1964) of the Harvard Business School. As stated by him, the marketing mix is:

A schematic plan to guide analysis of marketing problems through utilisation of (a) a list of the
important forces emanating from the market which bear upon the marketing operations of an
enterprise; (b) a list of the elements (procedures and policies) of marketing programs.
The marketing mix refers to the apportionment of effort, the designing, and the integration of
the elements of marketing into a program or ‘mix’ which on the basis of appraisal of the market
forces, would best achieve the objectives of an enterprise at a given time.

However, Borden’s (1964) list comprised 12 different elements and so lacked the simplicity and
memorability of McCarthy’s much simplified model, as a result of which the latter has dominated
the marketing curriculum for 50 years or more.
Inevitably, its popularity has encouraged other authors to propose alternative models for which
they can claim ownership. SIVA is such a model, standing for: solution, information, access and value.
Unfortunately, these four attributes do not match across the original four Ps, neither is SIVA quite
such a memorable mnemonic. Further, with the growth of services, it has been found necessary to
add at least another three Ps to the original four.
The first of the additional Ps is people, which recognises the fact that exchange involves human
interactions between buyer and seller. Where there is only limited interaction, the exchange is
often referred to as a transaction, but, when it involves significant involvement between both
buyer and seller, the process develops into a relationship. In the case of physical products, the
10 Michael J. Baker

nature of these relationships may well become the dominant factor in deciding the outcome and,
similarly, where we think the exchange is a service, then it is the people who provide the service
who provide that physical evidence.
However, the point remains that the role of the marketing manager is seen to be the creation of
a unique recipe through the manipulation and integration of the mix elements. In turn, this process
is reflected in the subtitle of Philip Kotler’s (1972) eponymous Marketing Management, the subtitle
of which is, ‘analysis, planning, implementation and control’. Hence, the APIC model of market-
ing, which, as we shall see, was to evolve into the relationship marketing concept in the 1990s.
However, before looking at the emergence of ‘relationship marketing’, we would like to address
the frequently voiced criticism that marketing is a triumph of style over substance.

Style versus substance

Initially, suppliers concentrated upon producing standardised or homogeneous products at the
lowest cost to enable them to reach the widest possible market. As the demand for low cost and
undifferentiated products began to become saturated, producers increasingly came to appreciate
that many of their customers with high disposable incomes would be willing to pay more for a
version of the product that offered more features and benefits. Of course, this has always been
the case, but, if you consider ‘growth’ to involve selling more and increasing your gross revenue,
then you will try to get your costs down as low as possible in order to appeal to the largest possible
market. In pursuing this strategy, it is accepted that the maximum economies of scale that enable
you to reduce costs will be associated with standardisation. Standardised products are often known
as commodities and, as the operation of the commodity market shows, the lowest cost producer
will attract the most buyers until they have sold all of their available supply, at which point the
market price will rise.
However, where the intending buyer is able to pay more than the prevailing market price, they
may be willing to do so if offered a product that offers added value. To do so we will have to shop
around – hence shopping goods –and will compare the claims of competing sellers. And, if you
believe that free range eggs or organic food will give you greater satisfaction, you will be prepared
to pay more to get it. Now eggs from battery hens and free range eggs possess the same basic attrib-
utes and so may be easily substituted for one another in preparing egg-based dishes – so much so
that in a blind taste test you probably couldn’t tell the difference between them. In other words,
the value-added is a subjective belief that one method of egg production is superior to another and,
if you think this, you will shop around to buy the kind of egg that gives you greater satisfaction in
return for the price paid.
The influence of our selective perception on our buying behaviour may be such that certain
goods and services take on a special meaning for us – what are called speciality goods – with the
result that we will go to considerable lengths to obtain supplies of them – and may well pay a great
deal more to secure this preferred object. At one level gin- or cola-flavoured carbonated beverages
are commodities and, if sold in identical packages simply labelled gin or cola the rational buying
decision would be to buy supplies at the lowest price. But if I offer you a coloured bottle labelled
‘Baker’s Best’ and ask you for 20 per cent more on the price you may well believe that the higher
price reflects higher quality and buy mine rather than the lowest cost offering. And if over time
you come to believe that Baker’s is genuinely the very best available, you may refuse to buy sub-
stitutes and pay an even higher price, which suggests that ultimately it is style or presentation that
determines our buying behaviour.
 What is marketing? 11

