Everything you need to know about what is marketing concept. The concept of marketing and its influential role in the transformation of market, consumer and Indian economy is increasingly felt. It is a pervasive element in contemporary life of everyone.
Marketing provides an opportunity to contribute to society as well as to an individual company.
The modern or new marketing concept replaces and to some extent reverses the logic of the old one.
The old concept starts with the firm’s existing products and considers marketing to be the use of selling and promotion to attain sales at a profit.
The new concept starts with the firm’s existing and potential customers, it seeks profits through the creation of customer satisfaction and it seeks to achieve this through an integrated, corporate- wide marketing programme. These are the three pillars of the new marketing concept. The two views — old and modern.
Learn about the traditional and modern concepts of marketing.
What is Marketing Concept – Traditional and Modern Concept
What is Marketing Concept – Production Concept, Product Concept, Exchange Concept, Marketing Myopia and Sales Concept
Marketing means managing markets to bring about exchange and relationships for the purpose of creating value and satisfying needs and wants. The concept of markets finally brings us full circle to the concept of marketing.
We shall now discuss each of the five distinct concepts of marketing in brief:
(1) The Production Concept:
The production concept holds that consumers will favour those products that are widely available and low in cost. According to the production concept, marketing is a mere appendage to production; production and technology denominate the thinking process of the key people in the business. They believe that marketing can be managed by managing production.
Organisations voting for this concept are impelled by a drive to produce all that they can. They do achieve high production efficiency as a substantial reduction in the unit cost of production; and in quiet a few cases they also do well with the distribution task and make the products widely available.
‘Managers of production-oriented organisations concentrate on achieving high production efficiency and wide distribution coverage. The assumption that consumers are interested in product availability and low cost is true in at least two situations – firstly, when the demand for a product exceeds its supply and therefore customers are more interested in just acquiring the product than its fine points.
The second situation is where the cost is so high that it has to be brought down by increased productivity to expand the market.
(2) The Product Concept:
The product concept holds that the consumers will favour those products that offer the most quality, performances, and features. Managers in these product-oriented organisations focus their energy in making good products and improving them over time and they give little promotional effort.
In general, it tries to take care of the marketing task through the claims regarding product. Yet, in many cases, these organisations fail in the market. They do not bother to study the market and the consumer in depth. They get totally engrossed with the product and almost forget the consumer for whom the product is actually meant; they fail to find out what the consumers actually need and what they would gladly accept.
(3) The Exchange Concept:
The exchange concept of marketing, as the very name indicates, holds that the exchange of a product between the seller and the buyer is the central idea of marketing. While exchange does form a significant part of marketing, to view marketing as a mere exchange process would amount to a gross undermining of the essence of marketing.
A proper scrutiny of the marketing process would readily reveal that marketing is very broader than exchange. Exchange, at best, covers the distribution aspect and the price mechanism involved in marketing.
The other important aspects of marketing, such as – concern for the customer, the generation of value satisfaction, the creative selling and integrated action for serving the customer get completely overshadowed in the exchange concept of marketing.
(4) Marketing Myopia:
Meeting customer wants and needs through economic utility and meaningful benefits sounds simple enough. But many companies seem to have trouble with it. Rather than looking at what they do from the buyer’s point of view, in terms of customer benefits, they see themselves strictly as producers.
Although utility companies supply natural gas and electricity, what they market is the comfort and convenience provided by gas furnaces and electric lights and appliances. And when a pet store sells a kitten, puppy, or canary, it’s marketing companionship, not animals.
Market myopia is product orientation without regard for customer benefits. When companies view themselves as suppliers of products rather than as fulfillers of customer needs and wants, they suffer from marketing myopia. Levitt argues that the U.S. railroads, for example, lost out to other transportation modes in the first few decades of the twentieth century because of this attitude.
Railroad executives believed they were in the railroad business rather than the transportation business. Automobiles and other forms of transportation emerged in the same period and responded hitherto the needs for various types of travel. If the railroads had defined their business as transportation rather than railroading, they would have been more flexible and in a better position to compete with auto makers, trucking companies, airlines, and other transportation marketers.
(5) The Sales Concept:
The sales concept became the dominant idea guiding marketing as more and more markets became buyers markets and as the entrepreneurial problem became one of solving the shortage of customers rather than the shortage of goods. The sales concept maintains that a company cannot expect its product to get picked up automatically by the customers.
The company has to consciously promote a push its products. Heavy advertising, high-power personal selling, large-scale sales promotion, heavy price discounts and strong publicity and public relations are the normal tools used by the organisations that rely on this concept.
The concept is also used in the political parties, college admissions offices, etc. One college may advertise saying that the seats are limited and will be filled up on a first come first serve basis. Another may still hard sell by telling students that the college selects prospective and eligible students through an intensive combination of past track record, written tests, group discussion and interviews.
This concept is practised aggressively with those goods which people normally do not think of buying such as insurance, encyclopedias etc. These industries have preferred various sales techniques to locate prospects and hard sell them on the benefits of their product.
The risks of selling are high. It assumes that customers coerced into buying a product will like it and if they don’t they won’t speak badly of it to friends. They’ll probably forget their disappointment and buy it again. These are very subtle assumptions to be made about a customer and are proved to be faulty.
Evidently, the sales concept too generates marketing myopia just as the exchange concept, the production concept and the product concept do. But only a few marketing executives realise this position. The majority feel that the sales concept is a flawless idea. They think selling is synonymous with marketing.
The general public too perceives marketing from the standpoint of the sales concept the majority of business firms practise only selling. But in reality, there is a great deal of difference between selling and marketing. And that explains the evolution of the marketing concept as a totally distinct idea from the sales concept.
What is Marketing Concept – 6 Important Concepts
Understanding of various marketing concepts helps marketing managers to develop effective marketing strategies.
Following are the important concepts used in marketing:
1. Needs, Wants and Demand:
Needs, wants, and demands are a part of basic marketing principles. Though they are 3 simple worlds, they hold a very complex meaning behind them.
