Marketing

Management
Introduction to Marketing Management
Week 2
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Learning Objectives
After studying this Chapter, learners should be able to :
 explain the meaning of Market and Marketing
 differences between Marketing and Selling
 functions of Marketing
 definitions of Marketing
 concepts of Marketing

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 Market provides a mechanism for the sale of goods. According to

Prof. Philip Kotler market is an area or atmosphere for a potential
exchange.
 Marketing includes all activities involved in the production and
distribution of goods and services.
 Marketing concept refers to the philosophy of an organisation in
relation to marketing of a product of service.

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 The term market is derived from the Latin word 'Marcatus' which means
merchandise, trade i.e. purchasing and selling of goods.
 It is a place where buyers and sellers meet together for the exchange of title
to goods. i.e. it is a place where business is conducted.
 For the students of marketing market refers to any region in which buyers
and sellers are brought in contact with one another, and by means of which
the prices of goods and services are finalised easily and quickly.

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 According to Prof. Mitchel market is not a geographical meeting

place but as any getting together of buyers and sellers, in person, by
mail, telephone, telegraph and internet or any other means of
communication.
 Prof. Philip Kotler expressed in his famous book 'Marketing
Management', the term 'market' as area or atmosphere for a potential
exchange.

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 Market is an arrangement that provides opportunity of exchanging

goods and services for money or money's worth.
 Thus in market there are two groups of persons, one group holding the
goods which they want to sell and another group of prospective buyers
who want to pay for the goods they are going to buy.

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Classification of Markets
 Markets can be classfied in several ways from different approaches:
 I. On Geographic or Area Basis : From the standpoint of
geographical area, markets are divided into
 a) Local Market : These markets relate to a particular locality. In the
case of these markets, commodities sold within geographical limits.
Such commodities are difficult to be sold outside local limits.
Generally, commodities which are heavy and perishable have local
markets.
 For example bricks, vegetables, fruits, milk etc have local markets.
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 b) National Market : The growth of industries has widened the scope

of market on national level. With the growth of transportation and
communication, most of the goods are marketed at national level.
 c) International Market : These are known as foreign markets where
goods are sold beyond national boundaries. With the growth of
transportation and communication systems, a number of products have
acquired and international level.

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 II. On the Basis of Importance : On the basis of importance markets

may be divided into
 (a) Primary Markets : In primary markets, primary producers of
agricultural products or manufactured goods sell to wholesalers, who
assemble the goods from different sources of production. These
markets are generally found in villages.

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 (b) Secondary Markets : In the secondary markets, wholesalers sell

the goods to retailers for further selling. Semi - processed and Semi -
manufactured goods are generally sold and purchased in secondary
markets E.g. Yarn market.
 (c) Terminal Market : It is the market where final products are sold
to final consumers i.e. consumers purchase goods in the terminal
markets from the retailers.

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 III. On The Basis Of Business : On the basis of volume of business, the market
may be divided into
 (a) Wholesale Market : In wholesale market goods are bought and sold in huge
quantities. In these markets sellers are wholesalers and the buyers are retailers.
Wholesalers purchase goods in bulk quantities and sell the same to retailers in
small quantities.
 (b) Retail Market : In this market retailers who puchase goods from wholesalers,
sell to ultimate consumers in individual units i.e. very small quantities.

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 IV. On Economic Basis : In economics markets are classified into

 (a) Perfect Market : In perfect market there will be perfect competition between
buyers and sellers who have full knowledge of other buyers and sellers. Due to
this only one price will prevail in the market for the commodity. The following are
the essential features of perfect market:
(i) Group of buyers and sellers.
(ii) Effective competition between buyers and sellers.
(iii) One price for the commodity throughout the market.

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 (b) Imperfect Market : Imperfect market is a market which is not a

perfect market. In this market we find some kind of maladjustment in
demand and supply; buyers and sellers have no knowledge of other
buyers and sellers.