Understanding buyer behaviour

The fact that people attach different importance to products is that it reflects their own personal
preferences. When I experience a basic need, such as hunger or thirst, I begin to think of objects
with attributes that will satisfy this need. One has only to pay a visit to their local supermarket to
find that they probably have 15,000 to 20,000 objects that would do so. If I am indifferent to the
differences between potatoes, genetically modified potatoes, fair trade potatoes, organic potatoes,
etc., then I will select the lowest price available. However, if I think that there are meaningful
differences between potatoes, then initially I may have to think quite hard about how to decide
between those on offer. I may also have to choose between the different features that enable me
to differentiate what is available. Only when I have consumed the potatoes will I know whether
they satisfy my need and deliver the desired benefits. If they do, then I will save a lot of time when
I next go shopping if I repeat purchase the same thing. Otherwise, I’ll have to go through the same
choice selection and find an alternative.
For low value products the easiest way to determine whether they will meet your need is to
buy and consume them. For more expensive goods and/or durable products like cars or wash-
ing machines that will last for a long time, trial and error is not a sensible option and you will put
more effort into gathering and evaluating information before making a purchase decision. In both
instances, the challenge for the seller is to establish what are considered to be the essential attributes
of a product category, i.e. the thing you are considering buying. What importance is attached to
features that differentiate between products with the same attributes, and how do prospective cus-
tomers describe the benefits that they are looking for in their ideal product?
To answer these questions firms invest heavily in marketing research so that they can classify
potential customers in terms of their activities, interests and opinions. Once they have secured this
data they can use it to allocate people into different categories, each of which may be expected to
respond differently to a different marketing mix.
Once the firm has collected sufficient data to enable it to profile the potential market it will
be able to develop a marketing plan, which will make best use of the skills and resources it has to
offer. This will be achieved through a process known as segmentation, targeting and positioning.
In essence, positioning means the achievement of a unique place in a competitive market for
a particular product such that some worthwhile subgroup of consumers or segment perceives it
to be different in some meaningful and important respect from all other competitors. In order to
determine the position of a product – whether one’s own or a competitor’s – the first step must be
to establish what are the key criteria or attributes, which consumers use to judge performance and
distinguish between the competitive offerings available to them. Once these key attributes have
been defined, a survey may be undertaken to find out how consumers perceive each of the differ-
ent brands in terms of the relevant criteria using AIO (attitudes, interests and opinions) research.
By combining this information one can develop what is called a perceptual map of a market
and decide where and how to position oneself against competition. Once this position has been
chosen, it becomes possible to identify what features and benefits may be used to differentiate
one’s own product in the mind of the buyer. As we have seen, to do this the marketer must
develop a unique marketing mix based on the ingredients available. As with cooking, one can
develop numerous recipes from the same ingredients but, in the final analysis, it is the way you
do this – the implementation – that determines how successful you are.
Generations of marketing managers have been brought up on the Kotlerian view of marketing
management as a process comprising the sequence analysis, planning, implementation and control,
hence, the APIC model of marketing. On closer examination, however, it is clear that the APIC
12 Michael J. Baker

model does not necessarily reflect the marketing concept. In a nutshell, marketing management is
about what we need to do to customers to get them to buy our goods – in other words, bending
demand to absorb the available supply. By contrast, the marketing concept and market orientation
are about what firms need to do for customers that will secure their patronage, goodwill, trust,
commitment and, ultimately, their loyalty.

Substance over style?

