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Transcript of Mb0046 Unit 01-Slm
Marketing Management Unit 1
Sikkim Manipal University Page No. 1
Unit 1 Introduction to Marketing Management
Structure:
1.1 Introduction
Objectives
1.2 Market and Marketing
Market place and market space
Marketing
1.3 The Exchange Process
1.4 Core Concepts of Marketing
1.5 Functions of Marketing
1.6 Importance of Marketing
1.7 Marketing Orientations
The production concept
The product concept
The selling concept
The marketing concept
The societal marketing concept
1.8 Summary
1.9 Glossary
1.10 Terminal Questions
1.11 Answers
1.12 Case Study
1.1 Introduction
Marketing is said to be as old as civilisation itself. In fact, marketing came
into existence with the barter system. With the passage of time, barter
system evolved into the art of selling. The origin of marketing dates back to
the ancient civilisation when man used symbols, signs, and material
artefacts to transact and communicate with others. The industrial revolution
of 18th and 19th century further fostered the evolution of marketing. The rapid
social change driven by technological and scientific innovation fuelled the
systematic approach for marketing.
The late 50s observed the emergence of real marketing concept, which was
entirely different from the sales concept. Higher level of competitiveness
forced the marketers to depart from the traditional sales approach.
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Eventually, customer satisfaction became an inseparable function of
marketing. Gradually, considering the long-term interest of society over the
specific needs and interests of a given target market became important to
marketing. This new approach was termed as social marketing. But, from
1960 onwards, most markets witnessed saturation, which pioneered the
sophistication of marketing management.
In recent years, the advent and wide availability of the Internet completely
changed the marketing concept. Increasingly demanding customers, rapid
technological change, heterogeneous and fragmented markets, and intense
competition led to the emergence of new branches of marketing, which
could potentially meet the challenges of the 21st century marketer.
The concept of marketing is based on identifying and meeting human and
social needs. The shortest definition of marketing is “meeting needs
profitably.” For example, Procter & Gamble observed that people want tasty
but less fatty food and they come up with the idea of Olestra. Likewise,
CarMax sensed people’s uncertainty while buying used automobile and
invented an entirely new system for selling cars.
The term ‘marketing’ is often used interchangeably with advertising or
publicity and most importantly, sales. Marketing encompasses many
activities like advertising, promotion, product design, etc.
Case Let
Marketing Management at Apple Computer
When Apple Computer launched its iPod digital music player, CEO Steve
Jobs called it the “21st century walkman”, referring to the Sony product
launched in 1979, which revolutionised the way consumers listened to
music. The stylish iPod has more than fulfilled that prophecy. Despite
intense competition from Sony, Samsung, and other rivals, the iPod
captured more than 60% of the US market for digital music players. Just
as important, iPod plays a strategic role as the cornerstone of Apple’s
ambitious marketing drive to bring its brand to a broader customer base
and boost long-term profits.
Apple’s marketers know that customers associate the brand with user-
friendly functionality, innovative technology, and sleek design. Therefore,
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every Apple product - the iPod, Macintosh desktops, laptop computers,
the online iTunes Music Store, and Tiger Software is consistent with this
image and delivers the kind of experience that customers expect from the
brand. The iPod’s runaway success brought new attention to the rest of
Apple’s offerings. As customers try other Apple products, it is helping
reverse Macintosh’s steep decline in the market share. However, market
share is only one measurement of marketing accomplishment, as the
CEO knows. Can Apple’s marketing managers keep up the momentum in
building relationships with customers and profits for shareholders, is a
thing to watch in the future.
(Source: Philip Kotler and Kevin Lane Keller, A Framework for Marketing
Management, 3rd Edition, Pearson Education)
This unit provides answers to the following questions:
What is marketing?
What are the functions and relevancies of marketing?
What are the modern concepts of marketing adopted by marketing
managers with the changing landscape?
Objectives:
After studying this unit, you should be able to:
define market and marketing
analyse the concepts of marketing
discuss the functions of marketing
explain the importance of marketing
differentiate between types of marketing orientations
evaluate how marketing function has changed over a period of time
1.2 Market and Marketing
1.2.1 Market place and market space
Earlier, a market was defined as a place where buyers, sellers, resellers,
and intermediaries met for exchange of goods and services. But with the
changing landscape, modern day marketing has witnessed drastic changes.
