Lesson 1.

Introduction to Marketing

Objectives
In this lesson, we will introduce you to the business function of marketing. After you
work out this lesson, you should be able to:
Define marketing and the utility (value) it creates for the customer
Trace the origin of marketing and explain how it has evolved
Describe the elements of a marketing strategy
Understand the scope of marketing
In this lesson, we will discuss the following:
What is marketing?
Evolution of marketing
Marketing framework
Extending the traditional boundaries of marketing
Functions of marketing
Introduction
Production and marketing of goods and services are the essence of economic life in any
society. All organizations perform these two basic functions to satisfy their commitments to
their stakeholders – the owners, the customers and the society, at large. They create a benefit
that economists call utility which is the want-satisfying power of a good or service. There are
four basic kinds of utility – form, time, place and ownership utility.
Form utility is created when the firm converts raw materials and component inputs into
finished goods and services. Although marketing provides important inputs that specify
consumer preference, the organization’s production function is responsible for the actual
creation of form utility. Marketing function creates time, place and ownership utilities.
Time and place utility occur when consumers find goods and services available when and
where they want to purchase them. Online retailers with 24*7 format emphasize time utility.
Vending machines focus on providing place utility for people buying snacks and soft drinks.
The transfer of title to goods or services at the time of purchase creates ownership utility.
Type Description Examples Responsible function Form Conversion of raw materials and
components into finished goods and services Pizza made from several ingredients Production
Time Availability of goods and services when consumers want them Dial-a-pizza; delivery
guaranteed in 30 min. Marketing Place Availability of goods and services where consumers
want them Delivery at your doorstep Marketing Ownership (possession) Ability to transfer
title to goods or services from marketer to buyer Pizza sales (in exchange for rupees or credit
card payment) Marketing
To survive, all organizations must create utility. Designing and marketing want satisfying
goods, services and ideas is the foundation for the creation of utility. Management guru, Peter
F.Drucker emphasized the importance of marketing in his classic book, The Practice of
Management as:
‘If we want to know what a business is, we have start with its purpose. And its purpose must
lie outside the business itself. In fact, it must lie in society since a business enterprise is an
organ of society. There is one valid definition of business purpose: to create a customer’.
What is Marketing?
Continuous exposure to advertising and personal selling leads many people to link marketing
and selling, or to think that marketing activities start once goods and services have been
produced. While marketing certainly includes selling and advertising, it encompasses much
more. Marketing also involves analyzing consumer needs, securing information needed to
design and produce goods or services that match buyer expectations and creating and
maintaining relationships with customers and suppliers.
The following table summarizes the key differences between marketing and selling concepts.
The difference between selling and marketing can be best illustrated by this popular customer
quote: ‘Don’t tell me how good your product is, but tell me how good it will make me’.
The American Marketing Association, the official organization for academic and professional
marketers, defines marketing as:
“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”.
Another definition goes as ‘ … process by which individuals and groups obtain what they
need and want through creating and exchanging products and value with others’. Simply put:
Marketing is the delivery of customer satisfaction at a profit.
The notion of exchange as central to marketing is reinforced by many contemporary
definitions such as ‘marketing is the process of creating and resolving exchange
relationships’ and ‘marketing is the process in which exchanges occur among persons and
social groups’. The essence of marketing is the exchange process, in which two or more
parties give something of value to each other to satisfy felt needs. In many exchanges, people
trade tangible goods for money. In others, they trade intangible services.
Exchanges in marketing are consummated not just between any two parties, but almost
always among two or more parties, of which one or more taken on the role of buyer and one
or more, the role of seller. A common set of conditions are present in the marketplace, viz.,
1) Buyers outnumber sellers
2) Any individual buyer is weaker than any individual seller economically, but
3) The total economic power of even a fraction of the buyers is enough to assure the
existence of, or to put out of business, most sellers or groups of sellers, and
4) Consequently, the sellers compete to sway the largest number of buyers they can to their,
rather than another seller’s (competitor’s) offerings. Finally and intriguingly,
5) The sellers in their attempt to meet competition and attract the largest number of buyers,
are influenced as well, regularly modifying their behaviours so they will have more success,
with more buyers, over time.
The expanded concept of marketing activities permeates all organizational functions. It
assumes that the marketing effort will follow the overall corporate strategy and will proceed
in accordance with ethical practices and that it will effectively serve the interests of both
society and organization. The concept also identifies the marketing variables – product, price,
promotion and distribution – that combine to provide customer satisfaction. In addition, it
assumes that the organization begins by identifying and analyzing the consumer segments
that it will later satisfy through its production and marketing activities. The concept’s
emphasis on creating and maintaining relationships is consistent with the focus in business on
long-term, mutually satisfying sales, purchases and other interactions with customers and
suppliers. Finally it recognizes that marketing concepts and techniques apply to non-profit
organizations as well as to profit-oriented businesses, to product organization and to service
organizations, to domestic and global organizations, as well as to organizations targeting
consumers and other businesses.
