Marketing
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Marketing is a societal process that is needed to discern consumers' wants; focusing on a product/service to those wants, and to mold the consumers toward the products/services. Marketing is fundamental to any businesses growth. The marketing teams (Marketers) have the task to create the consumer awareness of the products/services through marketing techniques; unless it pays due attention to its products/services and consumers' demographics and desires, a business will not usually prosper long-term.
Marketing tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers' future needs and wants, often through market research.
Essentially, marketing is the process of creating or reorganizing an organization to be successful in selling a product or service that people not only desire, but are willing to buy.
Therefore good Marketing must be able to create a "proposition" or set of benefits for the end Consumer, Shopper or Customer, that delivers value through products of services. This value will be made up of benefit/cost.
Its specialist areas include:
- Advertising and Branding
- Communications
- Database Marketing
- Direct Marketing
- Events Organization
- International Marketing
- Internet Marketing
- Industrial marketing
- Market Research
- Public Relations
- Shopper & Retail Marketing
- Search Engine Marketing
- Strategic Management
Contents[hide] |
[edit] Introduction
A market-focused, or customer-focused, organization first determines what its potential customers desire, and then builds the product or service. Marketing theory and practice is justified in the belief that customers use a product or service because they have a need, or because it provides a perceived benefit.
Two major factors of marketing are the recruitment of new customers (acquisition) and the retention and expansion of relationships with existing customers (base management). Once a marketer has converted the prospective buyer, base management marketing takes over. The process for base management shifts the marketer to building a relationship, nurturing the links, enhancing the benefits that sold the buyer in the first place, and improving the product/service continuously to protect the business from competitive encroachments.
For a marketing plan to be successful, the mix of the four "Ps" must reflect the wants and desires of the consumer s or Shoppers in the target market. Trying to convince a market segment to buy something they don't want is extremely expensive and seldom successful. Marketers depend on insights from marketing research, both formal and informal, to determine what consumers want and what they are willing to pay for it. Marketers hope that this process will give them a sustainable competitive advantage. Marketing management is the practical application of this process. The offer is also an important addition to the 4P's theory.
Within most organizations, the activities encompassed by the marketing function are led by a Vice President or Director of Marketing. A growing number of organizations, especially large US companies, have a Chief Marketing Officer position, reporting to the Chief Executive Officer.
The American Marketing Association (AMA) states, “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.".
Marketing methods are informed by many of the social sciences, particularly psychology, sociology, and economics. Anthropology is also a small, but growing influence. Market research underpins these activities. Through advertising, it is also related to many of the creative arts. Marketing is a wide and heavily interconnected subject with extensive publications. It is also an area of activity infamous for re-inventing itself and its vocabulary according to the times and the culture.
[edit] Two levels of marketing
Strategic Marketing attempts to determine how an organization competes against its competitors in a market place. In particular, it aims at generating a competitive advantage relative to its competitors.
Operational Marketing executes marketing functions to attract and keep customers and to maximize the value derived for them, as well as to satisfy the customer with prompt services and meeting the customer expectations. Operational Marketing includes the determination of the marketing mix.
[edit] Four Ps
In the early 1960's, Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Borden suggested that all those actions of the company represented a “Marketing Mix”. Professor E. Jerome McCarthy, also at the Harvard Business School in the early 1960s, suggested that the Marketing Mix contained 4 elements: product, price, place and promotion.
In popular usage, "marketing" is the promotion of products, especially advertising and branding. However, in professional usage the term has a wider meaning which recognizes that marketing is customer-centered. Products are often developed to meet the desires of groups of customers or even, in some cases, for specific customers. E. Jerome McCarthy divided marketing into four general sets of activities. His typology has become so universally recognized that his four activity sets, the Four Ps, have passed into the language.
The four Ps are:
- Product: The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
- Pricing: This refers to the process of setting a price for a product, including discounts. The price need not be monetary - it can simply be what is exchanged for the product or services, e.g. time, energy, psychology or attention.
- Promotion: This includes advertising, sales promotion, publicity, and personal selling,branding and refers to the various methods of promoting the product, brand, or company.
- Placement (or distribution): refers to how the product gets to the customer; for example, point of sale placement or retailing. This fourth P has also sometimes been called Place, referring to the channel by which a product or services is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc.
