PAPER No. 7: MARKETING MANAGEMENT MODULE No.1 : CONCEPTS, NATURE, SCOPE & IMPORTANCE OF MARKETING

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1 Subject Paper No and Title Module No and Title Module Tag 7; Marketing Management Module 1: Concepts, Nature, Scope & Importance of Marketing COM_P7_M1

2 TABLE OF CONTENTS 1.1 LEARNING OUTCOMES 1.2 CONCEPT OF MARKETING NEEDS WANTS DEMANDS PRODUCTS VALUE SATISFACTION EXACHANGE TRANSACTION 1.3 NATURE OF MARKETING 1.4 SCOPE OF MARKETING LEARNING OUTCOMES After studying this module, you shall be able to 1. Understand the concept of marketing. 2. Understand how marketing has evolved from the traditional to the modern concept. 3. Know nature and the scope of marketing. 4. Appreciate the importance of marketing. 1.2 CONCEPT OF MARKETING Marketing is an inescapable phenomenon in the present-day world. Everyday, we are exhibited to marketing of goods, services, and ideas. For example, when a salesperson sells T.V., a doctor treats a patient or a state government asks people to get their vehicles checked for pollution, each is marketing something to the targets. Marketing is all about recognizing and meeting human and social needs. Marketing holds that an organization should anticipate the needs and wants of customers and try to satisfy them more effectively than its competitors and by doing this it will be able to achieve its organizational objectives and goals more efficiently. In simple words, marketing is meeting needs profitably.

3 Marketing emphasizes on the needs of the customers before putting the ideas into concrete products. With the customer's wants and needs engulfed into the design and production of the product, sales and the goal of earning profit is likely to be accomplished. What is marketing? As per AMA, Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals. Marketing has been also been defined in the following manner: According to the American Marketing Association (AMA), Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. In the words of Peter Drucker, The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Philip Kotler has defined marketing as, Marketing Management is the analysis, planning, implementation and control of programs designed to bring about desired exchanges with target audiences for the purpose of personal and of mutual gain. It relies heavily on the adoption and coordination of product, price, promotion, and place for achieving responses. For marketing to be constructive an organization needs to have proper management of marketing activities i.e. marketing management. What is Marketing Management? It dictates the direction of purposeful activities that would lead to attainment of marketing goals. It is required to build up a suitable marketing-mix to accomplish the objectives of the business. It is accountable for planning, organizing, directing and controlling the marketing activities.

4 Through efficacious employment of market and marketing research an organization should be able to recognize the needs and wants of the customer and try to deliver benefits that will intensify or add to the customer s lifestyle, while at the same time ensuring that the satisfaction of these needs concludes in a healthy turnover for the organization. For example, when Sony launched its Play Station 3 game system and when Apple launched iphone 5, these manufacturers were flooded with orders because they had crafted the right product, based on doing careful marketing homework NEEDS- Needs are the most basic concept underlying marketing. Need arises when a person feels deprived of some basic satisfaction. Marketers do no create these needs. They exist automatically in every individual. Humans possess many elaborated needs which include: 1. Basic physical needs: It includes need for food, shelter, clothing and safety. 2. Social needs: It includes the need for belongingness and affection. 3. Individual needs: It includes the need for knowledge and self-expression WANTS- Wants are felt for specific products to satisfy human needs. Human needs are few, but their wants are unlimited. These wants are continually shaped by one s social, cultural and individual personality. Marketers can influence the wants by offering various products, informing the customers about the products and using marketing strategies to persuade them to buy the product DEMANDS- Wants that are supported by purchasing power i.e. ability and willingness to buy is referred to as demand. Companies should emphasis on calculating how many people would actually be willing and able to buy the company s products rather than measuring how many people want their products PRODUCTS- A product is defined as anything that can be offered to satisfy human need or want. The scope of product is not limited to physical objects only. It also includes services, experiences, persons, events, places, properties, organizations, information, ideas etc. Products are vehicles for delivering satisfaction to customers. In other words, a product is a solution that marketers offer to its target market VALUE- Value is a customer s estimate of the product s capacity to satisfy a set of goals. It is the difference between what a customer spends to obtain the product and the worth that he gets from using it. It is the value which guides the customers to choose among different products that can satisfy a given need. Value is a combination of quality, service and price and is known as Customer Value Triad. Value increases with quality and service and decreases with price SATISFACTION- It depends upon a product s performance as perceived by the buyer in delivering value relative to their expectation. If performance matches buyer s expectation then he feels satisfied. If it falls short of expectations then the customer is dissatisfied. And if it exceeds expectations then the buyer is delighted.