During the 1980s criticisms began to emerge about the practice of marketing, prompting the con-
sultants McKinsey and Co to describe it in 1993 as suffering a ‘mid-life crisis’ (Brady and Davis
1993). From being the driving force behind competitive strategy, much marketing was seen to
have lost its edge with one firm’s marketing activities cancelling out another’s. It is also important
to note that the marketing management school of thought was applied primarily to the market-
ing of consumer goods, or B2C marketing. In the case of what was originally known as industrial
marketing, and is now called business-to-business or B2B marketing, a different emphasis prevailed
with the stress upon interaction between buyer and seller and the development of networks. In
turn, this focused attention upon the relationship between buyer and seller.
The late 1970s and early 1980s also witnessed a new concern for what was identified as ‘macro
marketing’, with an emphasis upon the overall impact of marketing practices on social and human
welfare – as with the discipline of economics with a distinction between microeconomics focused
on competition between firms and industries, and macroeconomics that concentrated on the policy
implications of economic activity for national and international progress and success. This distinc-
tion was less marked in the marketing discipline possibly because environmental considerations
were factored into the organisation’s analysis when formulating its marketing strategy. However,
today, concerns for sustainability, the impact of climate change and awareness that one-third of
the world’s population lives below the poverty line have resulted in these macromarketing issues
assuming a more visible and important role in marketing practice.
The debate about which approach best represented the implementation of the marketing con-
cept was crystallised by the collapse of the Berlin Wall and the communist regime that had led to
its erection in the first place. This event called for a complete rethink about models of economic
organisation. Following the end of the Second World War, thinking about the most effective
form of economic organisation had polarised opinion by focusing upon centrally controlled
command economies, as practised in Russia and its allies, and the emphasis on free-market
capitalism, as practised in the US and other free economies. With the demise of communism
it became clear that the so-called Anglo-Saxon model practised in the US and the UK that
encouraged firms to compete with one another aggressively – what Milton Friedman referred to
as capitalism red in tooth and claw – was not always to the best advantage of consumers. Many
agreed with John Kenneth Galbraith (1958) of the need for countervailing power to curb the
excesses of big business, which, in turn, presumed some form of regulation of the marketplace.
In fact, a political model of a regulated free-market economy had emerged in Austria in the
mid-nineteenth century and had become known as the Germanic Alpine model, as it was widely
adopted in that geographical area. As the collapse of the banking system in 2008 in countries
subscribing to the Anglo-Saxon model and the subsequent recession have made clear, this was
essentially a consequence of a lack of regulation, and we may anticipate an increase of this in
future as the state seeks to control the excesses of big business and their marketing practices.
Of course, too much regulation can be a bad thing as it stifles competition and innovation.
Far better that organisations put their own houses in order, and there is evidence of this in the
 What is marketing? 13

growing emphasis given to relationship marketing. The key difference between marketing manage-
ment and relationship marketing is that the former is a functional approach to physically managing
the mix elements, while the latter promotes the view that the successful organisation needs to bend
all its efforts to the satisfaction of its customers – a cultural or philosophical view derived from
the marketing concept, which is what I had in mind when I first proposed my own definition of
marketing in 1976.
Many firms now claim that they have adopted the relationship marketing approach and are
implementing it through a system of customer relationship management (CRM). In deciding
whether to accept the claim that this is a move away from the marketing management approach,
one needs to examine closely what are the defining elements of most CRM schemes. But, if you
do so, it is likely that you will find CRM practices are a more sophisticated means of manipulating
knowledge about consumers to get them to buy what you have to sell, which, as we have seen,
is quite different from the marketing concept’s belief that we start with the customer’s needs and
wants and then create products and services to satisfy them.
People who subscribe to the latter view would argue that if you seek to manage a relationship
you are likely to destroy it, as ‘relationship’ implies that the partners will work together to achieve
a common objective. Accordingly, relationships are seen to involve the co-creation of value
through the interaction between producer and consumer, and it is this perspective that has led to
the most recent shift in thinking about marketing to what is known as the ‘service-dominant logic
(SDL)’. The notion of SDL was first proposed by Vargo and Lusch in 2004 when they argued that
‘marketing, has moved from a goods-dominant view, in which tangible output and discrete trans-
actions were central, to a service-dominant view, in which intangibility, exchange processes, and
relationships are central’. These propositions are still the subject of wide debate and beyond the
scope of an introductory overview designed to introduce expert contributions on a wide diversity
of marketing topics, many of which have become distinctive subfields in their own right. As will
become clear, the SDL paradigm reflects the continuing evolution of ideas about the nature and
practice of marketing and the current state of play.
The notion that marketing is concerned with the relationship between an organisation and its
customers suggests that this relationship should not be confined solely to those who work in the
marketing department or a marketing function. In other words, marketing is ‘everybody’s’ business.
There is an intrinsic danger in accepting such a proposition because when something becomes
everybody’s business, it may well become nobody’s business on the grounds that everyone assumes that
someone else is taking care of it. To overcome this danger a conscious effort must be made to avoid it.
First, everyone needs to understand the nature of the marketing concept and the fact that this is
a way of thinking about how an organisation will conduct its business, which, clearly, will involve
all members of that organisation. To begin with then, everyone must subscribe to the view that
the overall success of the organisation depends upon everyone within it working towards that
goal. Achieving this is not an easy task. I have worked with many organisations in which persons
in a designated marketing function believe that they are somehow more important than are other
members of their organisation, possibly because they are the point of contact between the organi-
sation and its customers. This attitude can alienate other members of an organisation and become
dysfunctional, especially where professional marketers perceive telephone operators, receptionists
and other contact personnel as less important and subordinate to them. Given that such people are
often the first point of contact between a prospective or existing customer and the organisation,
it is imperative that they understand the importance of their role in developing relationships. It
follows that every member of an organisation needs to understand what is meant by a marketing
culture and their part in creating this.
14 Michael J. Baker