Need is something you have to have.
Needs are usually physiological Following are the basic needs of any human being:
i. A roof over the head
ii. Enough food and water to maintain health
iii. Basic health care and hygiene products
iv. Clothing (just to remain comfortable and appropriately dressed)
It is something you would like to have. Wants are psychological. Therefore, everything that goes beyond needs is called a want. Example – a big house, branded clothes, fancy foods and drinks, a new car – is a want.
It is strong wants to which the person is dedicated. Desire is comfort, luxury and beyond.
It is a desire supported by necessary purchasing power.
2. Products and Services:
Product is an article or substance that is manufactured or refined for sale.
Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, medical treatment, or transportation are called services.
3. Value, Satisfaction and Quality:
Value, satisfaction and quality are interrelated concepts. Because customers focus on value, quality and satisfaction while purchasing products form the market.
It is the ratio between what benefits the customer gets and what he spends. The customer gets benefits of a product or service and spends money. Product choice is guided by the value provided by the product.
i. Benefits of customer may be functional and emotional
ii. Cost of products can be monetary, time, and energy
Marketing should provide value to the customers by raising benefits and reducing costs.
It is the customer’s perceived performance from a product in relation to the expectations.
The customer is dissatisfied if the performance fails to match his expectations; delighted if the performance exceeds expectations. Marketing aims for total customer satisfaction by matching product performance with expectations.
Quality is perception of product excellence by customers. It is linked to customer need satisfaction. Organizations adopt the concept of Total Quality Management (TQM) to maintain and increase the level of customer satisfaction. They continuously improve the quality of their products for enhancing customer satisfaction. Everyone is committed and involved to satisfy customer needs though quality improvement.
4. Exchange, Transactions and Relationships:
The act of obtaining a desired object from someone by offering something in return.
Hungry people could find food by hunting, fishing, or gathering fruit. They could beg for food or take food from someone else. Or they could offer money, another good, or a service in return for food.
Exchange must be seen as a process rather than as an event. This is the sense in which exchange is described as a value-creating process; that is, exchange normally leaves both parties better off than before the exchange.
A trade between two parties that involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.
One party gives some money to another party and gets a product in return. For example, Ram pays Rs. 6000 to buy a television.
The process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders.
Beyond creating short-term transactions, marketers need to build long-term relationship with valued customers, distributors, dealers, and suppliers. They want to build strong economic and social connections by promising and consistently delivering high-quality products, good service, and fair prices to maximise profit. A marketing network is required for better relationship marketing.
It consists of the company and all its supporting stakeholders- customers, employees, suppliers, distributors, retailers, ad agencies, and other with whom it has built mutually profitable business relationships.
Market is defined as the set of all actual and potential buyers of a product or service.
In the context, the following concepts are worth understanding:
Marketplace is physical place such as a store you shop in
Marketplace is digital- shopping online
Meta-markets- some product whose purchase necessitates the purchase of other products or services is called Meta market .e.g. new automobile market, where buying a new car calls for the purchase of insurance, getting a loan from the bank and so on
6. Concept of Consumerism:
The consumerism concept holds that consumers need to be protected from inferior products in the markets.
Approaches to study of marketing can be discussed under two broad headings:
(a) Traditional approach and
(b) Modern approach
What is Marketing Concept – Top 12 Concepts: Need, Wants, Demands, Product, Service, Customer Value, Customers Expectations, Quality/TQM and a Few Others
A state of felt deprivation.
a. Needs include basic physical needs for food, clothing, warmth and safety, social needs for belonging and affection, and individual needs for knowledge and self-expression.
b. They are a basic ‘part of human make up’.
They are the form taken by a human need as shaped by culture and individual personality.
Wants are described in terms of objects that will satisfy needs.
These are the human wants that are backed by buying power. Or it refers to the quantity of a commodity which a consumer is willing to buy at a given price and in a given period of time.
a. Anything that can be offered to market for attention, acquisition, use or consumption that might satisfy a want.
b. It includes physical objects, services, persons, organizations, and ideas.
c. Product is a tool to solve a customer’s problem.
Activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.
(vi) Customer Value:
The difference between the values the customer gains from owning and using a product and the costs of obtaining the product.
For example, Status and image may be viewed as value in addition to the real benefit, i.e., the benefit from the product itself.
Customer acts and evaluates the product on perceived value.
(vii) Customers Expectations:
The extent to which a product perceived performance matches a buyer expectation.
a. Performance < expectation = dissatisfaction
b. Performance = expectation = satisfaction
c. Performance > expectation = delighted customer
In the narrowest sense quality can be defined as freedom from errors.
It is the program designed to constantly improve the quality of products, services and marketing process.
a. American Society for Quality Control defines quality as the totality of features and characteristics of a product or service that bear on its ability to satisfy customer needs.
b. The fundamental aim of TQM has become Total Customer Satisfaction.
a. The act of obtaining a desired object from someone by offering something in return.
b. Exchange is only one of many ways that people can obtain desired object.
a. A trade between two parties involves at least two thing of value, agreed upon conditions, a time of agreement and a place of agreement.
b. Marketing consists of actions taken to obtain a desired response from a target audience towards some product, service, idea or other objects.
(xi) Relationship Marketing:
The process of creating, retaining and enhancing strong, value laden relationships with customers and other stake holders.
a. The set of all actual and potential buyers of a product or service.
b. Originally the term market stood for the place where buyers and sellers gathered to exchange their goods.
c. Economists use the term market to refer to a collection of buyers and sellers who transact in a particular product class.
d. Marketers see the sellers as constituting an industry and the buyers as constituting a market.
What is Marketing Concept – 3 Basic Concepts
Marketing starts with discovery of needs and demands of the consumers. It is a continuous process till the costumers demands fulfilled. Today the customer is on the driver’s seat. It is also because of the change in the demand supply equation. Now, the demand is less than supply just reverse to the past times situation. Today each marketer wants to retain and satisfy the customer because of the intense competition.
