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UNIT: 01
NATURE, IMPORTANCE AND CORE
CONCEPT OF MARKETING
Structure 1.1 Introduction 1.2 Objectives 1.3 Meaning and Definition Of ‗Marketing‘ 1.4 Nature of Marketing 1.5 Scope of Marketing 1.6 Marketing Concept 1.6.1 Needs, Wants and Demands 1.6.2 Products 1.6.3 Value, Satisfaction and Quality 1.6.4 Exchange 1.6.5 Market 1.7 Aspects of Marketing Concept 1.8 Marketing versus Selling 1.9 Importance of Marketing 1.10 Summary 1.11Glossary 1.12 Reference / Bibliography 1.13 Suggested Readings 1.14 Terminal Questions
1.1 Introduction
Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is ―meeting needs profitably‖. The objective of all business enterprises is to satisfy the needs and wants of the society. Marketing is, therefore, a basic function of all business firms. When a salesperson sells washing machines, a doctor treats a patient or a Government asks people to take their children for getting polio drops, each is marketing something to the targets.
Traditionally, small firm owners did not give as much importance to marketing as to other functions such as accountancy, production and selling. Training programmes, enterprise development and the current thrust for competitiveness have now given high priority to promoting marketing awareness among small business owners, and marketing is now assuming its rightful place along with other business functions.
Since early 1990s there has been a change in the thinking of businessman from product orientation to consumer orientation. Modern business concerns lay
emphasis on ‗selling satisfaction‘ and not merely on selling products. The activities have to be coordinated so as to develop the marketing mix, which provides maximum satisfaction to the customers.
That is why marketing research and product planning occupy an important role in marketing. The other important functions of marketing include: buying and assembling, selling, standardization, packing, storing, transportation, promotion, pricing and risk bearing. Thus, the scope of marketing is very wide and no more restricted to merely selling of products.
1.2 Objectives
After reading this unit you should be able to:
- appreciate the definitions of Marketing
- Understand the meaning and nature of ‗Marketing‘.
- Define the role of Marketing and discuss its core concepts.
- Understand the importance of Marketing
1.3 Meaning and Definition of Marketing
The concept of marketing can be viewed from social and managerial perspectives. So Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. At its simplest, marketing can be defined as exchange transactions that take place between the buyer and the seller. Marketing is the management function, which organizes and directs all those business activities involved in assessing and converting customer purchasing power into effective demand.
The American Marketing Association offers the following formal definition: Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders.Philip Kotler defines marketing as ―a social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others‖. In essence, the marketing concept is customer orientation aimed at generating customer-satisfaction through integrated marketing. Marketing may be narrowly defined as a process by which goods and services are exchanged and the values determined in terms of money prices. That means marketing includes all those activities carried on to transfer the goods from the manufacturers or producers to the consumers.
We shall be learning later in the lesson that marketing is more than a mere physical process of distributing goods and services. It is the process of discovering and translating consumer wants into products and services. It begins
Marketing cannot possibly copy the natural sciences in its methodologies. Positivist approaches have been accused of seeking meaning from quantitative data in a very subjective manner which is at variance with scientific principles (Brown, 1995). Experimental research in the natural sciences generally involves closed systems in which the researcher can hold all extraneous variables constant, thereby isolating the effects of changes in a variable that is of interest.
For social sciences, experimental frameworks generally consist of complex social systems over which the researcher has no control: a researcher investigating the effects of a price change in a product on demand from customers cannot realistically hold constant all factors other than price. Indeed, it may be difficult to identify just what the ‗other factors‘ are that should be controlled for in an experiment, but they may typically include the price of competitors‘ products, consumer confidence levels, the effects of media reports about that product category, and changes in consumer fashions and Tastes, to name some of the more obvious. Contrast this with a physicist‘s laboratory experiment, where heat, light, humidity, pressure, and most other extraneous variables can be controlled, and the limitations of the scientific methodology in the social sciences become apparent. Marketers are essentially dealing with ‗open‘ systems, in contrast to the ‗closed‘ systems that are more typical of the natural sciences. Post-positivists place greater emphasis on exploring in depth the meaning of individual case studies than on seeking objectivity and reliability through large sample sizes. Many would argue that such inductive approaches are much more customer focused, in that they allow marketers to see the world from consumers‘ overall perspective, rather than through the mediating device of a series of isolated indicators. Post-positivist approaches to marketing hold that the ‗real‘ truth will never emerge in a research framework that is constrained by the need to operationalize variables in a watertight manner. In real-life marketing, the world cannot be divided into clearly defined variables that are capable of objective measurement. Constructs such as consumers‘ attitudes and motivation may be very difficult to measure and model objectively. Furthermore, it is often the interaction between various phenomena that is of interest to researchers, and it can be very difficult to develop models that correspond to respondents‘ holistic perceptions of the world.