To achieve this calls for internal marketing, the purpose of which has been defined as having
motivated customer conscious employees and involves management in seeing those employees as
‘customers’ who need to be informed and educated about the meaning of a marketing orientation,
the creation of customer value and its delivery.
During 2013/2014, I was fully involved in preparing a radically revised new edition of my
textbook Marketing Strategy and Management, first published in 1985, in parallel with revising this
chapter and a similar one, which acts as the introduction to Marketing Theory. In the final Chapter
25, ‘Transformational marketing’, I attempt a summary of my perception of how the discipline of
marketing has evolved over the past 60 years or so. After careful consideration, I decided that I really
did not wish to modify the conclusion of this chapter which, with some modification, is repeated
here. In doing so I am conscious that some purists might consider this to be self- plagiarism for
which my defence is to cite Pamela Samuelson’s (1994) justification that ‘I said it so well the first
time that it makes no sense to say it differently a second time’. I also hope that this self-reference will
encourage you to consult the chapter, which also contains my personal views on how the marketing
discipline may develop in future.

Six decades of change

Since the articulation of the modern marketing concept around 1950 we have experienced a
period of rapid and accelerating change – technological, social and economic – that have had a
major impact on the competitive environment. Simplistically, we may identify these decades as:

•• 1950s post-war reconstruction;

•• 1960s materialism/consumerism;
•• 1970s newly industrialising countries;
•• 1980s globalisation;
•• 1990s emerging economies and sustainability;
•• 2000s the internet and social media.

In response to these changes we have seen a considerable growth of interest in the importance
of interaction and networks giving rise to an emphasis upon relationship marketing. In turn, this
has highlighted the importance of corporate social responsibility and the view that marketing is
‘everybody’s business’ with a consequential focus on internal marketing, while the impact of infor-
mation and communications technology (ICT) and, particularly, the internet, has promoted the
view that we are seeing the emergence of a ‘new economy’. Associated with these changes has
been a search for a new ‘business model’ with an accent on value and its co-creation through the
exchange process.
In parallel with these developments there has also been a growing recognition that while
marketing has been blamed as a practice that promotes materialism and excessive consump-
tion, potentially it is a discipline that offers the best prospect for encouraging conservation and
sustainability. After all, if marketing tools and techniques have the ability to shape attitudes and
modify behaviour there is no reason why they cannot be deployed for this purpose by means of
what has come to be known as ‘transformational marketing’. Simplistically, many see this as just
adopting the tools and practices refined by practitioners belonging to the marketing manage-
ment school of thought, which still tends to dominate the marketing curriculum and education.
I hope sincerely that this is a forlorn hope. If marketing is to become ‘transformational’, much
more radical measures are called for. It is also highly unlikely that marketing alone could have
 What is marketing? 15