Following are the basic concepts as the elements of marketing:
1. Needs, Wants and Demands
3. Exchange and Transaction
6. Cost and Satisfaction
7. Relationship and Networks
Needs, Wants and Demand:
Needs, wants and demands are a part of basic marketing principles. Though they are 3 simple worlds, they hold a very complex meaning behind them along with a huge differentiation factors. In fact, a product can be differentiated on the basis of whether it satisfies a customer’s wants or demands.
Human needs are the basic requirements and include food, clothing and shelter. Without these humans cannot survive. An extended part of needs today has become education and health care. Generally, the products which fall under the needs category of products do not require a push.
Instead the customer buys it themselves. But in today’s tough and competitive world, so many brands have come up with the same offering satisfying the needs of the customer that even the “needs category product” has to be pushed in the customers mind.
There are uncountable human needs, however human needs can broadly be classified into three categories as discussed below:
1. Basic Physiological or Primary Needs:
These needs arise out of the basic physiology of life and are important for the survival of a man. They are virtually universal among people, but they exist in different intensity. Needs are also influenced by the social environment. One man may require wheat to satisfy his hunger, other may require rice for the same purpose. Some of the physiological needs are food, water, sleep, air to breathe, sex, clothing and shelter.
2. Socio-Psychological or Secondary Needs:
Secondary needs are related to mind and spirit rather than to the physiology of life. Many of these needs develop as one matures. Instances are belongingness, recognition, self-esteem, sense of duty, self-assertion and so on. Actually, these are the needs which complicate the efforts of managers because the secondary needs vary among people much more than the primary physiological or basic needs.
3. General Needs:
This is an intermediate category of motives between the physiological and the socio-psychological. The motives in this category are unlearned but not physiologically based. In this category may fall all other motives which cannot be classified as physiological or socio-physiological, like competence, manipulation, curiosity and love or affection.
Wants are a step ahead of needs and are largely dependent on the needs of humans themselves. Wants aren’t permanent and it regularly changes. As time passes, people and location change, wants change accordingly. Wants aren’t essential for humans to survive, but it’s associated with needs. If one always manage to satisfy our wants, it transforms into a need.
When an individual wants something which is premium, but he also has the ability to buy it, then these wants are converted to demands. The basic difference between wants and demands is desire. A customer may desire something but he may not be able to fulfill his desire.
What is Marketing Concept – Modern Concept
The modern or new marketing concept replaces and to some extent reverses the logic of the old one.
The old concept starts with the firm’s existing products and considers marketing to be the use of selling and promotion to attain sales at a profit. The new concept starts with the firm’s existing and potential customers, it seeks profits through the creation of customer satisfaction and it seeks to achieve this through an integrated, corporate- wide marketing programme. These are the three pillars of the new marketing concept. The two views — old and modern.
1. Customer-Oriented Focus:
The new marketing concept holds that a firm can gain more by being oriented outwards towards the market instead of inward towards the products.
There are several benefits when management keeps its eyes on the market rather than on the product.
The first benefit is that management realizes that a customer needs one more basic than particular products. In USA many hotels fell into financial difficulties because they continued to build hotels in the face of the growing popularity of motels.
The second benefit is that attention to customer needs helps management spot new product opportunities more quickly. In this age companies cannot stand still. Existing products and brands are under constant attack by competition. The firm can defend itself only by developing new products.
The ideas for these new products can come from a number of sources, but the best source of new ideas is the unsatisfied needs of the company’s customers. As an instance, Ford developed its Mustang because it recognized that a large number of people had a keen interest in sports cars but could not afford the ones currently on the market.
The third benefit is that merchandising becomes more effective. The fourth benefit is that management brings its own interests into greater harmony with society’s interests. Management’s interests lie in the achievement of profit and providing steady employment for its resources.
Society is interested in enhancing human welfare. A market orientation means that management builds its future profits on seeking better ways to satisfy needs.
2. Integrated Marketing:
An orientation towards buyers on the part of top management is not enough. The orientation must be backed up by organizational changes within the company. Integrating marketing management is the second pillar of the marketing concept.
In a product-oriented company, each department develops its own logic of operations. Research and development thinks in terms of exploiting the existing technology; engineering thinks in terms of creating the product cheaply; production thinks in terms of utilizing present facilities; marketing thinks in terms of maximizing sales volume and traffic thinks in terms of keeping down traffic costs. But all these logics will affect the buyer.
On the other hand, the new marketing concept insists on the substitution of a single logic for these many logics. It requires that departments be guided by the logic of customer-need satisfaction at a profit.
3. Profit through Creating Customer Satisfaction:
Third pillar of the modern marketing concepts is the achievement of good profits by giving the customer what he wants. In an economy characterized by intense competition and rapid changes in customer wants, profits must be founded on producing customer-want satisfaction. A customer orientation is the logical basis for profit planning in a consumer sovereign economy.
What is Marketing Concept – Role in the Economy
The concept of marketing and its influential role in the transformation of market, consumer and Indian economy is increasingly felt. It is a pervasive element in contemporary life of everyone. Marketing provides an opportunity to contribute to society as well as to an individual company.
In the context of present competitive environment, marketing has become the key in deciding the success and the health of a corporate. Corporates in India have recognised this fact and thus are laying a greater emphasis on marketing.
The growth of an economy is indicated by an increase in the Gross National Product (GNP) and per capita income. Increase in gross national product and per capita income in a country requires an increase in the production of goods and services. Hence, the level of production is significant in determining the level of income whether of an individual economic unit or of the economy as a whole.
Marketing has both micro and macro aspects. In its micro aspect, an efficient system of marketing enables the producer of commodity to get a higher price for the product and thereby enables him to earn larger income and helps him maintain a higher standard of living.