Globalisation and technological advances like the Internet and e-commerce
empowers the marketer to overcome geographical boundaries. The market
has become a virtual world and marketing comes off in space than in a
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geographical place. Thus, market may be defined as a set of consumers,
potential consumers, past consumers, sellers, resellers, and intermediaries
who are involved in either the process of exchange or the process of getting
involved in an exchange process. Hence, marketplace is a physical place
where buyers and sellers meet for an exchange, whereas market space is
the virtual world where buyers and sellers meet through the Internet.
Markets can differ in size, range, geographic scale, location, types, variety
of human communities, and the types of goods and services traded. Some
examples include local farmers' markets held in town squares or grounds,
shopping centres and shopping malls, international currency and commodity
markets, etc.
We can categorise markets on the following basis:
Markets based on focus of the marketer – We can classify markets
into the following types:
(a) Consumer markets – These are the markets dominated by
products and services intended for the general consumer. Consumer
markets are categorised into four primary categories - consumer
products, food and beverage products, retail products,
and transportation products. For example, market for cars, consumer
durables, FMCGs, soft drinks, etc. (Provided these goods are bought
for individual use).
(b) Industrial markets – The goods and services sold in these markets
are not directly aimed at final consumers. They are aimed at buyers
who purchase them for use in the production of other goods and
services. For example, markets for machines, photocopier, trucks,
auditing services, etc.
(c) Non-profit and governmental markets – In these markets, the
buyers are government agencies and non-profit institutions who buy
products and services for running their organisations. For example,
the military needs an incredible amount of supplies to feed and equip
troops.
Markets based on area – When area is used as a basis of market
classification, the markets can be categorised into the following types:
(a) Local markets – This market includes the client or customers who
purchase the product in the region or area where it is brought forth.
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Marketing managers must know the target customers, their location,
and the distance they are willing to travel to purchase the product.
The local market includes customers located within the region where
the products or services are available. For example, vegetable
market, hairdressers, tailors, etc.
(b) National markets – This market encompasses domestic
marketplace for goods and services functioning within the borders
and is governed by the regulations of a particular country. The health
of national markets can be a deciding factor for business success.
For example, spice market located in Kerala, rice market located in
Kolkata, etc.
(c) International markets – This market is for products and services
that are bought by consumers residing outside the national
boundaries of the country to which the manufacturing company
belongs. For example, for companies like Tata Motors, Reliance,
Wipro, etc., all countries except India constitute international market.
Markets based on the nature of competition – The most important
form of market classification is based on the nature of competition,
i.e., the buyer-seller interaction. On this basis, the markets can be
classified as:
(a) Perfect competition – This is a kind of market structure which
reflects a perfect degree of competition and where a single price
prevails. The concept of perfect competition was propounded by
Dr. Alfred Marshall. It is a free-market situation in which the following
conditions are fulfilled:
(i) buyers and sellers are numerous but a few have a degree of
individual control over the prices;
(ii) buyers and sellers attempt to maximise their profit (income);
(iii) buyers and sellers are free to get in or leave the market;
(iv) buyers and sellers are endowed with the information regarding
availability, price, and quality of goods being traded; and
(v) goods of a specific category are homogeneous, hence they are
interchangeable for one another. This market structure is also
called perfect market or pure competition.
The industry that closely resembles perfect competition in real life is
the agricultural industry.
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(b) Imperfect market – In a market category where individual firms
exercise control over the price, there are fewer buyers and sellers,
and the firms do not sell identical products. These markets are
further divided into three parts as shown in figure 1.1:
Imperfect Market
Monopoly Oligopoly Monopolistic Competition
Fig. 1.1: Types of Imperfect Market
Monopoly – A kind of market structure where there is a single seller
and there is no close substitute for the product that is offered by the
seller. The price of the product is set by the single seller (price is
often regulated by some regulatory authority like the government).
There are four key features of monopoly: (i) there is a single firm that
sells all the output in a market, (ii) the firm or the seller offers a
unique product, (iii) there are restrictions to enter and exit the
industry, and (iv) other potential producers do not have access to the
specialised information about the production techniques. A few
examples of monopoly are local water utility, local electricity utility,
railways, etc.
Oligopoly – A kind of market structure where there are a few sellers
in the market and they control the supply of a product in the market.
Each seller has some degree of control over the price. There are
three key features of oligopoly: (i) the industry is controlled by a
small number of large firms, (ii) the firms sell either homogeneous or
differentiated products, and (iii) there are significant barriers to enter
the industry. A few examples of oligopoly are the petroleum, steel,
and aluminium industry.