These four elements are often referred to as the marketing mix,[1] which a marketer can use to craft a marketing plan. The four Ps model is most useful when marketing low value consumer products. Industrial products, services, high value consumer products require adjustments to this model. Services marketing must account for the unique nature of services. Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions.
As a counter to this, Morgan, in Riding the Waves of Change (Jossey-Bass, 1988), suggests that one of the greatest limitations of the 4 Ps approach "is that it unconsciously emphasizes the inside–out view (looking from the company outwards), whereas the essence of marketing should be the outside–in approach". Nevertheless, the 4 Ps offer a memorable and workable guide to the major categories of marketing activity, as well as a framework within which these can be used.
[edit] Seven Ps
As well as the standard four Ps (Product, Pricing, Promotion and Place), services marketing calls upon an extra three, totaling seven and known together as the extended marketing mix. These are:
- People: Any person coming into contact with customers can have an impact on overall satisfaction. Whether as part of a supporting service to a product or involved in a total service, people are particularly important because, in the customer's eyes, they are generally inseparable from the total service . As a result of this, they must be appropriately trained, well motivated and the right type of person. Fellow customers are also sometimes referred to under 'people', as they too can affect the customer's service experience, (e.g., at a sporting event).
- Process: This is the process(es) involved in providing a service and the behaviour of people, which can be crucial to customer satisfaction.
- Physical evidence: Unlike a product, a service cannot be experienced before it is delivered, which makes it intangible. This, therefore, means that potential customers could perceive greater risk when deciding whether to use a service. To reduce the feeling of risk, thus improving the chance for success, it is often vital to offer potential customers the chance to see what a service would be like. This is done by providing physical evidence, such as case studies, testimonials or demonstrations.
[edit] Four New P's
- Personalization: It is here refered to customization of products and services through the use of the Internet. Early examples include Dell on-line and Amazon.com, but this concept is further extended with emerging social media and advanced algorithms. Emerging technologies will continue to push this idea forward.
- Participation: This is to allow customer to participate in what the brand should stand for; what should be the product directions and even which ads to run. This concept is laying the foundation for disruptive change through democratization of information.
- Peer-to-Peer: This refers to customer networks and communities where advocacy happens. The historical problem with marketing is that it is “interruptive” in nature, trying to impose a brand on the customer. This is most apparent in TV advertising. These “passive customer bases” will ultimately be replaced by the “active customer communities”. Brand engagement happens within those conversations. P2P is now being referred as Social Computing and will likely to be the most disruptive force in the future of marketing.
- Predictive modeling: This refers to neural network algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem).
[edit] Product
[edit] Scope
- Breadth -- number of product lines in a range.
- Depth -- number of product items in a product line.
[edit] Steps in product design
- Design and development of product ideas.
- Selection of and sifting through product ideas.
- Design and testing of product concept.
- Analysis of profitability of product concept.
- Design and testing of physical product.
[edit] Packaging
[edit] Requirements of good packaging
- Functional - effectively contain and protect the contents
- Provide convenience during distribution, sale, opening, use, reuse, etc.
- Be environmentally responsible
- Be cost effective
- Appropriately designed for target market
- Eye-catching (particularly for retail/consumer sales)
- Communicate attributes and recommended use of the product and package
- Compliant with retailers' requirements
- Promotes image of enterprise
- Distinguishable from competitors' products
- Meet legal requirements for product and packaging
- Point of difference in service and supply of product.
[edit] Forms of packaging
- Specialty packaging — emphasizes the elegant character of the product
- Packaging for double-use
- Combination packaging two or more products packaged in the same container
- Kaleidoscopic packaging — packaging changes continually to reflect a series or particular theme
- Packaging for immediate consumption — to be thrown away after use
- Packaging for resale — packed, into appropriate quantities, for the retailer or wholesaler
[edit] Trademarks
[edit] Significance of a trademark
- Distinguishes one company's goods from those of another
- Serves as advertisement for quality
- Protects both consumers and manufacturers
- Used in displays and advertising campaigns
- Used to market new products
[edit] Requirements of a good trademark
- Reflects products' advantages
- Good, simple language
- Easily pronounced and remembered
- Distinct from names of other products
- Easily added to an existing range
- Easily registered for legal protection
[edit] Brands
A brand is a name, term, design, symbol, or other feature that distinguishes products and services from competitive offerings. A brand represents the consumers' experience with an organization, product, or service.
