Nature and Scope of Marketing

Nature and Scope of Marketing

• The History of Marketing• What is Marketing• Definitions of Marketing• Development of Marketing• Marketing Management Orientations• Why do organisations needs to be Marketing

Oriented?• Relationship Marketing

History of Marketing• Early humans had only basic requirements such as food and

shelter• They themselves obtained them collecting, growing and hunting.

They lived under trees or in caves. Therefore they were self- sufficient.

• Once the needs became more, the man could not obtain them on his own.

• Then he had to exchange for what he has with others. Eg. A farmer exchanged his rice with fisherman's fish.

• It was called the Barter System• However, Barter system was not efficient. There were many

problems with the barter system. E.g. Person could not easily find another person who had his need and who wanted his surplus.

• Then came the introduction of medium of exchange called money.

• The birth of selling goods and services started with the use of money as a medium of exchange.

• People started producing more items than that they want and sold them in the market for money and obtained their other requirements from the money they received,

• That gave birth to markets. Markets are places where customers and suppliers met. They were geographical places. It was a pre-planned place at a pre-planned time to exchange goods.

Markets• The excess items were sold in the market and

markets became very competitive• Producers met the buyers directly at the market

place.• After some time the producers could not handle

selling effectively. • There were problems of sharing time for

production and selling and many other practical problems.

• As a results specialist sellers were born. They are called the middlemen.

• The focus shifted to sales, retaining customers, finding new customers

• Selling could not be done well without really understanding the needs and wants of customers

• Therefore customers became more important• A customer oriented approach had to be used • That paved the way to form businesses as

marketing organizations

What is Marketing?• Marketing is a societal and managerial

process where people and organisations ( customers) obtain what they need and want by exchanging products and services of value with each other

• Marketing focuses on the needs and wants of customers.

• It is concerned about satisfying customers through supply of goods and services

• Many think marketing is only advertising and selling. But marketing is almost a way of life that everybody needs to know.

Iceberg Theory

Iceberg- under water

Selling & advertising

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Water

Real Iceberg

All profit and non profits are using marketing

• Marketing is not only used by commercial profit oriented organisations but also by other organizations such as temples, churches and many other not for profit organizations and persons.

• For example : Temple/Church provide their service ( product) to its congregation( customer) It announcers its activities

( promotion) to its congregation (target market). It depends on funds of congregation ( price/payment) for its survival. Further it is located where their congregation can have easy access

( place). • Therefore customer would be the most important element of any

marketing organization. • Marketer needs to strive to satisfy its customers as “ No

customers means No business”

Few definitions of Marketing

• Marketing is not a science and there is no single universally adopted definition. Lets discuss about some widely used definitions.

• Adams Smith( 1776) “ Consumption is the sole purpose of all production and interest of product ought to be attended to, only so far as it may be necessary for promoting that of the consumer”

Phillip Kotler( The Millennium Edition –2000) “Marketing is a societal process by which individuals and groups obtain what they want through creating, offering and freely exchanging products and services of value with others

Chartered Institute of Marketing – UK“ Marketing is a management process, which is

responsible in identifying, anticipating and satisfying customer needs and wants at a profit”

• American Marketing Association“Marketing Management is the process of planning and

executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational goals”

Dibb, Simkin,Pride and Ferrel“Marketing Consists of individual and organizational activities

that facilitate and expedite satisfying exchange relationships in dynamic environment through the creation, distribution, promotion and pricing of goods, services and ideas”

Core ingredients of various definitions indicate the key functions and activities of marketing

• Customer is the center of all Marketing activities.• Marketing focuses on the needs and wants of customers. • Identifying favorable emerging market opportunities• It is concerned about satisfying customers through supply of

goods and services• Marketing involves analysis planning and control• Marketing is concerned about staying ahead with competition

and making profits • Marketing has a heavy emphasis on relationships• Creating value to both the customer and organization

Development of Marketing

• Marketing as an exchange process• exchange is the act of obtaining something by offering

something in return ( money, services, goods or a combination)

• For an exchange to take place following conditions must exists:

• 1. Two parties2. Each party must possess something of value that the other party likes

• 3. The parties must be involved voluntarily• 4. Parties must be able to communicate about their

value proposition

Is Marketing a function of management or a business philosophy ? Discuss

• It is a function of management as well as a business philosophy

• It is considered as a function of management as it uses management techniques in satisfying customers.

• Businesses has various divisions that handles different functions such as human resource, financial, operations and marketing.

• In a typical Marketing Department there are marketing managers, product managers, sales managers, sales representatives, sales persons, delivery assistants etc.

As a function, marketing is involved in several activities• Identifying customer requirements through research• Study about customer perception and products, set

prices, involved in distribution systems, promo activities, etc.

• Anticipate customer demand by forecasting• Work with other functional departments to develop

products and services to satisfy customer needs• Simply analyzing, planning, implementation and

control of all the marketing activities.

• Marketing as a business philosophy

• Marketing is considered as a overall business philosophy which runs through all departments of an organisation and embedded in all the activities of a marketing organization. It is a way of business thinking.

• The idea rooted in satisfying customers through the supply of goods and services does not restrict to one department or function.

• It is the purpose of the whole business. Everyone should have the customer oriented attitude in an organisation.

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• Marketing is running like a silver lining in all aspects of the business.

• Therefore it is considered as an attitude of mind rather than a specific function or discipline.