5 1.2.7 EXCHANGE- It is defined as an act of obtaining a desired product from someone by offering something in return. It is the process of creating value because it leaves both the parties better off. There are 5 conditions which must be satisfied for exchange to take place. They are as follows: 1. The foremost condition is that there must be at least 2 parties 2. Each party must possess something of value that can be exchanged with another party. 3. Each party must have the ability to communicate and delivery. 4. Acceptance or rejection of the exchange offer lies at the discretion of each party. 5. Each party is in opinion that it is appropriate or desirable to deal with the other party TRANSACTION- It is defined as a trade of values between two or more parties. It is considered as marketing s unit of measurement. It engulfs at least two things of value, agreed upon conditions, a time of agreement and ace of agreement. 1.3 NATURE OF MARKETING Marketing is a never ending task. Marketing concerns itself with a arranging all the resources in a way that meets the needs of the customers. The following points will bring forth the nature of marketing. 1. Marketing is customer oriented: Marketing begins and ends with the customer. Marketing concerns itself not only with the satisfaction of the customer but also objects to delight him/her. All the organizational activities must be targeted and focused towards the customer. Customers must be allowed to decree product specifications and standards regarding quality. And for this, customer s needs must be examined continuously. 2. Marketing is the delivery of value: When a customer is satisfied from a particular product based on its overall performance, then the satisfaction that he has received is known as customer value. Customers consider the product s value and price before making a decision and make a trade-off between cost and benefit of the product. They will choose a product that gives them more value per rupee. According to De Rose, Value is the satisfaction of customer requirements at the lowest possible cost of acquisition, ownership and use. Thus, the organization must aim to deliver greater customer value than that of their competitors. 3. Marketing is network of relationships: The focal point of all marketing activities is the customer. The term relationships marketing came into light in1990 s. According to Philip Kotler, Relationship Marketing is the practice of building long-term satisfying relations with key parties like customers, suppliers and distributors in order to retain their long term preference and business. So the marketers should aim at maintaining long term relationships by delivering high quality products, better services and fair prices than their competitors.

6 4. Marketing is business: All activities start from marketing i.e. through knowing customer s needs and wants and ends on the customer i.e. providing after sales service and knowing customer dissonance. The entire business revolves around marketing. According to Peter F. Drucker Marketing is so basic that it cannot be considered as a separate function. It is the whole business seen from the point of view of its final result, that is, from the customer s point of view. Business success is not determined by the producer but by the customer. 5. Marketing is dynamic: The word dynamic means ever changing. The needs and wants of the customer are changing constantly. Since the goal of marketing is to meet customer s needs and wants by furnishing them with the products they want to buy, therefore, marketing must also change constantly to meet those needs and wants. 1.4 SCOPE OF MARKETING In today s world marketing has become almost indispensable for the success of an organization. Therefore, it is of utmost importance to study the scope of marketing. The spectrum of marketing covers the following: 1. Marketing Research: Market Research is a tool used for decision making about the marketing mix s elements. Research has to be carried out in order to identify the customer s needs, their tastes and preferences, their interests, economic position, their paying capacity and effectiveness of certain advertisements. For this purpose, data is collected, tabulated, codified, analyzed, and presented through knowledgeable techniques crafted to reveal what customers will buy, why they will buy it, and how much they will pay for it. Market research aims at adapting products to the desires of buyers. Often a questionnaire is used to obtain feedback from the customers. Marketing managers must play an active role in the research process if the input is to be useful to them. 2. Pricing: Pricing is extremely important since it directly affects an organization s sales and profits. While deciding the price of the product a number of factors have to be kept in mind like the cost of production, paying capacity of the customer, industry demand, competitor s prices and the target profit margin. Price knits together the elements of the