the desired effect, as any new business model must involve the contributions of other business
disciplines in a truly interdisciplinary approach.
As has been made clear when discussing the notion of ‘orientation’, different organisations
may have quite different orientations – production, sales, financial, etc. – one of which tends to
dominate and drives the organisational culture – the way we do things around here. Given that the
implementation of a strategy requires the coordination of inputs from all the business disciplines,
which are usually organised into divisions or departments with a disciplinary bias, the distinction
between ‘interdisciplinary’ and ‘multidisciplinary’ is not trivial. In a multidisciplinary environment,
each of the different disciplines tends to interpret the environment and the problems to be solved
from the perspective of that discipline and, inevitably, tends to persuade others to ‘see it my way’.
By contrast, an interdisciplinary approach seeks to combine potentially different perspectives into a
single agreed and coordinated solution, which combines and builds upon the contribution of them
all. This difference has been made explicit in our emphasis upon the distinction between marketing
as a philosophy that starts with the customer and attempts to maximise their satisfaction, and mar-
keting as a function that is focused on efficient and effective practice. But, the need to constantly
affirm this difference suggests that a more successful approach would be to avoid incorporating
‘marketing’ into the name of a new business model and settle for something less controversial. As
one thing that all the proponents of such a model appear to agree upon is that it should be focused
on human welfare and well-being, then social business appears to strike a balance between the vari-
ous alternatives and a worthy objective of what we might call ‘transformational marketing’.

Transformational marketing and social business

While there are numerous dedicated publications that address aspects of social business from a disci-
plinary perspective, in 2010 there appeared to be few if any taking a multidisciplinary approach, and
it was suggested to me that having founded other journals I might like to attempt another one to fill
this gap. Details of the outcome can be found on the website socialbusinessperiodical.com with the
inaugural issue appearing in Spring 2011. To populate this (and subsequent issues), approaches were
made to persons with expertise and established reputations including Professor Ken Peattie, who is
Director of the ESRC Research Centre for Business Relationships, Accountability, Sustainability
and Society (BRASS) at Cardiff University, whom I asked to write a commentary on a paper that
he had published in 2001 in The Marketing Review.
In his paper (Peattie 2011), ‘Towards sustainability: Achieving marketing transformation – a
retrospective comment’, Peattie had the following to say about the need to rethink marketing if it
was to have a transformative effect:

The notion that our marketing thinking may also be increasingly unsustainable is an idea that
has also gained currency from within the mainstream. In Search of a New Logic of Marketing by
Christian Grönroos (2007) describes marketing as an area of business thought and practice that
has failed to evolve. He feels that a marketing executive time-travelling forward from fifty
years ago would fit quite comfortably into a contemporary marketing department, given a
little coaching on the technology involved. To Grönroos marketing is in danger of becoming
an increasingly costly function whose strategic role and credibility within business is eroding
because it has become unable to break out of its existing ways of thinking: ‘The productivity of
marketing cannot be improved within the existing frameworks and structures. As long as marketing’s major
responsibility is customer acquisition and promise-making, the costs of marketing will continue to grow,
and its effectiveness will continue to go down . . . The development of brand management and adopting
16 Michael J. Baker

a branding terminology in marketing is only more of the same, in some situations making conventional
marketing more effective perhaps, but offering no innovative new avenues for customer management.
Marketing as a discipline is in crisis. And marketing as a business practice responsible for customer man-
agement is losing credibility’.
(Peattie 2011: 16)

Grönroos proposes an alternative vision of marketing that is centred around marketing as a process
of managing relationships with customers, rather than of facilitating exchanges with them. In doing
this, it shifts the focus away from the marketing of products to customers and instead emphasises the
need to deliver value to customers. What is particularly interesting is the extent to which Grönroos’s
analysis of the shortcomings of conventional marketing from a relationship management perspective
fit with critiques of conventional marketing from a socio-environmental perspective. This perhaps
provides a clue as to how the transformation to sustainability based marketing might be achieved in
both marketing practice and scholarship. In the book Sustainability Marketing – A Global Perspective
(Belz and Peattie 2009) they propose that the evolution from the managerialist modern marketing that
has dominated the mainstream for the past 50 years can be achieved by integrating two emerging
schools of thought: first, the transition from transactions to relationships perspective (Vargo and
Lusch 2004); second, increasing the scope of marketing from a narrow and short-term focus on
the wants of current consumers to a much broader consideration of stakeholders that includes non-
consumers, the environment and future generations of consumers. The result would be marketing
based on relationships delivering sustainable value to consumers and society.
If that integration can be achieved, then the prospects for achieving a transformation in our
marketing practices and thinking, and in the sustainability of our production and consumption
systems, will be much improved. To do it, we will need more scholars working in these areas, and
more channels through which their research can reach an audience and make a difference. For that
reason, I strongly welcome the emergence of Social Business and look forward to it driving the field
forward over the next ten years.

