UNIT 1 NATURE AND SCOPE OF MARKETING
1.0 Objectives
1.2 The Meaning of Marketing
1.3 Marketing Concepts
1.3.1 Production Concept
1.3.2 Product Concept
1.3.1 Selling Concept
1.3.4 Marketing Concept
1.1.5. Societal Concept
1.4 Evolution of Marketing
1.5 Difference between Selling and Marketing
1.6 Importance of Marketing
1.7 Marketing in a Developing Economy
1.8 Concept of Marketing Mix
1.9 Let Us Sum Up
1.10 Key Words
1.11 Answers to check Your Progress
1.12 Terminal Questions
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1.0 OBJECTIVES
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After studying this unit, you should able to:
explain the meaning of the term marketing and various marketing concepts
state the importance of marketing to the business, the consumer and the society
describe the nature of marketing in a developing economy
narrate the concept of marketing mix
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1.1 INTRODUCTION
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In this introductory unit we will study the meaning of marketing and various marketing concepts, evolution of marketing, importance of marketing and the nature of marketing in a developing economy like India. You will also understand the concept of marketing mix and the components of marketing mix.
1.2 THE MEANING OF MARKETING
In USA, 300 college administrators were asked about the meaning of marketing. *As many as 90 percent said the marketing was selling, advertising and/or public relations, Even in our country when managers are asked this question, the majority of them give a similar reply. It is important to understand that marketing is much more than selling or advertising, although these do form part of marketing functions.
According to the American Marketing Association "marketing is the performance of business activities that directs the flow of goods and services from producer to consumer or user." This definition is undoubtedly an improvement on the description of marketing as selling. According to this definition, marketing also encompasses other activities along with selling.
If you are an entrepreneur who wants to start a new business, you do not have a product. In fact you will have to decide what product you should manufacture and sell. How do you decide this? This you can do only when you identify the needs which require satisfaction among human beings. Once you identify the need of a group of human beings, you can determine the product which can satisfy that need. This is a part of the modern philosophy of marketing or the marketing concept.
Philip Kotler, a well known author in the area of marketing, defines marketing as "a human activity directed at satisfying needs and want through exchange processes."
Thus, the most fundamental concept which must be realized as being the basis of all marketing activities is the existence of human needs. A marketing man may devise a product or service aimed at satisfying a certain need, and thus provide satisfaction to the user. People may have unlimited wants but the ability to buy may be restricted on account of their econ~rnicbackground. They will, therefore, select from among those products which give more satisfaction or are needed more. Thus, when they are backed by ability to buy, the wants are converted into demand for your product. Therefore, when people decide to satisfy their needs and wants, in terms of marketing activities, exchange takes place. This explains in detail the definition given by Kotler.
Based on the above discussion we can develop a process-oriented definition of marketing, as "the process of ascertaining consumer needs, converting them into products or services, and moving the product or service to the final consumer or user to satisfy certain needs gnd wants of specific consumer segment or segments with emphasis on profitability, emuring the optimvm use of the resources available to the organisation. "
In practice, often, the business functions such as production, finance and marketing are performed by separate departments with their own way of thinking. Production is .often considered the more important function as compared to marketing. This practice is, gradually losing ground and it is being recognised that unless you can sell a product, you should not manufacture it. Production-orientation evolved because often products were designed and developed by inventors who hoped that they would sell. However, if these products fail to satisfy some needs, they would never sell in the market place. Therefore, consumer oriented thinking becomes necessary for any business to survive and grow.
1.3 MARKETING CONCEPTS
There are five different marketing concepts 'under which business enterprises conduct their marketing activity :
I) Production concept
2) Product concept
3) Selling concept
4) Marketing concept
5) Societal concept
1.3.1 Production Concept
This is probably the oldest concept. Some businessmen believe that the consumers are interested only in low priced, easily and extensively available good$. And finer points of the product are not very important t o them. S o the producers believe they must concentrate only in efficient (economical) and extensive (large scale) production. A company which believes in this approach concentrates on achieving high production efficiency and wide distribution coverage. Organisations may adopt this concept in two types of situations:
i) When the demand for the product is higher than the supply, you can sell more if you increase production. HeTe the main concern of the management is t o find ways to increase production to bill the demand and supply gap.
1he organtsatiqns which adopt thls concept are typically production oriented concersa, Production and engineering departments play an important role in this situation. Such organisations have only sales departments to sell the product at a price set by production and finance departments. -
1.3.2 Product Concept
1
As against the production concept, some organisations believe in product concept. The product concept implies that consumers favour those products that offer the most gyality, perfwmance and features, They also believe that consumers appreciate qwlity features and will be willing to pay 'higher' price for the 'extra' quality in the product o r service made available. Hence, those companies which believe in this coqqpt conmntrate on prwuct and its improvement. But, while improving the
~ r o d u c they rarely take into consideration the consumers' satisfaction and his multifarious needs. Even when new products are planned, thg pmdbcer is concerned more with the product and less with its uses or t h consumer~ needs. For example, a biscuit manufacturer produced a new brand of biscuits with good ingredients, colour, packaging, etc., without taklqg into accpunt consumer tastes and preferences. This may fail in the market if the biscvit does not taste good to the ultintate consumer.
