Unit 1: Introduction to Market and Marketing

Learning objectives To recognize the need and meaning of market and marketing- To define marketing terminologies To understand and analyze the various marketing concepts To classify and describe the functions and importance of Marketing

Session 1 Introduction to marketing - Markets: meaning, need, concepts, classification – Marketing:

meaning definition, components - Market and marketing - Philip Kotler need concept of

marketing (with Maslow’s hierarchy) Nature of marketing:

Session 2

Functions of marketing (briefly) - Utilities of marketing - Importance of marketing (Sector wise)

Marketing and Selling

Session 3

Evolution of Marketing - Meaning and Features of Marketing concept; Traditional & Modern

Concept; Marketing Philosophies; Social Marketing

The aim of every economic activity is to satisfy human wants which can be satisfied

by goods and services. But they have to be transferred or moved from the producer to the

final consumer. This involves the creation of markets.

The undertaking of a number of activities i.e. buying, assembling, transporting, warehousing,

risk bearing, financing, selling etc. brings about a need to study market and marketing. In the

words of Paul Hoffman “it is illusory to think that a country would be industrialized by building

factories”. Industrial activity has no meaning unless they are fully supported by ‘marketing

inputs’, i.e., production has no input unless it is exchanged for money or money’s worth .In

reality industrialization meant building markets.

Markets - Introduction:

Do you have a market near your house? How often do you visit the market?

Name some items of daily need that you have to buy from your local grocery store?

Do you know what wholesale shops are?

From where do you think your local vegetable-seller buys his stock of vegetables in the

morning?

In marketing, the term market refers to the group of consumers or organizations that is

interested in the product, has the resources to purchase the product, and is permitted by law

and other regulations to acquire the product.

WHY DO WE NEED MARKETS?

Have you ever thought that if there were no markets, how we would get the things we need? If

there were no general provisions store near your house, then how would you get fresh items?

Where would you buy pens, pencils etc. We cannot produce all the goods and services that we

require.

Trade thus refers to the buying and selling of goods and services with the aim of making profit.

Trading is not a new phenomenon. Since ancient times, mankind has been engaged in trading in

some form or the other. It began with the barter system, in which goods were exchanged for

goods. Later with the introduction of currency, goods were exchanged in return for money.

Trade which takes place within the boundaries of a country is called inland or internal trade.

When trade takes place between two or more countries it is known as external trade.

Understanding Markets

People who produce goods are called Producers. They make goods for consumers. Consumers

are people who buy goods or services for personal use. There are a group of people who

connect the producer with the consumer. These people are known as Traders. It is through

trade that goods are supplied to the market. Since, most of us are consumers; we purchase or

buy the goods that have been supplied by the traders. We go to the market to get the things we

need every day.

Meaning of market

The term market is derived from the Latin word ‘mercatus’ which means merchandise or a

place where business is conducted.

Thus market would imply:-

A place where goods and persons are physically present

An assembly of people (buyers and sellers)

An area of operation

An act of buying and selling

A place where consumers wants are satisfied

However in a general sense, it is a whole of any region in which buyers and sellers are brought

in contact with one another and by means of the prices of the goods tend to be equalized easily

andquickly

Definitions

According to Philip Kotler “Market is an area or atmosphere for exchange.”

According to American Marketing Association “Market is the aggregate demand of potential buyers for

the product”.

Concepts of Markets

In an economic sense, ‘market is defined as the aggregate of potential buyers for the products, i.e.,

demand for the commodity.’

From social view point ‘Markets are institutions delivering quality of life to people’.

Thus the concept of market can be:-

> Place concept - A convenient meeting place for exchange of goods.

> Area concept - Any area providing a set of price making forces.

> Demand concept - It stands for people with need and wants to satisfy and have purchasing power.

Classification of Markets

Markets can be classified on the following basis:

A. On the Basis of Area:

Local markets confine to locality mostly dealing in perishable and semi-perishable goods like fish,

flowers, vegetables, eggs, milk, and others.

Regional market covers a wider area may be a district, a state or inter-state dealing in durables both

consumer and non-durables and industrial products, including agricultural produce.

In case of national markets the area covered are national boundaries dealing in durable and non-durable

consumer goods, industrial goods, metals, forest products, agricultural produce.

In case of world or international market, the movement of goods is widespread throughout the world,

making it as a single market. It should be noted that due to the latest technologies in transport, storage

and packaging, even the most perishable goods are sold all over the world, not that only durables.

B. On the basis of Time:

The time duration is the factor. Accordingly, there can be short period and long period markets.

Short-period markets are for highly perishable goods of all kinds and

Long-period markets are for durable goods of different varieties that may be produced or manufactured.