There is another argument against the scientific approach to marketing, which sees the process as essentially backward-looking. The scientific approach is relatively good at making sense of historic trends, but less good at predicting what will happen following periods of turbulent change. Creativity combined with a scientific approach can be essential for innovation. The scientific approach to marketing planning has a tendency to minimize risks, yet many major business successes have been based on entrepreneurs using their own judgment, in preference to that of their professional advisers. Marketing has to be seen as a combination of art and science. Treating it excessively as an art can lead to
decisions that are not sufficiently rigorous. Emphasizing the scientific approach can lead a company to lose sight of the holistic perceptions of its customers. Successful firms seek to use scientific and creative approaches in a complementary manner.
1.5 Scope of Marketing
The scope of marketing can be understood in terms of functions that an entrepreneur has to perform. These include the following:
a. Functions of exchange: which include buying and assembling and selling?
b. Functions of physical supply: include transportation, storage and warehousing
c. Functions of facilitation: Product Planning and Development, Marketing Research, Standardisation, Grading, Packaging, Branding, Sales Promotion, Financing.
CHECK YOUR PROGRESS -
Q.1- What do you mean by ―Marketing‖ and distinguish it from mere ―Selling‖.
Q.2- Define ―Nature of Marketing‖.
For many public services, it is society as a whole, and not just the immediate customer, that benefits from an individual‘s consumption. In the case of health services, society can benefit from having a fit and healthy population in which the risk of contracting a contagious disease is minimized. Different customers within a market have different needs which they seek to satisfy. To be fully marketing oriented, a company would have to adapt its offering to meet the needs of each individual. In fact, very few firms can justify aiming to meet the needs of each specific individual; instead, they target their product at a clearly defined group in society and position their product so that it meets the needs of that group. These subgroups are often referred to as ‗segments‘.
1.6.1 Needs, Wants and Demands
The most basic concept underlying marketing is that of human needs. Consumers are motivated by their desire to satisfy complex needs, and these should be the starting point for all marketing activity. We no longer live in a society in which the main motivation of individuals is to satisfy the basic needs for food and drink. Maslow (1943) recognized that, once individuals have satisfied basic physiological needs, they may be motivated by higher-order social and self- fulfillment needs. In order of importance, they are physiological needs, safety needs, social needs, esteem needs and self-actualization needs. People will try to satisfy their most important needs first. When a person succeeds in satisfying an important need, he or she will then try to satisfy the next -most-important need. ‗Need‘ refers to something that is deep-rooted in an individual‘s personality. How individuals go about satisfying that need will be conditioned by the cultural values of the society to which they belong. In some cultures the need for self-fulfillment may be satisfied by a religious penance, while other societies may seek it through a development of their creative talents.
Figure: Maslow‟s Hierarchy of Needs
Self - actualization Needs (Self-development and Realization) Esteem Needs (Self-esteem, Recognition, Status) Social Needs (Sense of belonging, love) Security Needs (Security, Protection) Physiological Needs (Food, Water, Shelter)
It is useful to make a distinction between needs and wants. Wants are culturally conditioned by the society in which an individual lives. Wants subsequently become effective demand for a product where there is both willingness and an ability to pay for the product. Marketers are continually seeking to learn more about underlying needs which may eventually manifest themselves as demand in the form of people actually being willing to pay money for its products.
It must not be forgotten that commercial buyers of goods and services also have complex needs which they seek to satisfy when buying on behalf of their organizations. Greater complexity occurs where the economic needs of the organization may not be entirely the same as the personal needs of individuals within the organization.
People have almost unlimited wants, but limited resources. They choose products that produce the most satisfaction for their money. When backed by buying power, wants become demands. Consumers view products as bundles of benefits and choose those that give then the best bundle for their money. People choose the product whose benefits add up to the most satisfaction, given their wants and resources.
1.6.2 Product
People satisfy their needs and wants with products. A product is anything that can be offered to satisfy a need or want. The concept of product is not limited to physical objects. Anything capable of satisfying a need can be called a product. More broadly defined, products include experiences, persons, places, organizations, information, and ideas. Thus, the term product includes much more than just physical goods or services. Consumers decide which events to experience, which tourist‘s destinations to visit, which hotels to stay in, and which restaurants to patronize. To the consumer these are all products. One of the most interesting areas of marketing is product planning and development.