Monopolistic competition – A kind of market structure where there
are many sellers (but not as many as in a perfect market) and they
produce somewhat different products that are close substitutes of
each other. There are four key features of monopolistic competition:
(i) there are large numbers of small firms, (ii) they sell similar but not
homogeneous products, (iii) there is relative freedom of entry and
exit, and (iv) the producers have extensive knowledge of technology
and prices.
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1.2.2 Marketing
Marketing is the management process which facilitates the movement of
goods and services from concept (advertising, product development, etc.) to
the customer. The philosophy of marketing is based on a notion about the
business in terms of customer needs and their satisfaction. In simple terms,
marketing can be described as ‘the art of anticipating and serving customer
needs’. Marketing differs from selling because (in the words of Harvard
Business School's emeritus professor of marketing Theodore C. Levitt)
"Selling concerns itself with the tricks and techniques of getting people to
exchange their cash for your product. It is not concerned with the values that
the exchange is all about. And it does not, as marketing invariably does,
view the entire business process as consisting of a tightly integrated effort to
discover, create, arouse, and satisfy customer needs."
The broad field of marketing includes activities such as:
Estimating customer demand, needs, and wants and designing a
product to satisfy them.
Promoting the product to educate/inform the customers by using tools
such as public relations, advertising, and direct marketing.
Setting a price and making the product available to the customers.
Let us look at some common and popular definitions of marketing that will
help you understand the meaning of marketing.
American Marketing Association defines marketing as:
“The performance of business activities that directs the flow of goods and
services from producer to consumer or user.”
This definition seems somewhat narrow because of its emphasis on flow of
products that have already been produced. This definition is more of a
physical distribution-oriented idea, which assumes that there is nothing
beyond smooth flow of quality goods and services to customers.
Philip Kotler defines marketing as:
“A societal process by which individuals and groups obtain what they need
and want through creating, offering and freely exchanging products and
services of value to each other.”
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Paul Mazur defines marketing as:
“An ongoing process of discovering and translating consumer needs and
desires into products and services, creating demand for these products and
services, serving the consumer and his demand through a network of
marketing channels and expanding the market base in the face of
competition.”
From a broader social point of view, this definition is more relevant.
Self Assessment Questions
1. Which of these is a feature of an imperfect market?
(a) Large number of buyers
(b) Identical products
(c) Few sellers
(d) Freedom of entry and exit
2. In industrial markets, goods are generally bought for individual
consumption. (True/False)
3. In ____________ there is a single seller in the market.
4. According to Kotler, marketing is a _________ process.
1.3 The Exchange Process
Marketing occurs when people decide to satisfy their needs and wants
through the exchange of goods and services. It is the core concept of
marketing. It is the act of obtaining a desired object from someone by
offering something in return. For example, exchange takes place when you
buy a music CD from a store and give money to the store owner or when
you give your services to an organisation in return for salary.
For exchange potential to exist, the following five conditions must be
fulfilled.
At least two parties must exist
At least two things of value must form consideration for each other (for
example, car and cash)
Each party must be able to communicate and deliver
Each party must be free to accept or reject the exchange offer
Each party must believe it is appropriate to deal with other party
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Something of Value
(Goods, Service, Ideas, etc.)
Both Parties freely agree to the terms and conditions of exchange
(Money, Credit, Goods, Labour)
Something of Value
Marketer Customer
An exchange will actually occur only when the two parties involved can
agree on terms that will leave them both better off (or at least not worse off)
than before. Exchange can be looked at as a value-creating process as it
usually leaves both parties better off.
Figure 1.2 shows an exchange process where customer and marketer
exchange things that have value and both the parties agree to the terms and
conditions of the exchange.
Fig. 1.2: The Concept of Exchange
(Source: Marketing Management-Text and Cases, 2nd
Edition, Tapan K Panda,
Excel Books, New Delhi)
You must note that an exchange is not an event. It is a process of
negotiation in which both the parties try to arrive at mutually agreeable
terms. When they reach an agreement, we say that a transaction takes
place. A transaction involves at least two things of value, agreed-upon
conditions, a time of agreement, and a place of agreement.
Generally, a legal system exists to support and enforce compliance among
the parties involved in a transaction.
You must also note that transactions do not require money as one of the
traded values. For example, in a barter transaction, goods or services are
traded for other goods or services.