7 marketing mix and pays for their respective contributions. Therefore, the marketing manager must analyze and reconcile the various elements of those variables which influence price, and must then decide on an optimal price policy. A good pricing policy is a significant factor to attract the customers. 3. Advertising and Sales Promotion: In this era of tough competition, the sales promotion and advertisements have become almost an inbuilt part of the marketing. It helps to make the customer aware about the product, makes him curious about the product and thus promotes sales. There are ample sources of sales promotion and advertisements taking the decision about which source to be selected is also an imperative part in the sphere of marketing management. Through advertising marketers are able to position their products in the minds of the customer using various media like newspapers, magazines, television, radio, hoardings, window display and internet etc. Marketing managers must blend the methods of 1) face-to-face personal selling, 2) mass selling to large numbers of customers through advertising and 3) sales promotion, to inform the target market about the "right" product. 4. Channels of Distribution: Bringing together the buyer and seller and facilitating their exchange is the essence of marketing. Distribution channels are an integral part of a complex system that has evolved from cultural and social patterns in order to facilitate exchange transactions. Marketers must decide what methods are best for distributing their particular products. There are various media of distribution like the retailers, the wholesalers, department stores, chain stores, super markets etc. Marketers may choose to sell directly to the customers, to the customers through sales agents, to jobbers, directly to retailers, or to retailers through sales representatives. They must also determine as to how much long shall be its channel of distribution. A number of factors have to be borne in mind while selecting the medium of distribution like perishability, price of the product, size and weight, after sales service etc. 5. Financing: It is difficult to perform various marketing activities without the availability of adequate and cheap finance. It has been rightly remarked Money or Credit is the lubricant that facilitates the operation of the marketing machine as modern marketing requires vast resources. The term financing includes decisions like budgeting for marketing activities, obtaining the necessary funds needed for operations and providing financial assistance to customers so they can purchase the business products and services. In the era of global competition, financing of customer purchasing has become an important part of marketing. Marketers have to offer different finance schemes to their customers to increase the volume of sales. There are various sources of marketing finance like commercial banks, cooperative credit society, government agencies etc. The modern business is constructed on the foundation of trade credit. 6. After-Sales Service: The furnishing of after sales service is very critical for the satisfaction of the customers. The free repairs, the return or exchange of the product during the guarantee period if the product proves defective or worthless, etc. are included in after sales service.

8 The decision includes How much period What type of service has to be extended to the customers, And through whom. Marketers must aim at maintaining cordial relationships with customers, and must attend their queries and solve their problems. 1.5 Marketing has become a very significant aspect in business since a firm s financial success largely depends on marketing. Most facets of business depend on successful marketing. Therefore, no firm today can afford to ignore the significance of marketing. And it is not surprising that companies now have CMOs, that is, Chief Marketing Officer along with CEOs (Chief Executive Officer) and CFOs (Chief Financial Officer). Marketers have now come to appreciate the importance of their prudent marketing efforts and have understood that the

9 success of a product will depend on how well the product is introduced and promoted into the market. The umbrella term Marketing covers advertising, promotion, public relations, and sales. A firm might be offering the best products or services in an industry but without marketing it would be impossible for the firm to inform its potential customers about the product. If no one knows about a company s product, there will be no demand, company will make no sales and hence there will be no profits. This highlights the significance of marketing i.e. to create awareness about the products and make loyal customers and retain them. Marketing enables the customers to know what marketers are offering to them and at the same time it enables the marketers to convince their customers to buy their offerings. Successful marketing strategies help in not only understanding the customer and his needs but also in the following ways: 1. It promotes awareness among the public Marketing enables the customers to become aware about the various products that are available in the market. A firm s product must be known to the potential buyers for it to succeed. If there were no marketing or advertising, the customers would not know about the products. A company must capitalize on marketing activities so as not to miss the opportunity of being discovered. Attempts should be made to reach as many customers as possible and tell them what the company has to offer with the help of effective marketing strategies. 2. It helps in boosting sales- Once the prospects become aware about the company s products or services it boosts up the chances that customers will make a purchase. New customers also start to spread the word, informing their friends and family about the company s product and consequently company s sales starts to increase rapidly. No matter what a company is selling, it will generate sales once the people come to know about it through TV advertisements, commercials, newspaper advertisements, etc. The more the people see and hear about a new product, the more inclined they will be to buy it. 3. It builds company reputation Marketing helps to build brand name recognition or product recall and hence enables the customers to relate the brand name with the images, logos and captions that they see or hear in advertisements. When the company is able to satisfy the expectation of its customers, its reputation stand on a concrete ground. And once a company succeeds in establishing its name, its business will grow and expand and more and more customers will start purchasing its products and services. 4. It helps in fostering healthy competition Marketing promotes a climate of healthy competition in the marketplace. It helps to position the company as being superior to its rivals so that the customers will prefer its products rather than buying from other firms that sell similar products and services. Competition drives the firms to invest in research and development in order to produce better quality and innovative products and services. Thus marketing also helps to foster innovation. To sum up, an attempt should be made to develop integrated marketing in the firm to serve the customers better.