[edit] Pricing
Pricing refers to the amount of money exchanged for a product. This value is determined by utility to the consumer in terms of money and/or sacrifice that he is prepared to give for it.
[edit] Objectives
- Definite sales volume
- Achieve profit
- Larger market share
- Maintain market share
- Eliminate competition
- Advantages of mass production
[edit] Factors influencing price-determination
- Production and distribution costs
- Substitute goods available
- Normal trade practices
- Fixed prices
- Reaction of distributors
- Reaction of consumers
- Nature of demand:
- Elastic
- Inelastic
- Form of market:
- Perfect competition
- Monopolistic competition
- Monopoly
- Oligopoly
- philosophy
[edit] Steps to determine price
- Determine market share to be captured
- Set up price strategy
- Estimate demand
- Evaluate competitors' reactions
[edit] Distribution
[edit] Channels
- Manufacturer to consumer (most direct)
- Manufacturer to wholesaler to retailer to consumer (traditional)
- Manufacturer to agent to retailer to consumer (current)
- Manufacturer to agent to wholesaler to retailer to consumer
- Manufacturer to agent to customer ( ex : AMWAY )
[edit] Manufacturers
[edit] Reasons for direct selling methods
- Manufacturer wants to demonstrate goods.
- Wholesalers, retailers and agents not actively selling.
- Manufacturer unable to convince wholesalers or retailers to stock product.
- High profit margin added to goods by wholesalers and retailers.
- Middlemen unable to transport.
[edit] Reasons for indirect selling methods
- Manufacturer does not have the financial resources to distribute goods.
- Distribution channels already established.
- Manufacturer has no knowledge of efficient distribution.
- Manufacturer wishes to use capital for further production.
- Too many consumers in a large area; difficult to reach.
- Manufacturer does not have a wide assortment of goods to enable efficient marketing.
[edit] Wholesalers
[edit] Reasons for using wholesalers
- Bear risk of selling goods to retailer or consumer
- Storage space
- Decrease transport costs
- Grant credit to retailers
- Able to sell for the manufacturers
- Give advice to manufacturers
- Break down products into smaller quantities
[edit] Reasons for bypassing wholesalers
- Limited storage facilities
- Retailers' preferences
- Wholesaler cannot promote products successfully
- Development of wholesalers' own brands
- Desire for closer market contact
- Position of power
- Cost of wholesalers' services
- Price stabilisation
- Need for rapid distribution
- Make more money
[edit] Ways of bypassing wholesalers
- Sales offices or branches
- Mail orders
- Direct sales to retailers
- Travelling agents
- Direct Orders
[edit] Agents
- Commission agents work for anyone who needs their services. They do not acquire ownership of goods but receive del credere commission.
- Selling agents act on an extended contractual basis, selling all of the products of the manufacturer. They have full authority regarding price and terms of sale.
- Buying agents buy goods on behalf of producers and retailers. They have an expert knowledge of the purchasing function.
- Brokers specialize in the sale of one specific product. They receive a brokerage.
- Factory representatives represent more than one manufacturer. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms.
[edit] Marketing communications
Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. There are distinct stages in converting strangers to customers that govern the communication medium that should be used.
[edit] Advertising
- Paid form of public presentation and expressive promotion of ideas
- Aimed at masses
- Manufacturer may determine what goes into advertisement
- Pervasive and impersonal medium
[edit] Functions and advantages of successful advertising
- Task of the salesman made easier
- Forces manufacturer to live up to conveyed image
- Protects and warns customers against false claims and inferior products
- Enables manufacturer to mass-produce product
- Continuous reminder
- Uninterrupted production a possibility
- Increases goodwill
- Raises standards of living (or perceptions thereof)
- Prices decrease with increased popularity
- Educates manufacturer and wholesaler about competitors' offerings as well as shortcomings in their own.