C. On the basis of Transactions:

Taking the nature of transactions, these can be spot and future markets.

In spot market once the transaction takes place, delivery takes place.

In future market transactions are finalized pending delivery and payment for future dates.

D. On the basis of Regulation:

Taking regulation, markets can be regulated and non-regulated.

Regulated – A regulated market is one in which business dealings take place as per set rules and

regulations regarding, quality, price, source changes and so on. These can be in agricultural products or

produce and securities.

Unregulated market – is a free market where there are no rules and regulations; even if they are there,

they are amended as per the requirements of parties of exchange.

E. On the Basis of Volume of Business:

Taking volume of business as a basis, there can be two types of market, namely ‘wholesale’ and ‘retail’.

Wholesale markets are featured by large volume business and wholesalers

Retail markets are those where quantity bought and sold is on small scale. The dealers are retailers who

buy from wholesalers and sell back to consumers.

F. On the basis of Nature of Goods:

Taking the nature of goods, there can be commodity markets and capital markets.

Commodity markets deal in favour of material, produce, manufactured goods – may be consumer and

industrial and bullion market dealing precious metals.

Capital market is a market for finance. These markets can be subdivided into ‘money’ market dealing in

lending and borrowing of money; ‘Securities’ market or ‘stock’ market, dealing in buying and selling of

shares and debentures and ‘foreign exchange’ market where it is a forex market dealing buying and

selling of foreign currencies may be hard or soft.

G. On the basis of Nature of Competition:

Based on competition or competitive forces, there can be variety of markets for a product or service.

However, only two are the most important namely, perfect and imperfect.

A perfect market is one which is characterized by large number of buyers and sellers, prevalence of

single lowest price for products those are ‘homogeneous’, perfect knowledge on the part of buyers and

sellers, free entry and exit of firms in the market. These types for markets exist hardly.

Imperfect markets – Their products maybe similar but not identical, different prices for a class of

goods, no perfect knowledge of the products by the buyers and sellers and existence of physical and

psychological barriers on movement of goods.

H. On the basis of Demand and Supply:

Based on demand and supply conditions or hold of buyers and sellers, there can be seller’s and buyer’s

markets.

A sellers’ market is one where sellers are in drivers’ seat and the buyers are at the receiving end. In

other words, it is a situation where demand for good

s exceeds supply whereas Buyers’ market is one where buyers are in commanding position, i.e. supply

is exceeding the demand for the goods.

Classification of markets Weekly markets

+

Whole sale markets

Retail Markets

Bullion market stock market

Commodity market short period market

Local market International market

MARKETING

To a lay man, Marketing means promoting and selling things. According to Cundiff and still

‘ Marketing is the term used to describe collectively those business functions most directly

concerned with demand stimulating and demand fulfilling activities of the business enterprise.’

Stimulating and fulfilling demand, however, is possible only when things to be promoted or sold are

meeting consumers needs and wants, else consumers would not buy things. Needs are basic

human requirements

For example everyone needs food water, recreation etc., These needs can be fulfilled in many

ways. One may want to have a cake, a burger or biscuit, for the need of food. What one wants to

fulfill the needs are his/her wants. One may want to have a cake for satisfying the need for food,

but may not be able to buy it. When these wants are backed by the ability to buy , wants become

demand.

(A detailed study of the need based marketing according to Philip Kotler is explained separately.)

WHAT IS MARKETING?

Marketing is about meeting the needs and wants of customers; Marketing is a business-wide

function – it is not something that operates alone from other business activities; Marketing is about

understanding customers and finding ways to provide products or services which customers

demand.

Meaning and Definition

Marketing is the belt that connects the two major wheels of any economy namely producer and consumer. It starts well before production commences and ends only after rendering sales satisfaction. It is a set of those activities necessary and incidental to bring about exchange relationship. It is a process of discovering and translating consumers’ needs and wants into product and service specifications, creating them for these product and services and then in turn expanding this demand. It is a process of business by which products are matched with markets and through which transfers of ownership are affected. According to American Marketing Association (AMA)

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Dr. Philip Kotler - defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential.

Components of Marketing- 1. OFFER – An offer is a proposal which may or may not be acceptable by the

buyer as an offer is always from the center. The purchaser does not accept a product. What he actually accepts is an offer that includes every fact (whatever is invisible) which is likely to encourage/ discourage the purchases.

2. MARKET – Market is an aggregate demand of the potential buyers’ commodity or services. It is people with the money and the inclination to buy. It is a place where exchange offers occurs.

3. SYSTEM – Marketing is concerned with flow of goods and services from the point of production to the point of consumption. There is a systematic arrangement of marketing functions like facilitating function, etc., to move the goods and services to the target market.