1.6.3 Value, Satisfaction and Quality For customers, value is represented by the ratio of perceived benefits to price paid. Customers will evaluate benefits according to the extent to which a product allows their needs to be satisfied. Customers also evaluate how well a product‘s benefits add to their own well-being as compared with the benefits provided by competitors‘ offerings:
Customer perceived value = Benefits deriving from a product/ Cost of acquiring the product
Consumers often place a value on a product offer that is quite different from the value presumed by the supplier. Business organizations succeed by adding value at a faster rate than they add to their own production costs. Value can be added by
received and given up are essentially based on personal opinion and preferences, so there is no objective way of defining: what is a ‗fair‘ exchange, other than observing that both parties are happy with the outcomes. In market-based economies there is a presumption that each party can decide whether or not to enter into an exchange with the other. Each party is also free to choose between a numbers of alternative potential partners. Exchange usually takes the form of a product being exchanged for money, although the bartering of goods and services is still common in some trading systems.
Can the concept of exchange be generalized to cover the provision of public services? Some have argued that the payment of taxes to the government in return for the provision of public services is a form of social marketing exchange. Within marketing frameworks, the problem with this approach to exchange is that it can be difficult to identify what sovereignty consumers of government services have in determining which exchanges they should engage in. A single exchange should not be seen in isolation from the preceding and expected subsequent exchanges between parties. Marketers are increasingly focusing on analyzing ongoing exchange relationships, rather than one-off and isolated exchanges.
1.6.5 Markets
The term ‗market‘ has traditionally been used to describe a place where buyers and sellers gather to exchange goods and services (for example, a fruit and vegetable market or a stock market).
Economists define a market in terms of a more abstract concept of interaction between buyers and sellers, so that the ‗cheese market‘ is defined in terms of all buyers and sellers of cheese in the country. Markets are defined with reference to space and time, so marketers may talk about sales of a particular type of cheese in the north-west region for a specified period of time. Various measures of the market are commonly used, including sales volumes, sales values, growth rate, and level of competitiveness.
1.7 ASPECTS OF MARKETING CONCEPT
The important aspects of marketing concept are:
Creation of demand: Marketing tries to create demand through various means. The producers first ascertain what the customers want and then produce goods according to the needs of the customers. There is a systematic effort to sell goods and services according to the needs of the customers.
Customer Orientation: Marketing involves undertaking a range of business activities directed at the creation of customer satisfying products and services.
Integrated Marketing: The customer orientation alone is not enough on the part of management. To be effective must be backed by an appropriate set up within the country. The responsibility of marketing department is to ensure coordination of the various departments of the company i.e., finance, purchase, research and development.
Profitable sales volume through customer satisfaction: Marketing tries to realize long-term goals of profitability, growth and stability through satisfying customers‘ wants. All the basic activities of a company are planned to meet the wants of customers and still making reasonable profits. Modern marketing thus begins with the customer and ends with the customer.
1.8 MARKETING VERSUS SELLING
The basic difference between marketing and selling lies in the attitude towards business. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company‘s existing products, and calls for heavy selling and promoting to produce profitable sales. The marketing concept takes an outside-in perspective. It starts with a well-defined market, focuses on customer needs, coordinates all the activities that will affect customers, and produces profits through creating customer satisfaction.
1.9 IMPORTANCE OF MARKETING
Since marketing is consumer oriented, it has a positive impact on the business firms. It enables the entrepreneurs to improve the quality of their goods and services. Marketing helps in improving the standard of living of the people by
Marketing vs. Selling
Marketing
- _ Focuses on Customer’s needs.
- _ Customer enjoys supreme importance.
- _ Converting customer’s needs into product.
- _ Profits through customer satisfaction.
- _ Emphasis is given on product planning and development to match products with the market.
- _ Integrated approach to marketing is practiced.
- _ The principle of caveat vendor (let the seller beware) is followed.
Selling
- _ Focuses on seller’s needs.
- _ Product enjoys supreme importance.
- _ Converting product into cash.
- _ Profits through sales volume.
- _ Emphasis is placed on sale of products already produced.
- _ Fragmented approach to selling is practiced.