Self Assessment Questions
5. Exchange takes place when there is a __________________.
6. A transaction involves at least two things that have ____________.
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1.4 Core Concepts of Marketing
Marketing is a social process which alleviates individuals and groups to get
what they need and want through creating and exchanging products and
value with others. This definition rests on the core concepts as shown and
discussed below:
Needs, wants, and demands
Products
Value and satisfaction
Exchange and transactions
Markets
Needs, Wants and Demands
Products Value and
Satisfaction
Exchange and
Transactions
Markets and
Marketers
Fig. 1.3: Core Concepts of Marketing
(Source: http://www.idc.iitb.ac.in/~chakku/dm/02_marketting%20design.pdf)
Let us now study the concepts in detail.
Needs, wants and demand – A need can be defined as a felt state of
deprivation of some basic satisfaction. The human needs can be further
divided into three types as shown in figure 1.4.
Human Needs
Physical Needs Social Needs Individual Needs
Fig. 1.4: Types of Human Needs
(a) Physical needs – It addresses the basic need for food, clothing,
warmth, and safety.
(b) Social needs – It calls for belongingness and affection.
(c) Individual needs – It includes needs for knowledge and self-
expression.
Wants are desire for specific satisfiers of deeper needs. Wants are
shaped by culture and individual personality. For example, if you are
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thirsty, this is your need but if you want coca-cola to quench your thirst
then this is your want. Human needs and wants are unlimited, while the
resources available to meet them are limited.
Demand is want for specific products that are backed by an ability and
willingness to buy them at a price. For example, you have money to buy
coca-cola.
Marketing aims at identifying the following:
(a) Human (and social) needs and wants
(b) Consumers’ demand
(c) Endeavours to satisfy them by creating, communicating, and
delivering products and services
Products and services – A product is a mix of intangibles and tangibles
offered by the marketer at a price. For example, cars, food, air
conditioner, mobiles, etc.
Services may be described as intangible products such as banking and
other financial services, teaching, cleaning, hairdressing, counselling,
transportation, medical treatment. etc.
Sometimes, it becomes difficult to distinguish services from product as it
is closely associated with the product. For instance, if you visit a doctor,
the combination of diagnosis with the administration of a medicine may
confuse you.
Value and satisfaction – Value is the benefit that the customer gains
from owning and using a product compared to the cost of obtaining the
product. A lot depends on consumers’ perceptions about the value that
different products or services are expected to deliver. The sources that
build customer expectations include experience with products, friends,
family members, neighbours, associates, consumer reports, and
marketing communications.
Figure 1.5 depicts that Lake Union Boat Repair Cares (LUBER) can
accomplish restorations, major/minor damage repair, electrical refits,
electronic installations, and custom interiors and can deliver value and
satisfaction.
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Fig. 1.5: LUBER Delivers Value and Satisfaction
(Source: http://lakeunionboatrepair.com/Services.html)
Customer satisfaction is based on the product’s performance and
expectations. Customers generally experience satisfaction when the
performance level meets or exceeds the minimum performance
expectation levels.
Performance ≥ Expectations → Satisfaction
Performance < Expectation → Dissatisfaction
Activity 1
Conduct a small survey among customers of a bank and find out the
difference between the customers’ expectations of service and what is
being delivered at the counter.
Exchange, transaction, and relationship – (The concept of exchange
and transaction has already been discussed in the section 1.3.)
Building relationship with the customers is an important part of business
transactions. Of late, marketers have realised its relevance and are now
focusing on relationship marketing. It is an approach that focuses on
developing a series of transactions with consumers.
5. Markets – A market can be viewed as any person, group, or
organisation with which an individual, group, or organisation has an
existing or potential exchange relationship. Without the existence of a
marketplace, whether physical or virtual, no marketing would take place.
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Self Assessment Questions
7. _______________ is a felt state of deprivation of some basic
satisfaction.
a. Need
b. Want
c. Desire
d. Demand
8. I am willing to buy a sports car but I do not have enough money to buy
it. It is a demand. (True/False)
9. Services like hairdressing, consulting, etc., are _________ in nature.
10. A customer is satisfied when the performance of a product exceeds
minimum performance _______________ level.
1.5 Functions of Marketing
Marketing is a mixture of various activities that will get the consumer to buy
a product. These activities are referred to as marketing functions. Figure 1.6
depicts the major functions of marketing.
Fig. 1.6: Functions of Marketing
Let us now study the functions in detail.