Figure 1.2 The emergence of sustainability marketing

Source: Belz and Peattie 2009: 18.
 What is marketing? 17

What Peattie calls ‘sustainability marketing’ and I identify as ‘social business’ were both iden-
tified by leading American scholars, Ravi Achrol and Philip Kotler (2012), in a paper entitled
‘Frontiers of the marketing paradigm in the third millennium’ in which they proposed ‘a three-
tiered explanation of the emerging field of marketing – its sub phenomena (consumer experiences
and sensory systems), its phenomena (marketing networks), and its super phenomena (sustainability
and development)’.
To begin with, it is stressed that the focus is upon the future and the emerging paradigms of
marketing. However, to do so, it is necessary to summarise perceived assumptions of both the
received and emergent marketing paradigms as interpreted by the authors, and these have been
summarised in Table 1.1. Effectively, their analysis leads them to suggest a three tiered framework
comprising consumption experiences, marketing networks and sustainability.
The first three assumptions all relate to aspects of what are described as ‘sub phenomena’ relating
to consumer behaviour. These are elaborated on as covering: marketing and the human senses; neu-
rophysiology and marketing; and marketing and nanotechnology. The next four assumptions define
what are described as ‘phenomena’ and deal with ‘mid-range theories that have predictive power’ and
are concerned with relational concepts that are bringing ‘production and consumption closer together’.
The topics explored here include: the evolution of production and innovation networks; distributed
production-consumption networks; and consumption networks. And, finally, four assumptions iden-
tified as ‘super phenomena’ of which two, sustainability and poverty, are selected for detailed discussion.
Topics covered include the sustainable marketing concept and base of the pyramid marketing.

Table 1.1 Key issues and assumptions underpinning the current and future marketing paradigm

Paradigm Current Future

Statusi/Issue

A SUB-PHENOMENAL:
CONSUMER BEHAVIOUR
1 Experience Need satisfaction Sense-making
2 Disciplinary focus Cognitive psychology Neurophysiology
3 Sensory focus Objective Subjective
B PHENOMENAL:
RELATIONAL CONCEPTS
4 Supply orientation Mass production Co-creation. One-to-One
5 Dominant technology Computer based Bio and nanotechnology
6 Managerial orientation Internally focused Externally directed
7 Source of competitive advantage Distinctive competence Leadership in production and
consumption networks
C SUPER PHENOMENAL
8 Strategic management priorities Growth emphasis on customers Circular economy and
with discretionary purchasing sustainability, bio-centric
power, anthropocentric
9 Unit of analysis Buyer-seller Society
10 Strategic emphasis Corporate social responsibility Human welfare
11 Public policy Laissez-faire Regulated social business

Source: Adapted from Achrol, R. S. and Kotler, P. (2012), ‘Frontiers of the marketing paradigm in the third millennium’, Journal
of the Academy of Marketing Science, 40: 35–52.
18 Michael J. Baker

As suggested in this review, and confirmed and endorsed by numerous authors and theorists, the
marketing paradigm has evolved from a focus on marketing as a function, through marketing as a mana-
gerial practice to marketing as exchange. While credit for this evolution is largely attributed to the work
of American scholars, it is felt that this largely overlooks the contributions of numerous European and
other scholars whose work, chronologically, preceded recognition of marketing as mutual exchange
that I summarised was based upon the ‘creation and maintenance of mutually satisfying exchange
relationships’ (Baker 1976). Founded in Europe at about the same time, the Industrial Marketing
and Purchasing (IMP) Group focused upon the interaction between parties to an exchange and the
relationships in the networks formed between them. In parallel, the role of service and services were
given explicit recognition. It is significant that apart from Gummesson (1998) none of this research is
cited by the authors. On these grounds we consider it wrong to attribute the view that we are now
‘at the threshold of the network paradigm’ to an earlier paper by the authors in 1999.
In making this observation, I fully acknowledge that both authors, and especially Philip Kotler,
have made very important contributions to the evolution of marketing thought and theory. Indeed,
many developments like the transfer of the marketing concept to a non-commercial context (social
marketing) are founded on insights first promoted by Kotler and Kotler and Levy. Nonetheless,
the failure to consider the publication of research findings in non-American journals constitutes
a form of ‘research myopia’ that I referred to directly in an address to the American Marketing
Association’s Winter Educators (1994) meeting. To avoid a similar oversight. it is important that
one does not confine one’s research solely to papers published in leading American journals.
This advice is confirmed by Volume 6 in the Legends in Marketing series edited by Roderick Brodie
(2013), which is concerned with marketing theory and chronicles the published work of Finnish
scholar, Christian Gronroos. The volume contains thirteen papers written by Gronroos together with
commentaries by Brodie and four other contributors including myself. In the absence of any contact
between me and Richard Brookes and Victoria Little, who contributed chapter 14 ‘What-really-is
marketing?’, it was reassuring to find a high level of agreement in our answers to the question that is
the subject of this chapter. Brookes and Little identify three overriding themes in Gronroos’s work:

1 critique of the mainstream (AMA) approach;

2 a customer management/marketing practice perspective;
3 a business marketing, service, and relationship lens.

Their commentary concludes with an observation which is an appropriate introduction to this book:

However, clearly, we are still looking for the answers to that basic question: ‘What-really-is
marketing?’ We have seen that it can be a philosophy, a toolkit, process, a set of practices and, in
large organisations, a dedicated but somewhat constrained function. Christian has long argued
that perhaps we need a new word for what has been labelled marketing. It would need to be
a word which connotes what the combined part-time and full-time ‘marketers’ really do to
gain, keep, and grow their customers.

Summary
Our attempt to provide at least some answers to the question, ‘What is marketing?’ has indicated
that the answer has evolved and changed over time. As it has adapted to changing circumstances,
so it has found it necessary to embrace and incorporate insights and ideas from other disciplines.
 What is marketing? 19

Initially, the focus was seen as solving the central economic problem of maximising satisfaction
through the utilisation of scarce resources. Originally, economists thought that this would be
achieved through maximising efficiency and producing the largest possible supply at the lowest
possible cost. However, to do so required the heroic assumption that demand for a product was
homogeneous, so that the same product would satisfy everybody, i.e. the greatest good of the
greatest number. But, as technological innovation made it possible to increase both the quantity
and variety of goods available for consumption, it became accepted that demand is not homoge-
neous, and overall satisfaction could be increased through the provision of differentiated products
designed to serve the same use and need. In order to understand how to do this, it became
necessary to extend the principles of marketing to incorporate ideas from a number of other disci-
plines, such as anthropology, geography, psychology and sociology and integrate these into a more
broadly based explanation of marketing. It is for this reason that we regard marketing as a synthetic
discipline in the sense that it seeks to synthesise knowledge and ideas derived from other disciplines
into an integrated and systematic way of thinking about exchange processes. What distinguishes
modern marketing from earlier practice is that it has converted from a craft to a profession in
exactly the same way as architecture, engineering and medicine, all of which are synthetic disci-
plines. Marketing is not just an abstract way of thinking about exchange, it is a model for efficient
and effective practice.
And so, in looking to the future, it has become apparent that marketing ideas and practice can
be deployed in many other contexts beyond that of business or commercial exchange where they
originated. Marketing has the capability of transforming all kinds of exchange relationship, whether
for-profit or not-for-profit, as well as in promoting social welfare and sustainability. As American mar-
keting scholar, Jagdish Sheth, has pointed out, as a result of our past success in improving the quality of
life we have to recognise that, for the first time ever, there are five generations living in an economy.
Furthermore, we need to think through the implications of an ageing population and its impact on
lifestyle and consumption. To these we would add environmental or ‘green’ issues, concerns for social
responsibility and ethical corporate behaviour, together with the challenge of emerging economies.
If marketers are to meet and resolve these challenges, then they need to be customer focused,
build long-term relationships with customers, and think of their lifetime value as opposed to their
short-term profitability. In other words, observe the golden rule – do unto others as you would be
done by – and create and maintain mutually satisfactory exchange relationships. In the following
chapters you will find a diversity of views as to how this ambition may be fulfilled.

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