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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 18 th and 19 th 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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Page 1: 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