1. Marketing research – Marketers need to approach their customers in a
scientific manner. Marketing research provides a basis for it as it is
basically concerned with gathering data about the market. So, market
analysis (measurement and evaluation of target market and its
characteristics), product/service determination (analysis of consumer
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aspirations, expectations, tastes, functional, and economic utility), and
distribution analysis are the important sub-functions of marketing
research.
2. Advertising – Advertising is a mass media tool. It is perhaps a very
powerful tool in the hands of the marketer, particularly in consumer
goods markets. It is an impersonal presentation and promotion of ideas,
products, or services that are paid by the sponsors. It attempts to inform,
persuade, and remind customers about the products and services.
3. Sales promotion – This is a short-term incentive to boost sales. It acts
as a supplement to personal selling and advertising. Usually, marketers
use various sales promotion devices when the product is launched and
when the product reaches its maturity. Consumer sales promotion and
dealer sales promotion are the important sub-functions of a sales
promotion programme.
4. Sales planning – This function involves the planning for marketing of
the right products at the right prices. The sub-functions include
formulating sales plans, price and quantity determinations, packaging,
and budgeting (forecast sales, setting sales quota, and estimating sales
expenses).
5. Sales operations – This is concerned with transferring of products to
the customer point. Organising field and indoor sales force and their
management are the sub-functions of sales operations. Sales force
management includes recruitment, training, direction and supervision,
compensation, and evaluation.
6. Physical distribution – Moving and handling of products comes under
physical distribution. Order processing, inventory, warehousing, and
transportation are the key decisions to be assessed in the physical
distribution system.
Self Assessment Questions
11. If an advertisement says “It is the best product”, it is attempting to
______________ the consumers.
(a) Inform
(b) Remind
(c) Persuade
(d) Inform and/or persuade
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12. Sales promotion is a long-term incentive to boost sales and is directed at
the dealers. (True/False)
13. Handling of goods is a part of physical distribution function of marketing.
(True/False)
1.6 Importance of Marketing
Peter Drucker, popularly known as the father of modern management, said
in one of his articles that “marketing is everything”. All other activities in the
organisation are support services to the marketing strategy that a firm
pursues.
Marketing is important for the company, consumers, and the economy.
Importance of marketing for the company
The success of a company is known by its achievement in the
marketing front, measured in terms of profit, market share, and cash
flow.
It brings revenue and earns goodwill for a manufacturer or a
marketer.
Importance of marketing for the consumer
It provides more alternatives to choose from, controls the price
mechanism, and allows the consumer to bring a balance between
his/her income and level of consumption.
It ensures that high quality goods and services are available to the
customers at the right time and at the right place.
Importance of marketing for the economy
It opens new vistas of research by supporting product innovation and
enhancing the quality of life of the people of the economy.
It generates resources that are ploughed back to the economic
system, which accelerates the growth cycle of the country.
It generates additional employment, increases per capita income,
and helps in the overall progress of an economy.
Self Assessment Questions
14. Marketing ensures that goods and services are available at the right
time and right place. (True/False)
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15. Marketing activities attempt to enhance the quality of life of the
consumers. (True/False)
1.7 Marketing Orientations
A marketing manager must formulate strategies that can build profitable
relationships with the target consumers. Things are continuously changing
in terms of business and social changes, customer related changes, and
changes in manufacturing and marketing organisations. Therefore, the
organisations should select their marketing orientation considering these
factors. The various marketing orientations that exist help in understanding
how the marketing orientation has been undergoing various shifts.
Figure 1.7 depicts the marketing orientations; namely, production concept,
product concept, selling concept, marketing concept, and societal marketing
concept.
Fig. 1.7: Marketing Orientations
Companies conduct their marketing activities around five concepts. These
are discussed in the following subsections.
1.7.1 The production concept
The basic proposition of this concept is that customers will choose products
and services that are widely available and are of low cost. So, managers try
to achieve higher volume by lowering production costs and following
intensive distribution strategy.
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Figure 1.8 depicts the philosophy, objective, and operation of production
concept.
Companies interested to take the benefit of scale economies pursue this
kind of orientation. However, application of this concept leads to poor quality
of service and higher level of impersonalisation in business.
Production Concept
Philosophy Quality products at affordable prices sell themselves
Objective Minimise costs to lower prices, keep quality high.
How?Focus on Production & Distribution Efficiency to maximise Sales and revenue
Fig. 1.8: Production Concept
(Source: http://www.soopertutorials.com/business/marketing/2459-
production-concept.html)
1.7.2 The product concept
This concept is based on the idea that consumers will favour those products
that offer attributes like quality, performance, and other innovative features.