$3.3 8e)lial Concept
Bametimes the main problem of the enterprise is not more production, but to sell the output. Similarly, a better product may not assure success in the market. Hence selling assumes greater importance. So some producers believe that aggressive persuasion and selling is the grux of their business success, and without such aggressive methods they cannot sell and survive. Therefore, attention is paid to find \nays and mean$ to sell. They also believe that customer consumers left to thempelves, will not buy enough of organisation's products and services, and hence ~onsiderablepromotional effort is justified. Thus, the selling cqnqept assumes that Consumen on their own will not buy enough of organismtlon's products, unless the organbdion undertakes aggressive sales and $gomotional efforts. Many insurance agents, sales persons of certain elogtrical gadgets, health drinks, soft drinks, and fund raisers for social or reliu~ouscauses came under this category.
9qlq is tk i ~ d o ad success of marketing as well as the producti.on efforts. The marketers who believe in sales concept often forget that the consumers buy goods to fulfil certain needs. After the sale, what happens or bow the consumer feels is not their concern. They may not expect the customer to come again to buy the product. They may go t o new target consumers rather than building up a network of satisfied customers. Some firms facing with excess production also adopt selling concept. There are fair as well as &fair persuasive means adopted in this process. But the purpese behind aH such action is selling more. Sales/executives or sales department assumes greater importance in sales concept. Compared with production concept and produot oonwpt.
1.3.4 Marketing Concept
In an evolutionary process, pang organisers have come to change their focus and to see their marketing tasks in a broader perspective. Marketing concept is considered a business philosophy wider in its implications. Under the marketing concept, the organisation ooncidcrs the needs and wants of consumers as the guiding spirit and the deliwry of such goods and services which can satisfy the consumer needs more 'efficiently and effectively than the competitors. It is aleo said that the marketing concept is consumer orientation with tho objective of achieving long run profits. It is a modem marketing philwophy for dynamic business growth. In other words, under-tkL aencept the task of rnarbting begins with finding what the consumer wants, and produce a product which will meet that want and provide rnaxlmum satisfaction. Implicitly, the consumer is the boss or king who dictates. The focus which moved from the product to selling, now rests with the consumer.
When organisations practice the marketing concept, all their activities (manufacturing, finance, research and development, quality control, distribution,
Basic Concepts of
Marketing
selling, etc.) are direetd to satisfy the consumer. Consumer satisfaction becomes a single value which becomes the core of corporate culture in such organisations. Companies produce what consumers want and, thus, satisfy consumers and make profits.
Those companies which have attained a certain maturity and which could see far
beyond the immediate future adopt this concept. Some companies may not adopt
this concept because they feel that this may result in the decline of sales or profits in
the short run and the long run profits in any case are unpredictable ey uncertain.
The companies which want to make 'quick-bucks' also do not adopt this concept.
Even the departments within the organisation may not fully cooperate since they are
not 'convinced' about the advantages of following the marketing concept, In spite of
these hurdles, it is now a world-wide experience. Companies which are successful,
enjoy goodwill and grow in the long run are companies which have adopted the
marketing concept as their business philosophy. These companies realbed that a
satisfied customer is the best advertiser for their product. Their profits are gehcrated
from the satisfaction of the customer and not from the product or their selling
efforts. In an economy like India with shortages in many\goods as well as lack of
resistance from the consumen; the firms which practice the first three concepts also
'
survive.
1.3.5 Societal Concept
With the growin8 awareness of the social relevance of business, Sbig gn attempt
to make marketing also releypnt to the society. In a sefise, marketing is not .a
business ~ i v i t aloney but must tuke into account the social needs. Excessive
exploitation of resources, environmental deteriqration and the customer movements
-.
in particular have necessitated the recognition sf the relevance of marketing to the
society. Marketing then must be a ~ochllyresponsible or aaxwntable activity. The
'r
societal concept holds that the business orgauisotion must take into acr~untthe
needs and wants of the consumers and deliver the goods and services efficien't!y sq $s
to enhance consumer's satisfaction as well as the society's well being. The so~ietal
concept is an extension of the marketing concept to cover the society in M d i t i o ~to
the consumers.