• A marketing integrated approach is required in all departments and functions of a company

• Peter Drucker- “Business success is not determined by the producer but by the customer”

Marketing Management Orientations in the Evolution of Marketing?

• Production Concept: “ Consumers will prefer products that are widely available and inexpensive”

• - Concentrates on – high production efficiency- low cost- mass distribution

• Example : Ford T- Model• : Govt Hospital and other Service Depts• Heavy focus on the Price and Place on M.Mix

Ford T Model

• Product Concept• “ Consumers will favor those products that offer

most quality, performance or innovative features”• Just making superior products will make

customers seek and buy them• More focus on “Product” in the M. Mix. • Better mouse trap of Woolworth Co. Made a very

effective reusable mousetrap that the existing ones but price was more than double. It did not sell well. People did not want to spend twice as they used to throw the mousetrap also with the catch.

• Marketing Myopia- shortsightedness of not considering customer needs and behavior

Woolverths mouse trap

• Selling Concept• “If consumers are left along, will ordinarily not buy

enough of the organisation’s products. Therefore the organisations must undertake aggressive selling and promotional effort”

• Consumers have buying inertia and have to be persuaded

• Practiced more on unsoughted goods• Sell what is made or available rather than what

consumer wants.• Heavy focus on Promotion on the M.Mix

Consumers have to be persuaded

• Marketing Concept• “Key to achieving organisational goals

consists in determining the needs and wants of target market and delivering the desired satisfaction more effectively than competitors”

• Focus on all Ps of the Marketing mix.• To apply marketing concept three conditions

should be met

Key Components of the Marketing Concept

Marketing Conceptachieving organizational goals

consists in determining theneeds and wants

of target market and delivering the

desired satisfaction more effectively than competitors

Customer OrientationCorporate activities

Are focused on Customer satisfaction

Integrated EffortAll staff should accept The responsibility ofCreating customer

satisfaction

Goal AchievementThe belief that

corporate goals can be achieved

Through customerSatisfaction

Selling Vs. Marketing• Starting Point- focus- Means- End

Factory Product PromotionProfits through sales volume

Target Market

Customer needs

Coordinated - Mktg

Profit through customer satisfaction

• Societal Marketing Concept“Organisations task is to determine the needs, wants

and interest of consumers of target markets and to deliver the desired satisfaction more effectively and efficiently than competitors in a way that preserve or enhances the customer’s and the societies well being”

• They must balance often conflicting position of company profits, consumer wants and public interest

Societies well being is the public interest which includes – Ecological ( Green Marketing), Human

( Ethical Marketing) and The Intelligent Consumption

What is Green Marketing?• This stems from how marketer responds to the

environment. The marketers have been practicing very environmental destructive activities.

• Resource depletion and degradation - Genetic engineering- Pollution- Harmful emissions and products- health hazards

• Barriers to Green M- Cost- Technological problems- less innovation -less commitment and ignorance- considering world as bundle of raw materials for the benefit of the current generation.

What is ethical Marketing?• Ethical Marketing are the rules of conduct and moral

principals regulating marketing.- The limit of Claims/Promises that can be made as to

product benefits- Discriminating competing products- Marketing of products like cigarettes, alcohol- Limitations in Marketing products to children- Religious/racially susceptible Brand names and images- Unaccepted Promotional methods- Using women in unaccepted manner- Purposeful deception -

Relationship Marketing• Customer retention has become a major problem in the

competitive world of business• Relationship Marketing is the process of creating, building and

managing long term relationship with customers, distributors and suppliers. Life Time Value of a customer is emphasized more than a value of a single transaction

• Traditional Marketing is concerned with the exchanges with customers.

• The emphasis was to develop products that will satisfy customers and focus was basically on (single) transaction.

• Not much effort was kept on keeping the customer for a long time and Life Time Value was not considered much.

• Types and Levels of Relationship• Transactional approach- Marketer concludes a

transaction of selling a product. The marketer, in offering the product, is looking for a response. Transaction based marketing is on individual transaction

• Relationship approach- The concluded transaction is not the end of a process, but start of a long term relationship with the customer.

• Benefits of relationship marketing– Retaining existing customers is cheaper than getting new

ones– Repeat customers are costing less to service as they are

familiar with the company– Reduce customer deflection and bad word of mouth– Keep customer databases and service more effectively– Small changes in retention rates have large effects on

revenue

Identify and explain the anticipated benefits of introducing marketing orientation to an organisation.

• If a company to be successful in the long run the most important philosophy they should follow is the marketing orientation/ concept

• The mere survival of a company in the modern globalised world depends on how much of customer satisfaction that it can offer.

• Therefore the customer focus should be an integral part of the organisation

• All the departments in the company should have an integrated approach towards satisfying customers

• Further it would be able to reduce the number of dissatisfied customers.

• Dissatisfied customers will tell others • Research confirms it takes six times of

effort and cost to make anew customer than keeping the existing ones.

• It would make the organisation gain a competitive advantage

If an organisation can adopt a marketing oriented approach it would be able to get

• Increased customer satisfaction• Increased customer loyalty• Increased reputation• Increased motivation among staff• Increased market share• Reduction of waste• Combat threats from competitors

Difficulties in Developing the Marketing Orientation

• The main problem is with the differences of emphasis of other branches of the organisation.Engineering, production, Finance, R&D, HR etc.

• Lack of committed leadership and vision• Failure of managers to understand the true concept• Inability to to adapt to change• Difference in attitudes/culture• Autocratic leadership • Lack of customer knowledge• Lack of infrastructure- required technology