Managers focus on developing superior products and improving the existing
product lines over a period of time.
Fig. 1.9: The Total Product Concept
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A product has three layers or levels. These layers along with the features
associated with them are depicted in figure 1.9. All these levels put together
form the total product.
The core product – This explains the reasons for which the customer
purchases the product. The essential benefit associated with the product
forms the core product. For example, a customer in a hotel is buying rest
and sleep and buyer of car is buying ease of transportation.
The actual product – This refers to the basic utilities associated with
the product like physical attributes and tangible elements of a product.
Product’s attributes like design, brand name, features, quality level,
styling, packaging, etc., form the actual product. For example, a hotel
room includes a bed, bed sheet, wardrobes, towels, telephone, etc.
The potential product – This includes all possible augmentations and
transformations that a product may undergo in the future. Here, the
company looks for innovative ways to differentiate its offer. Marriott’s
hotels are examples of innovative transformation of the traditional hotel
product.
The focus of the total product concept is on the product attributes. The
problem with this orientation is that managers forget to read the customer’s
mind and launch products based on their own technological research and
scientific innovations. Prof. Theodore Levitt of Harvard Business School
termed this as ‘marketing myopia’. He recommended that companies
should not be short-sighted and adapt to the changing needs of the
customers and environment.
A similar thing happened with Onida when it launched “The Golden Eye”
Technology in India. The market could not perceive the benefit of the
technology and the idea flopped. Later, when consumers became aware of
the various brands and technologies related to televisions, LG again brought
this technology to the market and achieved marketing success.
1.7.3 The selling concept
This concept proposes that customers, whether individuals or organisations,
will not buy enough of the firm’s products unless they are persuaded to do
so through the selling effort. The marketers believe that the consumers need
to be motivated to buy a firm’s products or services through persuasion and
selling action.
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Figure 1.10 depicts the philosophy, objective, and operation of selling
concept.
Selling Concept
PhilosophyProducts don’t necessarily sell themselves. Customers must be convinced to buy products.
Objective Maximise sales revenue
How? Aggressive promotion to create demand
Fig. 1.10: Selling Philosophy
(Source: http://courses.unt.edu/kt3650_1/sld004.htm)
Companies selling unsought goods like life insurance, vacuum cleaner, fire
fighting equipment including fire extinguishers, etc., are using this concept.
The problem with this concept is that some marketers assume that a
customer will certainly buy his/her product after persuasion and he/she will
never complain, even if he/she is dissatisfied. In reality, this does not
happen and companies who blindly pursue this concept often fail in
business.
1.7.4 The marketing concept
The reason for success lies in the company’s ability to create, deliver, and
communicate a better value proposition through its marketing offer, in
comparison to the competitors, for its chosen target segment.
Figure 1.11 depicts the underlying philosophy, objective and operations
behind marketing concept.
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Fig. 1.11: Marketing Concept
(Source: http://courses.unt.edu/kt3650_1/images/img050.gif)
This concept is an elaborative attempt to explain the phenomenon that rests
on the four key issues:
Fig. 1.12: Pillars of Marketing Concept
1. Companies, instead of spending on a mass, undifferentiated market,
prefer to look for specific product market which will best match their
product and accordingly design a marketing program that suits the taste
of this target segment.
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2. The marketers attempt to know the needs of the consumers. For this,
they conduct a marketing research. On the basis of customers’ needs,
companies design and offer a suitable product or service to the
consumers. Their aim is to provide maximum satisfaction to the
consumers.
3. Companies need an integrated approach to achieve the goal of higher
consumer satisfaction. Keeping the marketing goals in mind, companies
need to integrate various key marketing functions like product design,
distribution channel selection, advertising, sales promotion, customer
service, and marketing research.
4. Companies look to earn profit. Earlier, companies worked only for
profits. But slowly this perception is changing. Now, profitability has
become a by-product of the efforts and strategies followed by firms in
their pursuit to create superior product value and higher customer
satisfaction.
Table 1.1 depicts the differences between selling and marketing concepts.