- _ The principle of caveat emptor (let the buyer beware) is followed.
you should be aware of the wide definition of marketing and core concept of marketing. Today‘s successful companies-whether small or large, share a goal of customer satisfaction and are committed to marketing. The marketing comprises many activities- product development, pricing, personal selling, effective channels of distribution, all aimed to achieve profits through customer satisfaction.Tobe successful in service industry, all the players will have to be strongly market focused. They need to identify market segments since buyers are numerous, widely scattered and different in their needs and preferences. The service product is highly perishable since the supply of services cannot be stored for future use; therefore marketing in service industry is different from marketing of manufactured goods. The service product is developed and other tools of marketing mix are designed to formulate prices, advertising and distribution channels to reach the target market efficiently. Market research helps to design and formulate such a strategy.
1.11 GLOSSARY
Attitude: A person‘s consistently favourable or unfavorable evaluations, feelings, and tendencies toward an object or idea.
Customer satisfaction: The extent to which a product‘s perceived performance matches a buyer‘s expectations.
Discount: A straight reduction in price on purchases during a stated period of time.
Human Need: A state of felt deprivation in a person.
Human Want: The form that a human need takes when shaped by culture and individual personality.
Marketing: A social and managerial process by which people and groups obtain what they need and want through creating and exchanging products and values with others.
Marketing Concepts: The marketing management philosophy that holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering desired satisfactions more effectively and efficiently than competitors.
Marketing Management: The analysis, planning, implementation and control of programs designed to create, build and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives.
Product: Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy want or need. It includes physical objects, services, persons, places, organizations and ideas.
Product Positioning: The way the product is defined by consumers‘ on important attributes- the place the product occupies in consumers‘ minds relative to competing products.
Quality: The totality of features and characteristics of a product that bear on its ability to meet customer needs.
Service: Any activity or benefit that one party can offer to another that is essentially intangible and does not result in ownership of anything.
1.12 REFERENCE
Kotler, P., Browen, J. and Makens, J.; Marketing for Hospitality and Tourism; Fourth Edition, Pearsons Education Ltd., 2008 Kotler, Philip and Gary Armstrong, Principles of Marketing, 10 ed., Pearsons Education Ltd., 2004. Kotler, Philip…..et. al.: Marketing Management; 12th^ Edition, Pearsons Education Ltd., 2007 Burnett, John: Core concepts of Marketing H:\Unit Writing Extra\Notes Marketing Management.mht Website http://www.samarthbharat.com E-mail snacks@sancharnet.in hindustanstudies@rediffmail.com hindustanstudies@yahoo.co.in
1.13 SUGGESTED READINGS
Burnett, John: Core concepts of Marketing Kotler, Philip and Gary Armstrong, Principles of Marketing, 10 ed., Pearsons Education Ltd., 2004. Kotler, P., Browen, J. and Makens, J.; Marketing for Hospitality and Tourism; Fourth Edition, Pearsons Education Ltd., 2008 Kotler, Philip…..et. al.: Marketing Management; 12th^ Edition, Pearsons Education Ltd., 2007 Seaton, A.V. and M.M. Bennett, Marketing Tourism Products- Concepts, Issues, Cases, International Thomson Press, 2000. S. Neelamegham: Marketing in India, 3 rd^ edition - 2000, Vikas Publications, New Delhi.
UNIT: 02
DIFFERENT ORIENTATION TOWARDS
MARKET PLACE AND MARKETING
PHILOSOPHIES
Structure: 2.1 Introduction 2.2 Unit Objective 2.3 Marketing 2.3.1 Benefits of Marketing 2.3.2 Key Marketing Activities 2.4 Different Orientations 2.4.1 Customer Orientation 2.4.2 Competitor Orientation 2.4.3 Inter Department Coordination 2.5 Marketing Strategies: Customer Orientation vs Competitor Orientation 2.6 Core Marketing Concepts 2.7 Marketing Philosophies 2.7.1 Production Concept 2.7.2 Product Concept 2.7.3 Selling Concept 2.7.4 Marketing Concept 2.7.5 Societal Marketing Concept 2.8 Comparison of Marketing Philosophies 2.9 Summary 2.10 Glossary 2.11 References 2.12 Suggested Readings 2.13 Terminal and Model Questions
2.1 INTRODUCTION
Marketing management is a process involving planning, implementation and control of a firm‘s marketing activity. It is particularly important since marketers function in a dynamic environment. The marketing opportunities facing organizations depend on the changing needs of society. Consumers are becoming more sophisticated and more discerning in their expectations. Globalization of the world‘s marketplace has not only created new possibilities but also the challenge of new competition. Even within their home markets, environmental concerns and changing demographics are presenting new challenges for marketers. For example, greater consumer awareness of the environment has led to increased demand for products which are ‗environmentally friendly‘. Conversely, those
products that are considered harmful may have suffered not merely from consumer demand but even government legislation.
