BB0001 – Q. 2 Explain the marketing concepts with its relevance in today’s marketing environment. Answer: Marketing Concepts : Studies reveal that different organisations have different perceptions of marketing. And these differing perceptions have led to the formation of different concepts of marketing such as 1. The Exchange Concept 2. The Production Concept 3. The Product Concept 4. The Selling Concept 5. The Marketing Concept 6. The Societal Marketing Concept. 1.
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 much broader than exchange. Exchange covers the distribution aspect and the price mechanism involved in marketing.
The other important aspects of marketing, such as concern for the customer, generation of value satisfactions, creative selling and integrated action for serving the customer, get completely overshadowed in the exchange concept of marketing. 2. The Production Concept: This philosophy holds that customers favour those products with low offered price and easily available products. Thus this concept holds that high production efficiency and wide distribution coverage would sell the product offered to the market.
Organisations voting for this concept are impelled by a drive to produce all that they can. Naturally they get focussed on production and put all their efforts toward that aspect of the organisation. They do achieve efficiency in production. But their thinking is guided by the assumption that the steep decline in unit costs arising from the maximisation of output would automatically bring them all the customers and all the profits that they need. But, they do not get the best of customer patronage. Customers, after all, are motivated by a variety of considerations in their purchases.
As a result, the production concept fails to serve as the right marketing philosophy for the enterprise. Production concept is applicable in situations where demand exceeds supply. 3. The Product Concept: This philosophy holds that customer favours quality, performance, innovative features etc. The buyer will admire such products. Therefore firms following this philosophy believe that by making superior products and improving their quality overtime, they will be able to attract customers. The product concept is somewhat different from the production concept.
Whereas the production concept seeks to win markets and profits via high volume of production and low unit costs, the product concept seeks to achieve the same result via product excellence – improved products, new products and ideally designed and engineered products. It also places the emphasis on quality assurance. They spend considerable energy, time and money on research and development and bring in a variety of new products. Organisations which follows this concept concentrate on achieving product excellence.
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 made. They fail to find out what the consumers actually need and what they would gladly accept. When organisations fall in love with the product it leads to marketing Myopia because the focus is on the product rather than on the customer needs. Marketing Myopia The term ? Marketing Myopia‘ is to be credited to Prof. Theodore Levitt.
It means a coloured or crooked perception of marketing and a short sightedness about business executive attention to production or product or selling aspect at the cost of the customer and his actual needs, creates this myopia. It leads to a wrong or inadequate understanding of the market and hence failure in the market place. The myopia even leads to wrong or inadequate understanding of the very nature of the business in which a given organisation is engaged and thereby affects the future of the business as well.
Levitt explained further that while business that maintains itself through the changing times, there is some fundamental characteristics in each business. And the fundamental characteristic invariably relates to the basic human need which the business seeks to serve and satisfy through its products. A wise entrepreneur or marketing man would understand this important fact and define his business in terms of this fundamental characteristic of the business rather than in terms of the products and services manufactured and marketed by him at a given point of time. For Ex. he Railways should define their business as transportation, the movie makers should define business as entertainment and the beverage marketers should define their business as nutrition. 4. The Selling Concept: This philosophy holds that customer, if left alone, would not buy enough of the company‘s products. The organization must, therefore undertake an aggressive selling and promotion effort. As more and more markets became buyers‘ markets and the entrepreneurial problem became one of solving the shortage of customers rather than that of goods, the sales concept became the dominant idea guiding marketing.
Most firms practice this concept when they have overcapacity. This concept maintains that a company cannot expect its product to get picked up automatically by the customers. The company has to consciously push its products. Aggressive advertising, high-power personal selling, large scale sales promotion, heavy price discounts and strong publicity and public relations are the tools used by organisations that rely on this concept. As a result the public often identifies marketing with hard selling and advertising. But marketing based on hard selling carries high risks.
It assumes that customers who are coaxed into buying a product will like it and if they don‘t, that they won‘t bad mouth it or complain to consumer organisations and will forget their disappointment and buy it again. These assumptions do not have base. One study showed that dissatisfied customers may bad-mouth the product to 10 or more acquaintances and bad news travels fast. Selling concept is practised more aggressively with unsought goods, goods that buyers normally do not think of buying such as insurance, encyclopedias etc.
These industries have perfected various sales techniques to locate prospects and hard sell them on their product‘s benefits. It is also practised in the non-profit area by fund raisers and political parties. 5. The Marketing Concept: The marketing concept holds that the key to achieving its organisational goals consists of the company being more effective than competitors in creating, delivering and communicating customer value to its chosen target markets. This concept was born out of the awareness that marketing starts with the determination of consumer wants and ends with the satisfaction of those wants.
The concept puts the customer both at the beginning and at the end. It says that any business should be organised around the marketing function, anticipating, stimulating and meeting customer‘s requirements. The customer has to be the centre of the business universe and not the organisation. A business cannot succeed by supplying products and services that are not properly designed to serve the needs of customers. The marketing concept rests on four pillars. They are a. Target market b. Customer needs c. Integrated marketing d.
Profitability. This can be illustrated with the help of the following figure which differentiates it from selling concept. a) Target market: 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. A target market is defined as a set of actual and potential buyers of a product, service or idea. A buyer, who has interest in the product, income and willingness to buy can broadly be called as potential buyer.
However, it might not be possible for the marketer to target all of them. There might be geographical barriers, unsuitabilities of product to certain climatic conditions or inability of the marketer to reach certain hilly or remote areas. Thus, a small portion of potential market might become part of the target market. The following figure clarifies the target market and penetrated market. The penetration of product is difficult even if the potential market is large. b) Customer needs: A company can define its target market but fail to correctly understand the customers‘ needs.
Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious or they cannot articulate their needs or they use words that require some interpretation. There are five types of needs. They are stated needs, real needs, unstated needs, delight needs and secret needs. Responding only to the stated need may shortchange the customer. A responsive marketer finds a stated need and fills it. He is going to lose the customer in the near future. An anticipative marketer looks ahead into what needs customers may have in the ear future. A creative marketer discovers and produces solutions customers did not ask for but to which they enthusiastically respond. Therefore companies must go beyond just asking consumers what they want. This is necessary because a company‘s sales comes from two groups, new customers and repeat customers. One estimate shows that attracting a new customer can cost five times as much as pleasing an existing one and it might cost sixteen times as much to bring the new customer to the same level of profitability as the lost customer.
Customer retention is thus more important than customer attraction. c) Integrated marketing: When all the company‘s departments work together for serving the customers, the result is integrated marketing. Integrated marketing takes place on two levels first the various marketing functions – sales force, advertising, customer service, product management, marketing research must work together. Second marketing must be embraced by the other departments, they must also think customer.
According to David Packard of Hewlett – Packard, ? Marketing is far too important to be left only to the marketing department. To foster team work among all departments, the company carries out internal marketing as well as external marketing. Internal marketing is the task of hiring, training and motivating able employees who want to serve customers well. External marketing is marketing directed at people outside the company. The following figure illustrates the relevance of integrated marketing. ) Profitability: The ultimate purpose of the marketing concept is to help organisations achieve their objectives. In the case of private firms, the major objective is profit. In the case of non-profit and public organisations it is surviving and attracting enough funds to perform useful work. Private firms should not aim for profits as such but to achieve profits as a consequence of creating superior consumer value. A company makes money by satisfying customer needs better than its competitors. 6.
The Societal Marketing Concept: This concept holds that the organisation‘s task is to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer‘s and the society‘s well-being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance the often conflicting criteria of company profits, consumer want, satisfaction and public interest.