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 V. On Time Basis : On the basis of time markets may be classified into

 (a) Very Short Period Markets : It refers to markets which exist for a very
short period normally a day. Such markets generally sell fruits, flowers,
vegetables, milk etc.
 (b) Short Period Markets :These markets include weekly markets held in
villages. Fairs are also included in this category.
 (c) Long Period Markets : Durable goods are purchased and sold in long
period markets. In these markets goods may be held for a long period
without any deterioration in quality.

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 VI. On The Basis Of Nature Of Goods : On the basis of the nature of goods that
are purchased and sold, markets may be divided into
 (a) Commodity Markets : These markets deal in different commodities.
Consumer goods are purchased by ultimate consumers and industrial goods are
purchased by manufacturers.
 (b) Capital Markets : These include money markets, stock markets etc. In money
markets borrowing and lending take place. In stock market shares, debentures,
bonds etc are brought and sold.

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 (c) Foreign Exchange Markets : Foreign exchange markets deal in currencies of

different foreign countries. These markets arrange foreign currencies to make
payments for the imports from other countries. They convert home currency into
currencies of foreign countries.

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Meaning of Marketing
 Marketing includes all activities involved in the production and distribution of
goods and services desired by the consumers. Marketing occupies an important
place in all business activities.
 According to modern marketing concept, marketing is essentially consumer
oriented and it starts with product idea and ends with customer satisfaction.
 According to William Stanton "Marketing is a total system of interacting
business activities designed to plan, price, promote and distribute want satisfying
products and services to present and potential customers". Thus the main idea of
modern marketing concept is customer - satisfaction.

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Meaning of Selling
 Selling is concerned with the transfer of goods and services to the
consumers. It is mainly concerned with the plans to get the customers
to exchange his money to goods and services. It is primarily concerned
with the seller's interest.

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Functions of Marketing
 A marketing function is an act or operation or service by which the
original producer and final consumer are linked together. If marketing
functions are not properly carried out, the business unit may not be in
a position to dispose off its products and all the efforts made for
production may not bear fruits.
 The prime objective of marketing is to take the goods from the
producer and perform all functions necessary to make them available
to the ultimate consumers.

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 All the marketing functions can be divided into two types:

(i) Concentration
(ii) Dispersion.
 The process of concentration is concerned with gathering raw
materials, manufactured goods at a central place namely market.
 Dispersion means distribution of goods to final consumers.

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 Concentration involves a number of marketing functions like:

(a) Buying
(b) Trading
(c) Storing
(d) Grading
(e) Financing etc.

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 The process of distribution may include the following:

(a) Selling
(b) Transportation
(c) Grading
(d) Risk bearing etc.

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Functions of Exchange
 Exchange refers to transfer of goods and services form money's worth.
 A. Buying And Assembling : Buying is the first step in the ladder of marketing
functions. A manufacturer has to buy raw materials for production, wholesaler has
to buy finished goods for the purpose of sale to the retailers, a retailer has to buy
goods for resale to the consumers.
 Efficient buying is essential for successful selling. Large sized business concerns
maintain a separate department namely purchasing department for the purpose of
buying.

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 Modes Of Buying : Goods may be purchased in any of the ways given below.
i) By inspection : Under this method goods are bought after examining the goods
by the buyer in the seller's premises.
ii) By Sample : A purchase by sample is made after the buyer examines the
sample of goods supplied by the seller.
iii) By Description : Some sellers issue catalogues containing description of goods
offered for sale. The intending buyer places an order specifying a particular
number mentioned in the catalogue.
iv) By Grading : This refers to standard quality of goods. Under this method
purchase can be made by telegram, telephone, or mail.

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 Assembling - begins after the goods have been purchased. It refers to gathering of
goods already purchased form different places at one central place.
 Assembling facilitates transportation and storage, It is significant in case of
seasonal goods and agricultural products.

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 B. Selling : The ultimate aim of every business is to earn profits and in realising
this aim selling plays an important role. Nothing really happens until somebody
sells something.
 Selling enables a firm to satisfy the needs of consumers. It is the process through
which ownership of goods is transferred from the seller to the buyer.
 Sales are the source of income for the manufacturers, wholesalers and retailers.