2.2 OBJECTIVE
On completion of this unit you should be able to:
- Describe the evolution of the marketing concept. 2 Evaluate the impact of a marketing based philosophy on organisational structure and operational relationships.
2.3 MARKETING
As defined by Phillip Kotler marketing is ―A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others‖.
As defined by Evans & Berman ―Marketing is the anticipation, management and satisfaction of demand through the exchange process‖. According to American Marketing Association “ Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services tocreate exchanges that satisfy individual and organizational goals‖. In short Marketing is a process of: Identifying Needs of the people; Making Products Accordingly; and Offering them through an Exchange Process
2.3.1 Benefits & Criticisms of Marketing
Benefits a) Improved Satisfaction of Target Market b) Improved efficiency in activities Criticism a) Marketing wastes money b) Marketing activity is intrusive c) Marketing is manipulative
**2.3.2 Key Marketing Activities
- Consumer Analysis:** It is examination and evaluation of consumer characteristics needs and purchase processes.
2) Product Planning: It involves development and maintenance of products, product assortments, product positions, brands, packaging options and deletion of old products.
3) Promotion Planning: It is combination of advertising, publicity, personal selling, and sales promotion to drive sales revenue.
services that are offered to the consumers so that real value can be provided to the targeted customers. The market-led approach has three components: Consumer orientation Competitor orientation Inter-functional co-ordination.
Figure 2: The Market-led Organisation
The first two involve the organisation-wide generation of market intelligence regarding current and future customer needs, and making this information available to all departments. Customer orientation also involves continuously monitoring customer information in order to be able to create superior value.
Inter-functional co-ordination concerns the organisation-wide co-ordination of resources in response to customers. Inter-departmental ‗connectedness‘ has a key role to play in the dissemination of and the responsiveness to market intelligence by the organisation
The Chartered Institute of Marketing (CIM) suggests that:―Marketing is the management process for identifying, anticipating and satisfying customers‘ needs at a profit‖.
2.4.1 Customer Orientation
Customers are attracted to various products and services and continue to remain loyal customers of that particular product if their needs and wants are met. Word of mouth plays a crucial role here. If they are satisfied they will not only return to the same organisation like hotels, cruise line, travel agency, restaurants etc. but they will also talk very favorably about it to their peers, colleagues, friends and family. If the customers are satisfied profits will definitely flow in the organisation.
In today‘s scenario most of the hospitality managers are focusing more on profits rather than customer satisfaction. This attitude of the managers does not work in favor of the guests as the organisation fails to get fewer repeat guests and does not
get good publicity. The managers should understand that if the customers are satisfied then automatically the profits will flow in.
Company‘s sales come from two groups: new customer‘s and repeat customers. It always costs more to attract new customers than to certain current customers. Therefore, customer retention is customer satisfaction. A satisfied customer: Buys again Talks favorably to other about the company Pays less attention to competing brands Buys other products from the same company
Thus a Company would be wise to regularly measure customer satisfaction. The delighted customers are more effective advertisers than the advertisement placed in media.
Let us consider the following situation: Mr. Singh comes to a fine dining restaurant at 10:50p.m., when the last order has already been taken. However, the waiter takes his order and serves him with the best hospitality. The guest is very contended with the hospitality and leaves good feedback. After the guest leaves the restaurant the managers shouts at him for taking the order because the last order is taken at 10:45pm. , and also because the management does not want to bear the overtime expenses.
A few days later a guest comes again at around 10: 50 pm and asks to be served. The same waiter shouts at him saying that the order cannot be taken. The guest goes back unsatisfied and spreads bad word of mouth. The management does not realize that they may loose customers because of their approach.
However, the alternate approach should be to cater to the needs of the customer rather than ignoring them because a customer once lost is lost forever and it ultimately leads to revenue loss and bad reputation of the organisation.
2.4.2 Competitor Orientation
Traditional economic theory calls for firms to maximize shareholder wealth. However, today profit maximization is not the ultimate goal of the managers. Instead, they frequently make decisions so as to perform well in comparison to their competitors, which we refer to as having competitor-oriented objectives. Managers do not prefer focusing on profit maximization as it is difficult to forecast total profit in the future due to fluctuations in the market and because a focus on profits may lead to a short-term orientation at the expense of long-term considerations.
For example, Pepsi and Coke. There was a time when Coke reduced its price and automatically Pepsi also slashed down its price.
