CHAPTER 11 MARKETING MANAGEMENT

MARKETING – Traditionally, “Marketing includes all activities that direct the flow of goods and
services from the producers to the consumers or users.” This definition is Product oriented as it
does not consider the needs of customers. (Emphasizes sale of produced goods to consumers.) The
activities involved in this process are product designing, branding, packaging, advertising,
warehousing, transporting, pricing and selling. These are also called marketing activities.

In the modern sense, “Marketing is a social process wherein buyers and sellers interact with each
other so that the needs of the buyers are satisfied through suitable goods and services offered by the
sellers.” This implies matching of products with the markets. It is based on the philosophy that
satisfaction of consumers is the basic purpose of business. This requires determining the
requirements of potential customers and supplying those products which meet their requirements.

MARKETING MANAGEMENT – It refers to the process of planning, organizing, directing and

controlling the activities related to marketing of goods and services to satisfy the customers’ needs
and achieve organizational objectives.

MARKETING MANAGEMENT PHILOSOPHIES

1) Production Concept – This philosophy is based on the belief that it is easy to sell the
products which are (a) offered at lower price (i.e. inexpensive products) and are (b)
easily available. So, the firms following Production concept, focus on Mass Production and
Distribution to reduce the cost of production per unit (using economies of scale).
2) Product Concept – The firms following this philosophy believe that by producing superior
products and improving their features overtime, they would be able to attract more customers.
The underlying assumption is that customer favours product quality, performance,
innovative features, etc. But in real life, better quality product may be costly and therefore
customer may compromise with quality and buy low quality goods.
3) Selling Concept – NCERT (Pg 301) The firms following this philosophy believe that in order to
sell a product, the customers must be convinced and this can be done by undertaking
aggressive selling and promotional efforts.
The use of promotional techniques such as advertising, personal selling, and sales
promotion is therefore essential for selling of products.
In this concept, making sales through any means is considered important. It is assumed that
buyers can be manipulated but what is forgotten is that is the long run customer satisfaction is
most important. If customer becomes dissatisfied once, he would not return to that particular
firm’s product. So selling concept can succeed in the short run and not in the long run.
 4) Marketing Concept – The marketing concept concentrates on the need of the customers
and tries to satisfy the needs better than the competitors. Hence, under this concept,
customer satisfaction is the pre condition for realizing firm’s goals and objectives.
Under marketing concept, firms don’t sell what they have produced but they produce and
sell what customers want. To sum up, the marketing concept is based on the following
pillars:
a) Identification of market or customer who are chosen as the target of marketing effort.
b) Understanding needs and wants of customers in the target market.
c) Development of products or services for satisfying needs of the target markets.
d) Satisfying needs of target market better than the competitors.
e) Doing all this at a profit.

The firms adopting marketing concept give importance to two important market forces. These are
customers and competitors as the firms keep a close eye on the needs and wants of customers
and try to satisfy these needs better than their competitors.

Maintaining constant vigil on customer is called customer orientation and constant vigil on the
competitors is called competitor orientation.

5) Societal Marketing Concept – The critics of the marketing concept argue that blindly
following the goal of identifying customers’ needs and satisfying them has led to some social
and environmental problems such as pollution, ecological imbalance, wastage of natural
resources, drug abuse, etc. Therefore, social objectives must be considered as an integral part
of the process of the customer satisfaction.
Thus, the societal marketing concept is the extension of marketing concept as supplemented
by the concern for the long term welfare of the society.
Apart from the customer satisfaction, it pays attention to the social, ethical and
ecological aspects of marketing.

→ Differences in the Marketing Management Philosophies (Read from NCERT)

 PRICE MIX

The term ‘Price’ means “the money value to be charged from the customer for a product or a
service.”

The decisions related to the pricing of a product or a service is called ‘PRICE MIX’. It involves fixing
the price of a product/service and taking decisions regarding discount (both cash discount and trade
discount); credit policy, period of credit, etc.

FACTORS AFFECTING PRICE DETERMINATION

1. Cost of Production – The cost of a product can be divided into two: (a) Fixed Cost – which
remain same irrespective of the production level. Eg: Rent of factory, Cost of machinery,
Salary of permanent staff, etc. (b) Variable cost – The cost which vary directly with the level of
production. Eg: Cost of raw materials, wages of labour, etc.
The price must be able to recover the cost in the long run including a fair
return/reasonable margin of profit.
However, sometimes in the short run, the price can be fixed at a price less than the total
cost. This can be done to fight competition and to capture a big share in the market. But the
price must at least cover the variable cost.
2. The Utility and Demand – The price of a product is affected by: (a) The utility provided by the
product; and (b) The price elasticity of demand.

→ If the product is offering higher utility, the firm can charge a high price for it but if the utility
provided by the product is low, its price needs to be lowered.

→The price elasticity of demand refers to ‘the degree of responsiveness of quantity demanded of
a good to the change in its price’.

i. If the demand is inelastic (i.e. no or few substitutes are available and therefore demand
does not change with change in price) the company can fix a higher price.
ii. If the demand is elastic (i.e. more substitutes are available and a change in price can affect
the demand) then the firm should fix flexible (lower) price than its competitors.
3. Extent of competition in market – The price of a product should be fixed after considering
the price charged by their competitors.
a) If the firm does not face any competition, it can enjoy complete freedom in fixing its price.
b) In case of cut throat competition, it is desirable to keep the price low.
 4. Government and Legal Regulations – In order to protect the interest of public against unfair
practices, government can intervene and regulate the price of essential commodities, e.g.
medicines, wheat, rice, sugar, etc. In such a case, no firm can charge beyond the statutory
price.
5. Pricing Objectives – The price of a firm’s products and services is affected by the pricing
objective of the firm.
a) If the firm decides to maximize profits in the short run, it would tend to charge maximum
price for its products.
b) If a firm’s objective is to obtain larger share of the market, it will charge lower price so that
greater number of people are attracted to purchase the products.
c) If a firm is facing difficulties in surviving in the market because of intense competition or
introduction of a more efficient substitute by a competitor, it may charge low price for its
product.
d) To attain product quality leadership, a firm normally charges higher prices to cover high
quality and high cost of Research and Development.
6. Marketing Methods Used – Price fixation process is also affected by other elements of
marketing such as Distribution system, Quality of salesmen employed, Quality of Advertising
and amount spent on it, Sales Promotion efforts, the type of packaging, etc. Eg: If a company
uses intensive advertising to promote sales, then that cost of advertising is also covered from
the customers which results in a higher price.

PROMOTION MIX

Promotion – Promotion of products and services include activities that communicate the
availability, features, merits, etc. of the products to the target customers and persuade them
to buy it. Thus, promotion refers to the use of communication with the twin objective of informing
potential customers about a product and persuading and influencing them to buy it.

Promotion Mix – Promotion mix refers to combination of promotional tools used by an

organization to achieve its communication objectives. These tools include: (i) Advertising; (ii)
Personal Selling; (iii) Sales promotion; (iv) Public Relations. These tools are also called elements of
promotion mix and can be used in different combinations. What combination of these elements is
used by a firm will depend upon various factors such as nature of market, nature of product, , the
promotions budget, objectives of promotion, etc.

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