[edit] Objectives
- Maintain demand for well-known goods
- Introduce new and unknown goods
- Increase demand for well-known goods
[edit] Requirements of a good advertisement
- Attract attention
- Stimulate interest
- Create a desire
- Bring about action
- Create Awareness
[edit] Eight steps in an advertising campaign
- Market research
- Setting out aims
- Budgeting
- Choice of media (TV,newspaper,radio)
- Choice of actors (New Trend)
- Design and wording
- Coordination
- Test results
[edit] Personal sales
Oral presentation given by a salesman who approaches individuals or a group of potential customers:
- Live, interactive relationship
- Personal interest
- Attention and response
[edit] Sales promotion
Short-term incentives to encourage buying of products:
- Instant appeal
- Anxiety to sell
[edit] Publicity
- Stimulation of demand through press release giving a favourable report to a product
- Higher degree of credibility
- Effectively news
- Boosts enterprise's image
[edit] Customer focus
Many companies today have a customer focus (or customer orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.[2]
A formal approach to this customer-focused marketing is known as SIVA[3] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.
The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.
Product -> Solution
Promotion -> Information
Price -> Value
The four elements of the SIVA model are:
- Solution: How appropriate is the solution to the customers problem/need?
- Information: Does the customer know about the solution, and if so how, who from, do they know enough to let them make a buying decision?
- Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward?
- Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery?
This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader - the journal of the Marketing Society in the UK.
The model focuses heavily on the customer and how they view the transaction.
[edit] Product focus
In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing.
- An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding).
- Diffusion of innovations research explores how and why people adopt new products, services and ideas.
- A relatively new form of marketing uses the Internet and is called internet marketing or more generally e-marketing, affiliate marketing, desktop advertising or online marketing. It typically tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing.
- With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of Permission marketing such as Branded content, Custom media and Reality marketing.
- The use of herd behavior in marketing.
- In an article entitled "Swarming the shelves: How shops can exploit people's herd mentality to increase sales", The Economist recently reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.[4] Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 .
- Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon, eBay).
[edit] Criticism of marketing
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Some aspects of marketing, especially promotion, are the subject of criticism. It is especially problematic in classical economic theory, which is based on the assumption that supply and demand are independent. However, product promotion is an attempt coming from the supply side to influence demand. In this way producer market power is attained as measured by profits that would not be realized under a free market. Then the argument follows that non-free markets are imperfect and lead to production and consumption of suboptimal amounts of the product.
Critics acknowledge that marketing has legitimate uses in connecting goods and services to the consumers who want them. Critics also point out that marketing techniques have been used to achieve morally dubious ends by businesses, governments and criminals. Critics see a systemic social evil inherent in marketing (see No Logo, Bill Hicks, Marxism or Commercial Alert). Marketing is accused of creating ruthless exploitation of both consumers and workers by treating people as commodities whose purpose is to consume. (see Fashion victim)
Most marketers believe that marketing techniques themselves are amoral. While it is ethically neutral, it can be used for negative purposes, such as selling unhealthy food to obese people or selling SUVs in a time of global warming, but it can also have a positive influence on consumer welfare.[5]
The Observer’s survey among 1,206 UK adult consumers in 2001 highlighted some of the stark changes our society has gone through in the last two decades. This raises a question on the effectiveness of the CIM’s definition of marketing (anticipating, identifying and satisfying customer needs profitably), mainly in consumer marketing. There are similar concerns in industrial markets, also known as business-to-business or B2B. Industrial market segmentation attempts to provide some answers.
Core marketing elements such as segmentation, targeting and positioning are still relevant in the modern (or post-modern) world.[6] However, they are complex topics that need a high level of effort, intelligent thinking as well as resources to be implemented successfully. A definitive statement cannot be made whether the conventional marketing concept is applicable in today’s environment. Its relevance is very much situational and depends on many factors such as the product, the segment, time, location, political and economic conditions and the inner workings of a company.
However, some scholars such as Stephen Brown challenge the marketing concept in an extreme language. Their statements, sometimes unfair, are relevant, which is why Post-Modern Marketing 2 was chosen as a key reference point for this chapter.[7]
On the one hand Brown makes positive statements about marketing, e.g. “marketing is endowed with considerable personal charm and has enjoyed more than its fair share of conquests” (Brown, 1998:16); and “indeed, the increasing academic attention that is being devoted to marketing and consumption-related phenomena by non-business disciplines such as sociology, anthropology and history; far from being the second-hand rose of the scholarship, marketing is now something of a fashion leader” (p 17)[8]
On the other hand, he condemns marketing by saying “marketing has to decide whether to expose its intellectual nakedness or press itself against the searing heat of postmodernism” (p 17); and using phrases such as “mid-life crisis” (p 23); “in decline; failing; anachronistic; being abandoned; no longer appropriate; in an unprecedented state of crisis; delivered nothing of value; failure; confusion; misunderstanding; occasional inexplicable hitting of the jackpot” (p. 21).