In its macro aspect, it enables society to get different products which its members need at reasonable prices and thereby enables them to improve their consumption standards and levels of living. It avoids waste of economic resources by mobilising goods from places where they are in plenty, and hence do not have much value in terms of human satisfaction, to places where they are scarce and hence have a great value in terms of such satisfaction.
The term ‘marketing’ connotes different meanings to different people; to some it is shopping, to others it is selling and still others understand it as purchasing as well as selling.
Marketing is the activity undertaken by the companies to make an exchange transaction, a consummate and adding on bring out greater output at a minimum cost. Marketing in its most general definition “is the directing of the flow of goods and services from the producer to consumer or users”.
Marketing is the set of human activities directed at facilitating and consummating exchanges. Marketing is human activity directed at satisfying needs and wants through exchange prices. Marketing is also referred to as the process of discovering and translating consumer needs and wants into product and service specification, creating demand for these products and services and in turn expanding this demand.
Paul Mazur defines marketing as the creation and delivery of standard of living. Marketing is a matching process, based on goals and capacities by which a producer provides a marketing mix (product and services, promotion, pricing and distribution) that meets consumer needs within the limits of society?
Marketing is a total system of business designed to plan, promote and distribute want-satisfying products and services an ideas to target markets in order to achieve organizational objectives.
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 objectives, in simple words, marketing may be defined as the process of providing the right product in the right place, at the right time and at the reasonable price to the consumer.
Marketing has moved away from the selling of basic necessities to selling specific facilities. The application of marketing concepts makes a company to view consumer needs as focal points for identification, analysis, and development of strategies which are evolved out of a clear understanding of customer needs.
To be precise, target market needs are identified, and attempts are made to develop marketing programmes in order to increase consumer satisfaction. All marketing starts with the consumer and ends at his satisfaction. The consumer understanding is therefore indispensable to marketers for the effective planning and execution of their marketing strategies at all levels.
What is Marketing Concept – 4 Pillars Propounded by Philip Kotler: Target Marketing, Customer Needs, Integrated Marketing and Profitability
Kotler has identified 4 pillars on which the whole marketing concept is based and these are:
1. Target Marketing:
A marketer has to define the market to which it will direct its efforts. The specification and identification of market would enable the marketer to design specific marketing strategies. Companies do best when they choose their target markets carefully and prepare tailored marketing programmes.
A buyer who has interest in the product, income and willingness to buy can broadly be called as potential buyer.
2. Customer Needs:
A company can define its target market but fails to correctly understand the customer’s needs. Understanding customer needs and wants is not always simple.
There are basically five types of needs, (let’s take an example of car):
i. Stated Needs (The customer wants an inexpensive car)
ii. Real Needs (The customer wants a car whose operative cost, not its initial price, is low)
iii. Unstated Needs (The customer expects good service from the dealer)
iv. Delight Needs (The customer would like the dealer to include a gift)
v. Secret Needs (The customer wants to be seen by friends as a savvy customer).
A Responsive Marketer finds a stated need and fills it. He is going to loose the customers in near future.
An Anticipate Marketer looks ahead into what needs customers may have in near future.
A Creative Marketer discovers and produces solution. Customers did not ask for but to which they enthusiastically respond.
3. Integrated Marketing:
When all the companies’ departments cork together for serving the customer, the result is integrated marketing.
Integrated marketing takes place on two levels:
First, the various marketing functions – sales force, advertising, customer services, product management, market research must work together.
Second, Marketing must be embraced by the other departments.
The ultimate purpose of the marketing concept is to help organizations achieve their objectives. In case of private firms, the major objective is profit. But in today’s world the companies also have to fulfill their responsibility towards society to great extent.
The marketing concept emphasizes that an organization should strive to satisfy the needs of the consumers by identifying them and then produce the products accordingly through a coordinated set of activities.
To identify unsatisfied needs, organizations had to go for extensive market research. While doing so, it was discovered that consumers were highly complex individuals, possessing a wide variety of innate and acquired needs. Hence, the study of consumer needs has become the basis of another discipline also i.e.; consumer behavior.
The Societal Marketing Concept:
“The Societal Marketing Concept holds that the organizations task is to determine the needs, wants and interests of target markets and to deliver the desired satisfaction more effectively and efficiently than competitors in a way that preserves or enhances the consumers and the society’s well-being”.
The new concept emerged as the societal marketing concept where it is emphasized that besides satisfying consumer needs, long run societal welfare has to be considered by the marketers. The marketers have to adopt social and ethical considerations into their marketing practices. They must make a balance between the different criteria of organization’s profits, consumer’s satisfaction and public interest as a whole.
What is Marketing Concept – Customer Concept, Societal Marketing Concept, Relationship Marketing, Change in Business Environment, Company Responses and Adjustment
1. Customer Concept:
Today many companies are moving beyond the marketing concept to the customer concept. In the marketing concept companies worked at the level of the customer segment, whereas in the customer concept the companies are shaping separate offers, services and messages specifically targeted at individual customers within the segment. It is this element of customization within the overall marketing strategy that has significantly impacted the way companies react to consumer needs and wants.
2. Societal Marketing Concept:
As the marketing concept was gaining wide acceptance in business organizations, it was noticed that firms were ignoring their social responsibility while satisfying consumers and achieving their organizational goals. Their activities are often in direct conflict with society’s best interests.
Thus, a firm may totally satisfy its customers, achieving handsome profits but in the process of doing so, they might also be polluting the air and water in the environment or damaging the cultural environment. As companies came to realize their social responsibility, this factor became one of its primary objectives. It was seen that for a company to prosper in the long-run, it needed to satisfy social needs as well as the economic needs of customers.
The marketing concept and a company’s social responsibility is compatible if the management strives over the long-run to:
(i) Satisfy the wants of its product- buying customers, even if that introduced an element of customization
(ii) Meet the societal needs of others affected by the firm’s activities
(iii) Achieve the company’s performance objectives
The societal marketing concept holds that organization’s task is to determine the needs, wants and interests of target markets and to deliver the desired satisfaction more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and society’s well-being.