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Functions of Physical Supply

 There are two important functions under this classification:
 A. Transportation : Transport means carrying of goods, materials and men from
one place to another. It plays an important role in marketing. It creates place
utility by moving goods from the place where they are available in plenty, to
places where they are needed.
 Both assembling and distribution of goods are done by using transport.
Transportation facilitates not only movement of goods from the places of
production to the places of consumption but it also enables the consumers to go to
marketing areas where there is wide choice of goods than in the places where they
like.

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 B. Storage And Ware Housing : Storage is another function of marketing

process and it involves the holding and preservation of goods from the time
they are produced to the time they are consumed.
 Generally, there is a time gap between the production and consumption of
goods. Therefore, there is need for storing so as to make the goods available
to the consumers as and when they are required.
 By bridging the gap between production and consumption, storage creates
time utility. It also creates place utility by holding goods at different places.

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 Warehouse - is a place for storage of goods. The function of storage can be

carried successfully with the help of warehouses. Warehouses create time
utility by storing the goods throughout the year and releasing them as and
when they are needed.
 Several types of warehouses are used for storage of goods, which are as
follows.
(i) Private Warehouses : Private warehouses are owned by big business
units for the storage of their own goods. Only big business houses can afford
to have such type of warehouses.

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(ii) Public Warehouses : These are the business concerns which offer storage space
on rent. These warehouses are licensed by the Govt. They are helpful to
businessmen who cannot afford to maintain their own warehouses. These
warehouses are generally located near railway lines and main roads.

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(iii) Bonded Warehouses : These are located near the ports for the storage of
imported goods. When the importer cannot pay customs duties immediately on the
goods imported by him, he can store them in bonded houses. Importer can remove
the goods in parts after paying import duty.

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Facilitating Functions
 There are the functions which help or facilitate in the transfer of goods and
services from the producer to the consumer. They are not directly connected
with the transfer of goods. Under this category the following functions are
included:
a. Financing : Finance is the life blood of every business. It is needed for
marketing of goods and services. The goods produced or purchased cannot be
sold immediately to the ultimate consumers and much time is involved in
marketing process. Hence there is need for finance for the purchase of raw
materials, meeting transportation, storage costs, insurance etc.

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 There are three main sources of finance. They are as follows:

(i) Long - Term Finance : It is needed for purchasing fixed assets like land,
building, Plant & machinery, furniture etc. The main sources of this finance are
shares, debentures, financial institutions.
(ii) Medium - Term Finance : It is needed for raising working capital. The main
sources are financial institutions and commercial banks.
(iii) Short - Term Finance : It is mainly required for meeting short term payment
normally for less than one year. It can be raised from commercial banks and
trade creditors.

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 b. Risk Bearing : Risk means the possibility of loss due to some unforeseen
circumstances in future. Marketing process is confronted with risks of many kinds
at every stage. Risk may arise due to changes in demand, a fall in price, bad debts,
natural calamities like earthquakes, rains etc. The marketing risks may be
classified under the following heads.
(i) Time Risk : Goods are bought by the business with a view to sell them at a
profit out of anticipated rise in prices in future. During the time lag conditions might
change and the price my fall. Thus time risk is involved in marketing.

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 (ii) Place Risk : Place risk arises when the prices of the same product are different
in different places. The businessmen may purchase goods in market where prices
are low with a view to sell them at other places where the prices are high. But the
price in the other market may come down causing loss.
 (iii) Competition Risk : Businessmen have to face risk arising from the forces of
competition. The competing firms may introduce modern methods of production
due to which quality may be improved or cost of production may be reduced.
Under such circumstances, a firm may be forced to sell at a loss which is called
risk of competition.

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 (iv) Risk of Change in Demand : The manufacturers produce goods

on large scale in anticipation of demand in future. But, sometimes the
demand of the product may not come to expectations resulting in
losses.
 (v) Risk Arising from Natural Calamities : Risks from natural
causes are beyond human control. These include rains, earthquake,
floods, heat and cold. These risks cause heavy loss.

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 (vi) Human Risks : These risks arise due to adverse behavior of

human beings like theft, strikes, lockouts, bad debts etc.
 (vii) Political Risks : Political risks arise due to change in political
factors such as changes of government / changes in government
policies etc.