Evolution Of Marketing
As noted earlier, exchange is the origin of marketing activity. When people need to exchange
goods, they naturally begin a marketing effort. Wroe Alderson, a leading marketing theorist
has pointed out, ‘It seems altogether reasonable to describe the development of exchange as a
great invention which helped to start primitive man on the road to civilization’. Production is
not meaningful until a system of marketing has been established. An adage goes as: Nothing
happens until somebody sells something.
Although marketing has always been a part of business, its importance has varied greatly
over the years. The following table identifies five eras in the history of marketing: the
production era, the product era, the sales era, the marketing era and the relationship
marketing era.
Era Prevailing attitude and approach
Production Consumers favor products that are
available
and highly affordable
Improve production and distribution
‘Availability and affordability is what
the
customer wants’
Product Consumers favor products that offer
the most
quality, performance and innovative
features
‘A good product will sell itself’
Sales Consumers will buy products only if
the
company promotes/ sells these
products
‘Creative advertising and selling will
overcome
consumers’ resistance and convince
them to
buy’
Marketing Focuses on needs/ wants of target
markets and
delivering satisfaction better than
competitors
‘The consumer is king! Find a need
and fill it’
Relationship marketing  Focuses on needs/ wants of target
markets and
 delivering superior value
 ‘Long-term relationships with
customers and
 other partners lead to success’

In the production era, the production orientation dominated business philosophy. Indeed
business success was often defined solely in terms of production victories. The focus was on
production and distribution efficiency. The drive to achieve economies of scale was
dominant. The goal was to make the product affordable and available to the buyers. In the
product era, the goal was to build a better mouse trap and it was assumed that buyers will
flock the seller who does it. However, a better mousetrap is no guarantee of success and
marketing history is full of miserable failures despite better mousetrap designs. Inventing the
greatest new product is not enough. That product must also solve a perceived marketplace
need. Otherwise, even the best-engineered. Highest quality product will fail. In the sales era,
firms attempted to match their output to the potential number of customers who would want
it. Firms assumed that customers will resist purchasing goods and services not deemed
essential and that the task of selling and advertising is to convince them to buy. But selling is
only one component of marketing. Next came the marketing era during which the company
focus shifted from products and sales to customers’ needs. The marketing concept, a crucial
change in management philosophy, can be explained best by the shift from a seller’s market –
one with a shortage of goods and services – to a buyer’s market – one with an abundance of
goods and services. The advent of a strong buyer’s market created the need for a customer
orientation. Companies had to market goods and services, not just produce them. This
realization has been identified as the emergence of the marketing concept. The keyword is
customer orientation. All facets of the organization must contribute first to assessing and then
to satisfying customer needs and wants. The relationship marketing era is a more recent one.
Organization’s carried the marketing era’s customer orientation one step further by focusing
on establishing and maintaining relationships with both customers and suppliers. This effort
represented a major shift from the traditional concept of marketing as a simple exchange
between buyer and seller. Relationship marketing, by contrast, involves long-term, value-
added relationships developed over time with customers and suppliers. The following table
summarizes the differences between transaction marketing (i.e. exchanges characterized by
limited communications and little or no ongoing relationship between the parties) and
relationship marketing.
Needs, wants and demands
Marketing starts with the human needs and wants. People need food, air, water, clothing and
shelter to survive. They also have a strong desire for recreation, health, education, and other
services. They have strong performances for particular versions and brands of basic goods
and services. A human need is a state of felt deprivation of some basic satisfaction. People
require food, clothing, shelter, safety, belonging, esteem and a few other things for survival.
These needs are not created by their society or by marketers; they exist in the very texture of
human biology and the human condition.
Wants are desires for specific satisfiers of these deeper needs. For example, one needs food
and wants a pizza, needs clothing and wants a Raymond shirt. These needs are satisfied in
different manners in different societies. While people needs are few, their wants are
unlimited. Human wants are continually shaped and reshaped by social forces and
institutions.
Demands are wants for specific products that are backed up by an ability and willingness to
buy them. For example, many people want to buy a luxury car but they lack in purchasing
power. Companies must therefore measure not only how many people want their products,
but, how many would actually be willing to buy and finally able to buy it. Marketers do not
create need, they simply influence wants. They suggest to consumers that a particular product
or brand would satisfy a person’s need for social status. They do not create the need for social
status but try to point out that a particular product would satisfy that need. They try to
influence demand by making the product attractive, affordable, and easily available.
Marketing, marketers, and marketing management
The concept of markets bring the full circle to the concept of marketing. Marketing means
human activities taking place in relation to markets. Marketing means working with markets
to actualize potential exchanges for the purpose of satisfying human needs and wants. If one
party is more actively seeking an exchange than the other party, we call the first party a
marketer and the second party a prospect. A marketer is someone seeking a resource from
someone else and willing to offer something of value in exchange. The marketer is seeking a
response from the other party, either to sell something or to buy something. Marketer can be a
seller or a buyer. Suppose several persons want to buy an attractive house that has just
became available. Each would be buyer will try to market himself or herself to be the one the
seller selects. These buyers are doing the marketing. In the event that both parties actively
seek an exchange, we say that both of them are marketers and call the situation one of
reciprocal marketing.