3. Relationship Marketing:
Relationship marketing is based on building mutually satisfying long-term relations with profitable customers rather than opting for short-term, ‘one-time profitable’ transactions.
In relationship marketing, the company creates a marketing network, which consists of the company, and it’s supporting stakeholders, namely, customers, employees, suppliers, distributors, retailers, ad agencies and others with whom the company has built a mutually profitable business relationship.
4. How the business environment is changing?
We are operating in a most dynamic business environment today, one that is changing radically as a result of major radical societal forces, such as technological advances, globalization and deregulation, which have created new behaviours and challenges –
(i) Customers increasingly expect higher quality and service along with some customisation. They are also showing greater awareness and price-sensitivity in their search for value.
(ii) Brand manufacturers are facing intense competition from domestic and foreign brands and rising promotion costs coupled with shrinking profit margins.
(iii) Giant retailers are growing powerful and killing store-based retailers. They are marketing an ‘experience’ rather than a product assortment.
5. Company Responses and Adjustment:
Highly respected companies are adapting to the fresh challenges by:
(i) Reengineering the business process.
(ii) Outsourcing from more competitive and cost effective sources.
(iii) Attracting customers more effectively through e-commerce.
(iv) Benchmarking their activities, performances and cost structure.
(v) Building global network.
(vi) Becoming more market-driven.
Marketers are also switching to new concepts such as:
(i) Customer relationship marketing
(ii) Customer lifetime value
(iii) Customer share
(iv) Target marketing
(v) Integrated marketing communications
What is Marketing Concept – Top 2 Concepts: Traditional Concept and Modern Concept
Marketing is an integral part of market. The market is a place where the sellers and buyers assemble to exchange their product/services and vice versa.
The marketing concepts are broadly classified in two categories:
1. Traditional concept
2. Modern concept.
1. Traditional Concepts:
In traditional concept there were scarcity of the products. The customers were having very limited choice to select and purchase. In this situation the function of marketing was to make the products widely available at an affordable price.
The following viewpoints were used traditionally in marketing:
Converse, Huegy and Mitchell concepts “Marketing includes such activities which involves inflow of goods/services from production points to customers”.
American accounting association – “It is the performance of the business activities which direct the flow of goods/services from producers to users/customers”.
Thus, the traditional marketing concepts are “Product-oriented” concepts of marketing.
Comparison between Traditional and Modern Marketing:
(i) Meaning – It deals with production and products to be sold out at any cost.
(ii) Satisfaction of Consumers – Deals with circulation of products, with respect of satisfaction to the consumers.
(iii) Approach – It is product oriented.
(iv) Profit Generation – Profit earning has weightage.
(v) Social Responsibility – It has such an approach.
(vi) Mutual Relation – No relationship among the various marketing functions.
(vii) Research & Development – It is absent.
(i) Meaning – It deals with production and distribution, satisfying the needs of customers.
(ii) Satisfaction of Consumers – Consider consumer satisfaction as an important aspect.
(iii) Approach – It is consumer-oriented.
(iv) Profit Generation – Profit is secondary to consumer satisfaction.
(v) Social Responsibility – Provides quality, in time, at reasonable price.
(vi) Mutual Relation – It deals with relationship, co-ordination and integration among the marketing functions.
(vii) Research & Development – It has basis of research and development, consumers and publicity.
2. Modern Concepts:
This is a new approach where emphasis is on customer and not on the availability of the products. The customers become more conscious about the quality, price, durability, looks quantity and satisfaction. The benefits to the consumers may be tangible and/or intangible. Hence, the producers were compelled to produce as per the demand of customers. The new approach is customer oriented.
Few theories are available for modern marketing:
(i) Stanton Theory – “Marketing is a total system control. The business activities are designed to plan, price, promote and distribute what satisfy the potential consumers”.
(ii) Kotler Theory – “Marketing is a social and managerial process where individuals/ groups, needs are taken into consideration”.
While the traditional concept focus on the needs of the producers. The modern concept takes care of the consumers.
What is Marketing Concept – Production Orientation, Product Concept, Selling Concept and Marketing Concept
The three basic philosophies or concepts that have evolved over the centuries are ‘product’, ‘selling’, and ‘marketing’. Each of these philosophies was dominant at some time in its history, but the concepts did not die out; instead, they evolved and merged with the other philosophies and are still actively used today by large and small companies.
1. Production Orientation:
The production concept has prevailed since the time of the Industrial Revolution until the early 1920s. The production concept evolved around the idea that a firm should focus on products which it could produce most efficiently and that the creation of a supply of low-cost products which would in itself create further demand for products. The key questions that a firm would ask before producing a product were – (a) can we produce the product? and (b) can we produce enough of it? At that time, the production concept worked fairly well because the goods that were produced were largely those of basic necessity and there was a relatively high level of unfulfilled demand.
Virtually everything that could be produced was sold easily by a sales team whose job was simply to execute transactions at a price determined by the cost of production. The production concept prevailed into the late 1920s. The concept simply suggests that the customers prefer inexpensive products that are readily available.
In effect, ‘if we make it, they will come’. As long as the colour of the car is black, according to Henry Ford, any car would sell. Of course, things took an ugly turn when everyone started producing the same kind of goods or essentially the same product with more or less similar features. No one bought the so-called ‘me-too products’ after a while.
2. Product Concept:
The product concept itself suggests that the companies that build the ‘better mousetrap’ will gain favour. The concept emerged as a belief that consumers will buy only those products that are superior. This superiority may be achieved through higher levels of quality, performance, or innovation. Manufacturers are obsessed with the product—the quality and features of the product—more than with the customer and his/her needs. The product concept seeks to win markets and profit through high volumes and low unit cost.
The only difference (between the product concept and the production concept) is the change in the emphasis—through product excellence— improved products, new products and ideally designed and engineered products. It seeks to achieve business success through product attributes. The thinking is based on the premise that the consumers would automatically buy products of high quality. It is a technique that is still widely practised today, with the use of comparative advertising and market leaders who introduce new inventions. Firms primarily focus on developing a product and fine-tuning its features.