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 c. Market Information : According to Clark and Clark market

information means "all the facts, estimates, opinions, and other
information used in marketing of goods". The main object of any
business is to create and maintain demand for the product produced.
 For this purpose market information is useful. On the basis of
information the seller can know what type of goods are needed by the
consumer, when and where they are needed and in what quantity.

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 d. Standardisation : Standardisation means establishment of certain

standards based on intrinsic qualities of a commodity. The quality may
be determined on the basis of various factors like size, colours, taste,
appearance etc. It is helpful to the consumers as they can safely rely on
the quality of the standardised products.

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 e. Grading : Grading means classification of standardised products in

to certain well defined classes. In the words of Clark and Clark "It
involves the division of products into classes made up of units
possessing similar characteristics of size and quality". Grading is very
important for agricultural products like Wheat, Cotton etc.

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 f. Branding : Branding means giving a name or symbol to a product

in order to differentiate it from competitive products. It helps the
consumers in identifying their products. Branding may be done by
selecting symbols and marks such as Charminar cigarettes, Camel
inks, Binny textiles, or by using the name of manufactures such Ford
cars, Godrej steel furniture. A good brand should be brief, simple, easy
to spell and remember.

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 g. Packing : Packing means wrapping and crating of goods before

distribution. Goods are packed in packages or containers in order to
protect them against breakage, leakage, spoilage and damage of any
kind. It consists of placing the goods in boxes, tins, bottles, cans, bags,
barrels of convenient size to the buyers.

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Marketing Concept
 'Concept' refers to philosophy, an idea, an attitude or a not on relating to
any aspect. Marketing concept means the philosophy of an organisation in
relation to marketing of a product or service.
 According to Prof. Robert F Hartley marketing concept is "an integration of
marketing activities directed towards customer satisfaction".
 Prof Philip Kotler defines it as "a customer orientation backed by integrated
marketing aimed at - generating customer satisfaction, as the key to
satisfying organisational goals".

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Evolution of Marketing Concept

 There are various stages in the evolution of marketing concept, which are as
follows.
 1) Self - Sufficient stage : In the olden days each family was a self - sufficient
unit as far as production and consumption functions are concerned.
 They produced as per their requirements i.e, practically there was no surplus for
exchange. Therefore, the concept of marketing was absent in this stage.

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 EXCHANGE ORIENTED STAGE : In this stage the families produced more

than their requirements leaving some surplus. This necessitaited exchange of
surplus products with others.
 For exchanges 'Barter System' came into existence. Under barter system goods are
exchanged for goods. The greatest draw back of barter system is absence of
double coincidence of wants.
 To over come this defect - goods are brought to a central location so that exchange
will take place smoothly. Thus 'Markets' came into existance.

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 PRODUCTION - ORIENTED STAGE : Under production oriented stage there

is no need of any marketing effort if the product is good and its price is
reasonable. This marketing concept was built on "Good wine needs no bush".
 That is if the product is of good quality and the price in reasonable there is no
need of any special marketing efforts. It implies for good products; customer
response is bound to be favourable.
 It appears that producers gave more emphasis to production than consumption.
Under this concept, production is the starting point.

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 SALES - ORIENTED STAGE : Industrial revolution brought technological

changes in industrial activities. Consequently drastic changes were reflected in the
buying patterns and behaviour of consumers.
 There were revolutionary changes in the growth of transport and communications.
All these changes compelled the manufacturers to realise the importance of
marketing.

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 CONSUMER ORIENTED STAGE : It is also called customer oriented stage.

This philosophy was introduced after 1950. According to this the main task of any
business unit is to study the needs, desires, wants of the consumers and produce
goods accordingly. Here the starting point is consumer or customer than the
product. All Business operations revolve around customer satisfaction and service.
Marketing research provides information relating to wants, desires, aspirations etc
of the consumers.

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 SOCIAL ORIENTED STAGE : It is the broadest marketing concept. It takes

into consideration not only consumer satisfaction but also social welfare. Social
welfare speaks of pollution - free environment and quality of human life.
 Every organisation should adopt socially responsible marketing policies and plans
in order to assure social welfare in addition to consumer welfare.

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