Table 1.1: Differences Between Selling and Marketing Concepts
Selling Marketing
Emphasis is on the product Emphasis is on the needs and wants of the consumer
Company first manufactures the product and then decides to sell
Company first determines customers’ needs and wants and then decides on how to deliver a product to satisfy these needs and wants
Management is sales-volume oriented
Management is profit-oriented
Planning is short-run oriented, in terms of today’s products and markets
Planning is long-run oriented, in terms of new products, tomorrow’s market and future growth
Stresses on the needs of the seller Stresses on the needs and wants of the buyer
Views business as a goods producing process
Views business as a customer satisfying process
Emphasis is on staying with existing technology and reducing costs
Emphasis is on innovation in every sphere, on providing better value to the customer by adopting a superior technology
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Different departments work in highly separate departments
All departments of business operate in an integrated manner, the sole purpose being generation of consumer satisfaction
Costs determine price Consumer determines price, price determines cost
Views customer as the last link in business
Views customers as the main purpose of business
Activity 2:
Though we have summarized by saying that a real marketing orientation
comes out of enterprise-wide application of marketing culture, but this is
not so in many Indian organizations. Please visit five companies near
your city and find out how customer oriented these people are.
1.7.5 The societal marketing concept
The term ‘societal marketing’ is growing in popularity day-by-day. It
proposes that the enterprise’s task is to determine the needs, wants, and
intentions of the target market. To enhance the consumer’s and society’s
well-being, a marketer is supposed to deliver the expected satisfaction more
effectively and efficiently than its competitors.
The concept of societal marketing combines the best elements of marketing
to bring social change in an integrated planning and action framework with
the utilisation of communication technology and marketing techniques. It
also expects marketers to instil social and ethical considerations into their
marketing decisions.
Some people also refer to social marketing as cause-related marketing that
utilises concepts of market segmentation, consumer research, product
concept development, product testing, and brand communication to
maximise the target segment response.
Almost all major companies are engaged in societal marketing in some form
or other. For example, P&G with CRY - each time you buy a P&G product,
you help support one day’s education of one child, Sony launched “Shiksha”
to help educate underprivileged children.
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Self Assessment Questions
16. Health insurance companies generally use _____________ concept to
sell their policies.
(a) Product
(b) Production
(c) Selling
(d) Marketing
17. A concept where the marketer produces a product that is technologically
superior is product concept. (True/False)
18. Societal concept is just an extension of the marketing concept with
consideration for _____________ needs and values.
19. Marketing concept focuses on customer’s needs and ____________.
20. The term ‘marketing myopia’ was given by Professor _________.
1.8 Summary
Let us recapitulate the important concepts discussed in this unit:
Marketing is a social activity directed towards satisfying customer needs
and wants through an exchange process.
The five core concepts of marketing are:
Needs, wants, and demand,
Product and services,
Exchange process,
Customer value and satisfaction, and
Markets.
The main functions of marketing are advertising, sales promotion,
market research, and sales planning.
Marketing is not only important for a company but also for consumers
and the economy. It attempts to improve standard of living through
better product and service offers.
Marketing, as a concept, has evolved over a period of time and has
witnessed changes and modifications with the progress of civilisation.
There are five concepts that explain this change and offer ways to
companies on how to conduct their activities. They are production
concept, product concept, selling concept, marketing concept, and
societal marketing concept.
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1.9 Glossary
Exchange process: It occurs when the buyer with a demand and a seller
with a product offering confront each other.
Marketing myopia: It refers to a short-sighted and inward looking approach
to marketing that focuses more on the needs of the producer than the needs
and wants of the consumers.
Marketing: A societal 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.
Marketing orientation: It requires the firm to look for consumer needs and
the necessity to search for new opportunities to satisfy the consumers in a
better way than the competitor.
Needs: A condition or situation in which something is required.
Production concept: A concept that assumes that customers will choose
products and services that are widely available and are of low cost.
Product concept: A concept based on the proposition that consumers will
favour those products that offer the most attributes like quality, performance,
and other innovative features.
Selling concept: A concept that proposes that customers will not buy
enough of the organisation’s products unless they are persuaded through
selling efforts.
1.10 Terminal Questions
1. Explain the concept of market and marketing.
2. Describe an exchange process with the help of an example.
3. Explain the core concepts of marketing.
4. What role does marketing play in an economy?
5. ‘Marketing involves satisfaction of consumer needs’. Elucidate the
statement.
6. What are the marketing concepts? Explain the evolution process of
management philosophy.
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1.11 Answers
Self Assessment Questions
1. (c)
2. False
3. Monopoly
4. Societal
5. Transaction
6. Value
7. (a)
8. False
9. Intangible
10. Expectation
11. (d)
12. False
13. True
14. True
15. True
16. (c)
17. True
18. Society’s
19. Wants
20. Theodore Levitt
Terminal Questions
1. Market is a place, physical or virtual, where buyers and sellers meet to
exchange goods and services. Marketing is a process through which
goods and services move from concept to the customer. For more
details, refer section 1.2.