Other marketing strategies, such as – pricing, distribution, and promotion are all afterthoughts. For the firms/marketing people who are totally engrossed with the product and almost forget about the consumer for whom the product is actually meant, Theodore Levitt says, ‘they don’t get as excited about their customers in their own backyard as about the oil in the distant Sahara Desert’.
The product concept, thus, makes one believe that the purpose of business is to make high quality products. This is clearly a wrong definition of business. Unfortunately, the fact of the matter is that people buy benefits or services or solutions or even value satisfactions but not the products.
3. Selling Concept:
The reason for the selling philosophy was the ever-rising number of goods available after the Industrial Revolution. Businesses became progressively more efficient in production, which increased the volume of goods. With the increased supply, competition also entered the picture.
These two events eventually led to the end of product shortages and the creation of surplus. It was because of the surpluses that companies turned to the use of advertising and personal selling in order to reduce their stocks and sell their products. Selling is pushy. You need aggressive salesmen to convince the customer somehow. You also need obnoxious advertising to support selling effort. The focus is always on selling somehow—taking the customer for a ride.
The Ford Motor Company is a good example of the selling philosophy and why this philosophy does not work in many instances. Ford produced and sold the Model T for many years. During its production, the automobile market attracted more and more competition. Not only did the competition begin to offer cars in other colours, the styling of the competition was viewed as modern and the Model T became considered as old-fashioned. Henry Ford’s sons were aware of the changes in the automobile market and tried to convince their father to adapt.
However, Henry Ford was sure that his standardized low-price automobile was what the public needed. Consequently, Ford turned to marketing techniques to sell the Model T. It continued to sell, but its market share began to drop. Eventually, even Henry Ford had to recognize consumer desires and introduce a new model.
The selling philosophy assumes that a well-trained and motivated sales force can sell any product. However, more companies began to realize that it is easier to sell a product that the customer wants, than to sell a product the customer does not want. When many companies began to realize this fact, the selling era gave way to the era of the marketing concept and philosophy.
4. Marketing Concept:
The marketing concept focuses on discovering and responding to the consumer needs. Firms produce what the market demands, rather than expecting potential customers to purchase whatever they make. Research and development methods uncover consumer perceptions and needs. Firms design the products that will specifically meet the consumer needs.
Rather than distributing to the masses, companies focus on market segments with distinct sets of needs and preferences. The idea behind the marketing concept is to build a long-term relationship between the firm’s products and its customers. The marketing concept is founded on the belief that profitable sales and satisfactory returns on investment can only be achieved by identifying anticipating and satisfying customer needs and desires.
What is Marketing Concept – Need, Wants, Demand, Exchange, Transaction, Product and Utility
A traditional market was a physical place where buyers and sellers gathered to buy and sell goods. Market is often described as a collection of buyers and sellers who transact over a particular product or product class. From the marketing viewpoint, sellers constitute the industry and buyers constitute the market. Sellers and buyers are connected by four types of flows. The sellers send market-offering (goods and services) and product communications to the market, in return for which they receive money and feedback/information.
Need, Wants and Demand:
The marketers must try to understand that the basic concept underlying all economic activities is based on human needs. Needs can be defined as the states of felt deprivation. They include basic physical needs for food, clothing, warmth and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression.
Wants can be stated as educated needs based on human needs as shaped by culture and individual personality. Wants are described in terms of objectives that will satisfy needs.
For example, a consumer in India while feeling the need for food, may want to have rice and curry, whereas an American consumer in a similar situation may want to have hamburger and coke.
Demands are empowered human wants, i.e., when consumers have the capability to satisfy their wants. Companies must measure not only how many people want their product but also how many will actually be willing and able to buy it.
Here also, a consumer while wanting a car may have a demand for Maruti 800 or Mercedes Benz depending on his financial capabilities.
Hence marketers must try to understand the target market’s needs, wants and demands. They do not create needs. Needs pre-exist marketers. Marketers along with their social factors influence wants and manage demands.
Exchange and Transaction:
Needs can be best satisfied by a socially accepted process of exchange and we define marketers as people and organizations that wish to make exchanges.
Exchange is a process by which an individual gets a desired object from someone by offering something of value in return.
Transaction is a trade between two parties that involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.
Product is a generic term to describe what is being marketed-whether it is a good, service, idea, person or place. Product can also be defined, as a need satisfier, i.e., a product is any offering that can satisfy a need or want. Customer is the individual or organization that actually makes a purchase decision, while a consumer is the individual or organizational unit that uses or consumes a product. In many cases, the customer is also the consumer, such as when you buy and eat a sandwich, otherwise in a household when the parents buy products which are consumed by the children (and the reverse occurs too!).
A customer purchases a product because it provides satisfaction. That something which makes a product capable of satisfying wants is its utility. And it is through marketing that much of a product’s utility is created.
Examples of different types of utilities:
(i) Form utility – When leather takes the form of a shoe, it satisfies our need for footwear.
(ii) Place utility – An oven is useful in the kitchen.
(iii) Time utility – A newspaper has value early in the morning, it loses is value in the afternoon.
(iv) Information utility – TV news is useful when it provides relevant information.
(v) Possession utility – A car fulfills our need when we possess one and ride to our destination on it.
What is Marketing Concept – Need, Wants, Demand, Product, Services, Value, Cost, Satisfaction, Exchange, Transaction, Relationships and Markets
1. Needs, Wants and Demands:
Needs, Wants and Demand are the bases of marketing. All marketing strategies revolve around customers and understanding customer’s need, want and demand becomes the vital part of any business. These components help marketing managers in various way such as procurement of raw material, production cycle, forecasting demand, and post-sale services.
Every individual have basic requirements. Previously the process was to identify the need and satisfy those needs. But now the process is to create need. This can be done by various promotional activities.