In the normal situation, the marketer is a company serving a market of end users in the face
of competitors. The company and the competitors send their respective products and
messages directly and/or through marketing intermediaries i.e. middlemen and facilitators to
the end users.
Marketing management takes place when at least one party to a potential exchange gives
thought to objectives and means of achieving desired responses from other parties. According
to American Marketing Association, ‘Marketing Management 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’. This definition
recognizes that marketing management is a process involving analysis, planning,
implementation, and control; that it covers ideas, goods and services; that it rests on the
notion of exchange; and that the goal is to produce satisfaction for the parties involved.
1.4 Marketing concepts
Firms vary in their perceptions about business, and their orientations to the market place. This
has led to the emergence of many different concepts of marketing. Marketing activities
should be carried out under some well-thought out philosophy of efficient, effective, and
responsible marketing. There are six competing concepts under which organisations conduct
their marketing activity.
1.4.1. 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 more exchange will result in
missing out the essence of marketing. Marketing is much broader than exchange. Exchange,
at best, covers the distribution aspect and the price mechanism. The other important aspects
of marketing, such as, concern for the customer, generation of value satisfactions, creative
selling and integrated action for serving customer, are completely overshadowed in exchange
concept.
1.4.2. Production concept
It is one of the oldest concepts guiding sellers. The production concept holds that customers
will favour those products that are widely available and low in cost. Managers of production-
oriented organisations concentrate on achieving high production efficiency and wide
distribution coverage.
The assumption that consumers are primarily interested in product availability and low price
holds in at least two types of situations. The first is where the demand for a product exceeds
supply. Here consumers are more interested in obtaining the product than in its fine points.
The suppliers will concentrate on finding ways to increase production. The second situation is
where the product’s cost is high and has to be brought down through increased productivity
to expand the market.
1.4.3. The product concept
The product concept holds that consumers will favour those products that offer quality or
performance. Managers in these product-oriented organisations focus their energy on making
good products and improving them over time.
These managers assume that buyers admire well-made product and can appraise product
quality and performance. These managers are caught up in a love affair with their product and
fail to appreciate that the market may be less “turned on” and may even be moving in
different direction.
The product concept leads to “marketing myopia”, an undue concentration on the product
rather than the need. Railroad management thought that users wanted trains rather than
transportation and overlooked the growing challenge of the airlines, buses, trucks, and
automobiles. Slide-rule manufacturers thought that engineers wanted slide rules rather than
the calculating capacity and overlooked the challenge of pocket calculators.
1.4.4. The selling concept
The selling concept holds that consumers, if left alone, will ordinarily not buy enough of the
organization’s products. The organization must therefore an aggressive selling and promotion
effort.
The concept assumes that consumers typically show buying inertia or resistance and have to
be coaxed into buying more, and that the company has available a whole battery of effective
selling and promotion tools to stimulate more buying.
The selling concept is practiced most aggressively with “sought goods”, those goods that
buyers normally do not think of buying, such as insurance, encyclopedias, and funeral plots.
These industries have perfected various sales techniques to locate prospects and hard-sell
them on the benefits of their product. Hard selling also occurs with sought goods, such as
automobiles. Most firms practice the selling concept when they have overcapacity. Their aim
is to sell what they make rather than make what they can sell.
Thus selling, to be effective, must be preceded by several marketing activities such as needs
assessment, marketing research, product development, pricing, and distribution. If the
marketer does a good job of identifying consumer needs, developing appropriate products,
and pricing, distributing, and promoting them effectively, these products will sell very easily.
When Atari designed its first video game, and when Mazda introduced its RX-7 sports car,
these manufacturers were swamped with orders because they had designed the “right”
product based on careful marketing homework.
Indeed, marketing based on hard selling carries high risks. It assumes that customers who are
coaxed into buying the product will like it; and if they don’t, they won’t bad-mouth it to
friends or complain to consumer organizations. And they will possibly forget their
disappointment and buy it again. These are indefensible assumptions to make about buyers.
One study showed that disappointed customers bad-mouth the product to eleven
acquaintances, while satisfied customers may good-mouth the product to only three.
1.4.5. The marketing concept
The marketing concept holds that the key to achieving organizational goals consists in
determining the needs and wants of target markets and delivering the desired satisfactions
more effectively and efficiently than competitors. Theodore Levitt drew a perceptive contrast
between the selling and marketing concepts. Selling focuses on the needs of the seller;
marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert
his product into cash; marketing with the idea of satisfying the needs of the customer by
means of the product and the whole cluster of things associated with creating, delivering and
finally consuming it.