2. Exchange process involves an interaction between the buyer and seller
in which each party gives something of value to the other. For example,
sale of a book. For more details, refer section 1.3.
3. There are five core concepts of marketing: needs, products and
services, exchange, customer value, and markets. For more details,
refer section 1.4.
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4. Marketing supports the process of economic development as it
enhances quality of life of the people and generates employment. For
more details, refer section 1.6.
5. Consumer needs are fundamental to the formulation of any marketing
strategy, from developing a product to its delivery. For more details, refer
section 1.4 and 1.5.
6. Marketing concepts aid a company in conducting their activities. There
are five marketing concepts: production, product, selling, marketing and
societal marketing. For more details, refer section 1.7.
1.12 Case Study
Marketing in the Banking Industry
Banks play a large role in the economy of every country in the world. They
offer a large and ever expanding number of services to the public and
private sector such as long-term and short-term loans, annuities, savings
accounts, mortgages, financial advice, and other financial services.
Banks are getting more serious about marketing and it shows. All you have
to do is watch the television for a short period of time and you'll see a
number of ads for banks that have branches all over the country.
Fig. 1.13: Banking is now more Customer-Oriented
(Source: blog.reuters.com/ mobile.netpmb.com/ggn.ac.in)
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Depending on the customer needs for finance, the market can also be
segmented into trade finance, consumer finance, etc. For the banker to
derive maximum returns and enhance his/her market position, the marketing
mix has to be effectively managed. The products offered by a bank may be
in the core or augmented form. The core products offered by a bank include
savings bank account or housing loan.
The augmented product includes services like Internet banking, ATMs, 24-
hour customer service, etc. These augmented services help the banker
differentiate his/her service offering from those of competitors.
The place element of the marketing mix refers to making the services
available and accessible to customers. Improvements in the availability and
accessibility of services have changed the process of banking.
Technological innovations have given rise to modern channels like the
Internet, which have helped banks increase business volumes and attract
new customers.
ATMs, credit cards, and debit cards offer convenience to customers and
have also improved the efficiency of banking operations. These changes
have helped banks tackle the challenges of services marketing. The
promotion or communication mix in banking refers to varied strategies like
personal selling, advertising, discounts, publicity, etc., used by present-day
banks to promote their service offerings.
People also play an important role, even though their role has been eclipsed
by technology in the recent past. Process determines the efficiency of
banking operations and thus, the service quality in a bank. Physical
evidence includes the infrastructure and buildings not only in branch offices,
but also the ATMs or other places of interaction. Even the quality of cheque
books and mailers to customers forms physical evidence.
The banking industry has changed drastically over the past decade. The
banking reforms and the opening of the economy to foreign and private
banks have improved the working of the public sector banks. This has
resulted in improved service to the customers of the banking industry.
Increased competition and technology have enhanced the quality of service
offered to the customers and also improved the returns for bankers.
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Today, banks like State Bank of India, Punjab National Bank, ICICI Bank,
HDFC Bank, Standard Chartered, Axis Bank, HSBC, and many more banks
compete in India and are looking at the future prospects of banking in India.
One can say that marketing will surely be the differentiating factor.
Discussion Questions:
1. What type of orientation do private banks have?
(Hint: Private banks work for customer satisfaction and profits.)
2. How have banks used marketing concept for their benefit?
(Hint: Banks have become more customer-oriented.)
3. Comment on the marketing practices of ICICI Bank.
(Hint: It uses customer-oriented marketing and differentiates itself using
innovative promotion methods.)
4. How are the marketing efforts of public banks different from those of
private banks?
(Hint: Public banks do not have as much funds to allocate as compared
to the private banks.)
(Source: www.icmrindia.org)
References:
Philip, K. (2007). Marketing Management, Pearson Education.
Tapan, P.K. (2010). Marketing Management: Excel Books, New Delhi.
Ramaswami, V.S. and Namakumari, S. (2003). Marketing Management,
Macmillan Publishers.
E-References:
http://www.netmba.com/marketing/ – Retrieved on December 29 2011
http://www.agecon.ksu.edu/accc/kcdc/PDF%20Files/marketing.pdf –
Retrieved on December 29 2011
http://marketingteacher.com/lesson-store/lesson-what-is-marketing.html
– Retrieved on December 29 2011