Needs are classified by Maslow’s hierarchy of needs. Abraham Maslow’s has presented about the same in his paper ‘the theory of human motivation’. Hierarchy of Needs helps to explain how these needs motivate us all. This theory state that humans have different needs at different level of their life. The other important aspect of this theory is that human are motivated by unsatisfied need. As the name suggest according to Maslow there is hierarchy in needs and it should be satisfy in one by one.
The higher order needs of influence surface only after our lower order needs of both physical and emotional well-being are fulfilled.
On the contrary if the things that satisfy our lower order needs are swept away, we are no longer concerned about the maintenance of our higher order needs.
The basic needs such as air, water, food which without consuming we cannot even function or perform a simple task are to be satisfied first. If such needs are not satisfied individual feel irritation and discomfort. A child when born is not feed well he will never be motivated to focus on fulfilling other needs. According to this theory once this needs are fulfilled, one can focus on other needs.
Safety needs comes second in Maslow’s hierarchy of need. According to him after » fulfilling physiological need the focus turns to safety. Safety needs are psychological in nature such as four walls and a roof on top, life insurance, medical insurance, a permanent job, bank account.
If an individual has not fulfilled its safety needs it will be impossible for him to go to next level. For example an individual struggling for job or not having a home they will not be able to focus on love or belongingness.
iii. Love and Belonging Needs:
Moving up the pyramid, human crave for feeling of love and belongingness. Sense of belongingness and acceptance in embedded in us since childhood. From childhood we aspire to be part of some group, clubs, with the passing time this need increases and we look up to bigger and renowned groups. The feeling of being loved and to love is so important for humans that people who don’t get love suffer from clinical depression, social anxiety, loneliness.
After being part of a group the need to be respected in that group arises. Being accepted and respected is the typical human desire. Maslow divided esteem into two categories one is higher version and the second is lower version. Higher version of esteem is the need of self-respect, it means how a person see himself/herself with respect to others.
For example a teacher’s feeling of mastery a subject in the best possible with respect to other teachers teaching the subject. On the other hand lower version of esteem is the need of respect from others. For example the teacher who wants to master the subject also wants that his mastery should be recognized from his peers, students and management.
It is the zenith point of this hierarchy. Self-actualization is a stage where all the needs are fulfilled. It’s a stage where one has achieved what he can, he/she has become what the best they can be. This is the stage where there is no emptiness in one’s life. It’s the stage where all the materialistic quest ends and the quest for wisdom, justice and truth arise.
People at this are highly experienced and have a feeling of profound happiness. According to Maslow, only a small percentage of the population reaches the level of self-actualization.
Maslow divided the needs of human in a hierarchy but all this five levels are interrelated. Needs are not hierarchical they are closely related for example an individual needs love and belongingness since birth before they even understand the concept of basic needs other example can be even though somebody can achieve at self-actualization stage other need such as mastery in different field may arise so it is not an end to need.
Needs are limited in nature and human wants are unlimited. Need is to quench thirst, want is to quench the thirst by having water, having mineral water, having cold drink, or by having fruit juice. Environment such as family, society, neighbors, friends, colleagues has a huge impact in shaping one’s want.
For example a person need to buy a vehicle to commute to office now he wants to buy a two vehicle but seeing the need of other family member he buys a four wheeler. Marketers always focus in influencing wants and to pursue customers to buy products.
Wants are unlimited but resources are limited. Therefore each and every customer chooses that product which has maximum value for their hard-earned money. When a purchase is done based on the ability of an individual to buy wants become demands. For example may people wants to visit and explore places such as Bali, Switzerland, Venice etc. but only few can afford it. Thus demands are basically wants for specific product that are linked with the ability to buy the product.
In truth, marketers do not actually create needs. On the other hand, they trigger and influence the wants of people. For example, they suggest or provide ideas to the end users that the product or the service will cater to the person’s social status or just fulfill the want. Marketers do not even create the need for social status, in turn they try to indicate or provide strong clues that the particular product will satisfy that need. And in turn, they try to influence this want or demand by making the product attractive, affordable and well within reach.
2. Products and Services:
A product can be defined as a tangible item that satisfy needs and wants. People buy products which then find worthy of their money. The difference between products and services are that product is physical objects and services are intangible in nature.
The importance of physical products does not lie in owning them rather using them to satisfy our wants. People do not buy expensive APPLE laptops to look at, but because it is faster and better than other competitive products. In short, it can be said that physical products are platforms that provide services to people.
Noticing the upward growing trend of service industry many companies have now begun to focus on the service part of their products. If an individual is bored, then a lot many things can be done such as going to a musical concert (entertainment), traveling to a hill station (place), go to a gym for physical fitness (activity), join a laughter club (organization) or simply adopt a different philosophy about life (idea).
All these are fine examples of mix of products and services that can be offered to individuals telling us that services can indeed be offered through physical products. When we mean a product, we refer to a service product or a physical product that satisfies a need or a want.
3. Value, Cost and Satisfaction:
The concept value, cost and satisfaction are interlinked. For a customer that product or service is valuable which gives maximum satisfaction at lower price. For example one person needs to travel daily 10 kilometer to his office. Numerous options are available to meet this distance such as bicycle, motor-cycle, car, state-owned transport (bus, train, and metro train), private transport (taxi, auto rickshaw).
These options represent his product choice set. Factors such as speed, safety, time, comfort also play an important role before zeroing to one option. Each travelling option has a different capacity to satisfy different needs. Like using a bus might be cheaper but it may take more time. Now, the person has to decide based on all the factors that which mode of commuting should be used.
Here comes the concept of value. Value is the consumer’s estimate of each product in satisfying his needs. Assume his priority is to reach office on time every time he is not concern with the money factor it is likely that he will choose to travel by car. But what if his concern is money then he will choose to travel by either bus or bicycle.
However each commuting mode involved a cost, he will choose the product that will produce the most value per rupees. He will consider the products value and price before making a choice. He will make an estimate of all the options and then consider the factors such as time and comfort and choose that option which gives more value and satisfaction.