This apparent love-hate relationship is proof in itself that even a skeptics find it difficult to deny the contribution that marketing has made and can make to customer satisfaction and economic value. It has contributed to both customers’ and suppliers’ quality of life by selecting profitable customer satisfaction as its sole objective. The marketing concept, together with other business disciplines, helped the UK to make the transition from a 19th-century manufacturing economy to a modern model of success in the service industry, creating an economic growth period never seen before in the United Kingdom.[citation needed]
Marketing has helped create value through customized products, no-questions-asked refund policies, comfortable cars, environmental attention, shopkeepers’ smile, and guaranteed delivery dates. Even some government departments address the public not as ‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers.' Of course all of the above is done for economic or political gain, for better or worse. Despite all this achievement, to dismiss marketing as a failure is unfair.[citation needed]
Marketing also helps companies avoid unnecessary R&D, operational and sales costs by helping to develop products because customers want them, not for the sake of innovation. Another success is the now commonly implemented value-pricing principle, whereby a product or service is sold for the price the customer is willing to pay, not on a cost-plus basis. This way, both suppliers and customers get a fair deal.[citation needed]
In the context of segmentation, Brown suggests that “the traditional, linear, step-by-step marketing model of analysis, planning, implementation and control no longer seems applicable, appropriate or even pertinent to what is actually happening on the ground” (p. 23-24). If Mr. Brown had studied “the ground” before making his statement, he would have realised that companies are successful the world over precisely because they implement this model.
They segment their markets, relate their products and services to them, define their value proposition and serve their customers accordingly. Examples are General Electric, HSBC, PriceWaterhouseCoopers, Smiths Aerospace, BAE Systems, BOC Edwards, Weir Group and the BT Group to name but a few. A brief visit to their websites can make this point clear.
Stephen Brown also has a constructive suggestion: “I reckon we need more passion in marketing, not less; it is time we banished banishing passion from works of marketing scholarship” (p. 256). This refers mainly to promotion, which is only one element within the marketing concept. The truth is that marketing today leads the way in segmentation, innovation, pricing, product management, distribution, and last but not least, promotion.
[edit] Construction marketing
Due to increased competition, privatisation and globalisation, marketing and business development have become increasingly important functions in all construction organisations. Marketing research,branding and public relations are increasingly being seen as vital in a marketplace typified by sophisticated and demanding clients and customers, and a socially and environmentally aware general public and media.
[edit] See also
[edit] Related lists
- See List of marketing topics for an extensive list of the marketing articles.
- List of management topics
- List of human resource management topics
- List of economics topics
- List of finance topics
- List of accounting topics
- List of information technology management topics
- List of production topics
- List of business law topics
- List of international trade topics
- List of business ethics, political economy, and philosophy of business topics
- List of business theorists
- List of economists
- List of corporate leaders
[edit] References
- ^ "The Concept of the Marketing Mix" from the Journal of Advertising Research, June 1964 pp 2-7
- ^ "Marketing Management: Strategies and Programs", Guiltinan et al, McGraw Hill/Irwin, 1996
- ^ "In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century". Chekitan S. Dev and Don E. Schultz, Marketing Management v.14 n.1 January/February 2005
- ^ "Swarming the shelves: How shops can exploit people's herd mentality to increase sales?", The Economist, 2006-11-11, p. 90.
- ^ Marketing Nutrition: Soy, Functional Foods, Biotechnology, and Obesity (2005), Brian Wansink, Champaign, IL: University of Illinois Press
- ^ "The Customer Driven Company: Moving From Talk to Action" R.C. Whiteley, Pfeiffer & Company, 2000
- ^ Brown, Stephen (1993), „Postmodern Marketing?“, European Journal of Marketing Vol. 27 No. 4, pp. 19-34
- Brown, Stephen (1998), „Post-Modern Marketing 2 – Telling Tales“, Thomson Business Press.
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