In effect, a company which adopts the societal concept has to balance the company profit, consumer satisfaction and society interests. The problem is almost the same as that of social responsibility of business. What is good for the society is a question to be decided. A voluntary acceptance of this concept is desirable for the long run survival of private business. An effective implementation of the societal concept will certainly enhana the goodwill of the business house. The business enterprises which believe in this concept will produce and market those goods and services which are
- beneficial to the sodety, those #hat do not pollute the environment, 'and give full value for the money spent.
Check ~ b ; Progress A
1) . Distinguish between production concept a i d product eoncept.
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2) ,Distinguish between selling concept and marketing concept.
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3) Distinguish between marketing concept and societal concept.
4) Match the organisational objectives given in Column1 with the marketing concepts rn Column 2.
Organisational Objectives
Marketing Concept
i)
Effective distribution
a)
Product concept
ii)
Large scale selling and
b)
Societal concept
promotion effort
c) Selling concept
iii)
Produce what consumers !~eed
d) production concept .
iv)
Product improvement
e)
Marketing concept
v)
Improve society's well being
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5 )
State whether the following statements are True or False
i) In a n organisation which adopts the production concept, marketing departdent assumes greater importance.
ii) Producing a cheaper product is the focus of product concept of marketing.
iii) Selling concept of marketing assumes that left to themselves consumers will not buy enough of organisation's products.
iv) '"Make what you can sell instead of trying to sell what you can make", is the 2pproach in marketing concept.
1.4 EVOLUTION OF MARKETING
Marketing has gradually evolved out of the barter system. The Industrial Revolution, growing population, improvements in communications and transport facilities have contributed to the growth of marketing as an important economic activity. In the initial stages of development, a village artisans or craftsmen made goods to order and tried to meet the neighbourhood demand. After the Industrial Revolution, large scale production became possible and large scale industries came into existence. In the initial stages of Industrial Revolution, producers were able to sell whatever they have produced. So, they concentrated on higher production. At that stage most of the enterprises adopted the production concept. Later when the competition started building-up, producers faced difficulties to sell whatever they produced and the need to improve the product arose. This led to the emergence of product concept and selling concept. With the increase in competition, producers realised the advantage of producing what consumers need instead of selling whatever is produced. This led to the consumer orientation in marketing and the emergence of marketing concept and
societal concept. -
Figure 1.1 Evolution of Marketing Concepts Approximate Time Period
-Late
1880s
Nature and Scope
of Marketin'g
Present
3
~ a s i Concepts
01
Figure 1.1 presents the approximate time spans covered by each ofithe five concepts
in the USA. Since changes occur gradually over a continuum, the periods overlap
one another. So, the figure indicates only the times during which a particular
concept has been prevalent. Other developed countries also have gone through the
similar periods, usua
In the developed countries where the markets are developed, most of the producer adopt the marketing concept. In the developing countries markets are heterogeneous and you can see the co-existence of all the five concepts. Thus, the concebt of inarketing has grown along with the process of economic development.
The growth of civilisation, the standard of living, the changing life styles and technological growth have created new wants. These can be satisfied only with a wide variety of new goods and services apart from changes and improvements in the existing goods and services. This is however the general trend, and there are several exceptions. Markets for all products and services have to reach a certain maturity to experience this evolutionary trend. It may not be so in the case of each and every product or market. The rural market in India, for example, is fairly different from the vrban market. Even among a set of consumer goods, for example, cosmetics which serve the middlelupper income groups are much more consumer oriented than the market for undergarments for men. Besides, there is a seller's market in some goods and services and a buyer's market in some others.
Another feature in the evolutionary process of marketing is the growing role of service marketing. The demand for service contracts to maintain the gadgets in use have become more easily marketable and a reliable service commands a premium in the market. When one computer manufacturer enters the market, q a y be another 20 to 30 service organisations come up to offer their services for an uninterrupted performance of the computer or to train people in computek software and operation.
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Another feature in the growth of marketing is the globalisation of qarkets. Many producers aim at selling in more than one country. The product and promotion strategies are planned that way. It does not require a large scale business to enter the export market, even the small scale businesses are entering the export market quite significantly.
1.5 DIFFERENCE BETWEEN SELLING AND MARKETING
Many people use the terms marketing and selling as synonyms. In fact, these two terms have different meanings in marketing management. An understanding of the differences between them is necessary for you to be a succtssful marketing manager.
Selling is an action which converts the product into cash but marketing is the whole process of meeting and satisfying the needs oC the consumer. Marketing consists of all those activities that are associated with product planning, pricing, promoting and distributing the product or service. Selling focusar on the heeds of the eeller whertls marketing concentrates on the needs of the buyer.
Selling is the modem version of the exchange under barter system. When the focus is on selling, the business man thinks that after production has been completed the task of the sales force starts. It is also the task of the sales department to sell whatever
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