Customers in today’s era are very informative and tech savvy. So before narrowing down to an option customers do lot of research and choose the best. Marketers cannot ignore the modern theories on consumer behavior because the sum and substance of the marketing plan rests on ideas about how consumers take their decisions. As a consequence, principles namely the value, cost and satisfaction are critical to the concept of marketing.
4. Exchange, Transactions and Relationships:
Exchange is a process of attaining a product by giving something in return. The concept of exchange has changed with the evolution of mankind. In primitive age when people did not had much option they use to depend upon hunting, fishing or on fruits. Then with evolution concept of barter system came into existence.
Barter system is trading goods with another person. This system worked for centuries but with passing time people had different needs and in different quantities for example a milkman cannot exchange milk with barber in long run because a barber might need milk daily but a milkman will not need haircut daily.
So after the invention of money barter system lost its importance. Trade became easier with money, an individual can choose what to buy, at what quantity and when to buy.
Kotler (1984) explains that for exchange to take place, five conditions must be satisfied:
i. There are at least two parties.
ii. Each party has something that might be of value to the other party.
iii. Each party is capable of communication and delivery.
iv. Each party is free to accept or reject the offer.
v. Each party believes it is appropriate or desirable to deal with the other party.
Exchange takes place between two persons when all the above conditions are met satisfactorily. Exchange results in satisfaction for both the parties and it can be said that both the parties are now better off than before the exchange actually took place.
You say that two parties are engaged in an exchange in case they are negotiating a deal and moving in the direction of signing an agreement. Negotiation is the natural process of trying to arrive at naturally agreeable terms. A transaction is said to have taken place when an agreement is reached.
Transaction is a deal between two parties. It has several dimensions such as place of agreement, things to exchange, and both the party agreeing to the condition of agreement. The terms of transactions are also supported by legal system of all the nations to safeguard the interest of both the parties.
Transfer is also a kind of exchange where one person exchange a product (in terms of a gift, a donation, or a help) with another person but it is different from transaction. In transfer the other party is not oblige of giving anything in return, there is commitment place of giving or receiving gift, and this exchange is not based on need, want or demand.
Every company wants exchange to happen on regular basis and to make this happen every company should work on relationship marketing. Relationship marketing is a bond of loyalty between buyer and seller this bonding is achieved by effort of both the parties. Seller has to ensure quality product at better price and buyer has to pay the price and will be brand loyal. This ‘win-win’ situation strengthened the relationship of buyer and seller.
A marketing asset consists of building trust, knowledge and help amongst two parties. Relationship marketing results in cutting down of transaction costs and time. Out of the building of true relationship marketing emerges a unique company asset which is known as a marketing network. Within the fold of marketing network, fall companies and firms which have over years come to build solid and dependable business relationships.
A layman regards market as a place where buyers and sellers personally interact and finalize deals. The term “market” originates from the Latin word “Marcatus” which means “a place where business is conducted.”
According to Perreault and McCarthy, market is defined as a group of potential customers with similar needs or wants who are willing to exchange something of value with sellers offering various goods and/or services to satisfy those needs or wants. Of course, some negotiation will be needed. This can be done face-to-face at some physical location (for example, a farmer’s market). Or it can be done indirectly through a complex network that links middlemen, buyers and sellers living far apart.
Depending upon what is involved, there are different types of markets which deals with products and/or services such as:
i. Consumer Market:
In this market the consumers obtain what they need or want for their personal or family consumption. This market can be subdivided into two parts—fast moving consumer goods market from where the consumers buy the products like toothpaste, biscuits, facial cream etc. and services like internet, transportation etc.
Another is durables market from where, the consumers buy the products of longer life like motorcycles, cars, washing machines etc. and services like insurance, fixed deposits in the banks and non-banking financial companies etc.
ii. Industrial/Business Market:
In this market, the industrial or business buyers purchase products like raw materials (iron ore, coke, crude oil etc.), components (wind-screen, tyres, picture tubes, micro-processors etc.), finished products (packaging machines, generators etc.), office supplies (computers, pens, paper etc.) and maintenance and repair items (grease, lubricating oil, broom etc.).
Apart from products, now-a-days due to outsourcing the industrial buyers also require a number of services like accounting services, security services, advertising, legal services etc. from the providers of these services.
iii. Government Market:
In most of the countries central/federal, state or local governing bodies are the largest buyers requiring a number of products and services. Government is also the biggest provider of services to the people, especially in a developing country like India where army, railways, post and telegraph etc. services are provided by the Central Government and State Govt. and local municipality provides services like roadways and police and sewage and disposal and water supply respectively.
iv. Global Market:
The world is rapidly moving towards borderless society thanks to information revolution and the efforts of WTO to lower the tariff and non- tariff barriers. The product manufacturers and service providers are moving in different countries to sustain and increase their sales and profits.
Although the global companies from the developed countries are more in number (AT & T, McDonald’s, Ford Motors, IBM, Sony, Citibank etc.); the companies from developing countries are also making their presence felt in foreign countries (Aditya Vikram Birla Group, Maruti-Suzuki, Infosys, IRCON etc.). The ultimate winners are the consumers who are getting world class quality products and services at an affordable price.
v. Non-Profit Market:
On one hand the society is making progress in every field, on the other hand the number of problems that it is facing are also increasing. Most of the people don’t care for these problems due to variety of reasons such as lack of awareness, lack of time, selfishness etc. So in order to fill the void, the non-profit organizations came into being.
These organizations support a particular issue or a charity and create awareness among the general public towards these issues and try to obtain financial and non-financial support. For example, there are NGOs who are working towards the conservation of flora and fauna, Narmada Bachao Andolan, Chipko Andolan (to conserve the trees in the Himalayan region) etc.
These non-profit organisations need monetary support from individuals, institutions and governments to promote a cause or a charity like old age home, free dispensary, free education, home for destitute etc.