4. FORCES – The forces of environment influence the nature and character of offer, market and system. It consists of demography (change in the size of population), social, economic, psychological and technological influences which have profound effect on marketing. A marketer must perceive and understand the opportunities and also encounter (meet) the challenges and threat. Difference between Market and Marketing

The distinction between “Market” and “Marketing” can be drawn clearly on

following grounds:

Basis Market Marketing

1. System versus

Activity:

“Market” is a system or an

atmosphere or a mechanism that

facilitates such forces as are

leading to price fixation.

Contrary to this, ‘marketing’ is

the sum- total of all those

activities that are related to the

free-flow of goods from points

of production to the points of

consumption.

2. Outlet versus

Means:

‘Market’ is a solid foundation to

push goods from sellers to buyers.

It is an outlet to let out the

products. It is the key to engine of

marketing.

On the other hand, ‘marketing’

is a gigantic machinery to move

the goods by creating utilities of

place, time and ownership.

3. Narrow Versus

Comprehensive

Concept:

Market’ as a concept has a

narrower meaning and coverage. It

signifies both place and an

atmosphere where buyers and

sellers are in touch with one

another.

Contrary to this, marketing is a

wider or comprehensive term

that represents the entire

process of distribution and the

process prior to distribution.

Basis MARKET MARKETING 4. Occurrence of Events:

‘Market’ acts as a price-fixing mechanism and once the transactions are struck, then the actual movement of goods starts and change in ownership is brought about. That is, ‘market’ is the, starting point

Marketing comes thereafter.

5. Change versus Consistency:

In case of ‘market’, it might undergo a change in marketing that is in buyers and sellers, their requirements, with changes in supply and demand dimensions.

While in case of marketing in terms of philosophy it remains more constant, it takes decades to change as warranted by environmental external factors.

THE NEED CONCEPT OF MARKETING

Marketing is a continuous process. Our marketers are individuals who enter in the market and have understanding of the activities of the marketing. For understanding the activities properly, understanding the needs and wants of customers becomes essential. Thus, marketing is satisfaction of the needs and wants of the customer. Needs are the state of being deprived of something.

Maslow's Hierarchy of Needs

In the most basic sense, Maslow's hierarchy identifies five primary areas of needs

experienced by most humans. Beginning with physiological, or basic life survival, needs, the

model progresses in subsequent steps through safety and security, love and belongingness,

self-esteem and finally self-actualization. Maslow postulated that as man meets the needs

at the first level, he moves toward the next, then the next and so on. More recent studies

have added levels to the needs hierarchy and refined the categories, but marketing classes

throughout the country continue to use Maslow's needs hierarchy as a reasonable focus for

modern marketing efforts.

Potential Marketing Implications of Maslow's Theory

Maslow posited that human behavior and decision-making are motivated by one of the five need levels in his hierarchy. Applied to marketing theory, your ability to effectively appeal to one of these motivational drivers is a key determinant of your potential success. Non-essential services -- massage treatments or custom tailoring, for example -- may be marketed successfully to those in the fourth or fifth level of Maslow's hierarchy because those people are driven by the needs for increased self-esteem and realizing their full potential. The same marketing campaign is unlikely to appeal to those on the first level, as they are driven by the most basic of human needs: food, water and other elements of survival A marketer cant create needs . Marketers have the option of identifying, analyzing, anticipating and fulfilling the needs only.

Abraham Maslow’s Five Level Hierarchy of Needs

Philip Kotler’s Need concept of Marketing

‘Marketers don’t create needs. Needs pre-exist marketers. ’This is the underlying

principle of marketing philosophy enunciated by Philip Kotler. According to him

marketing is an activity directed to satisfy the needs and wants of the consumer in

the exchange process.

This can be depicted through the following chart:

Need, want, demand Product, goods, services, ideas, person

Creating a market offering

Value, cost, satisfaction Exchange, transaction Relationships network Markets and marketing

Needs This is the core concept, a social process by which individuals obtain what they need and want creating, offering and exchanging products of value with others. Marketing starts with human needs & wants. The human need is a state in which, a person feels deprived of something.

Needs can be:

- Physiological (food, clothing & shelter) - Social needs (belongingness, affection, love) - Psychological (self-esteem, actualization, etc.) It is important to understand that at any time some needs in human are dormant and unsatisfied. Whereas, others are active and are being satisfied. A marketer may device a product or service aimed at satisfying a certain dormant need through providing satisfaction to the customers Wants

Wants are desires for specific satisfaction of needs. For e.g. when an American is

hungry he looks for a hamburger and an Indian looks for bread, ‘roti’ or rice or one

may need clothes, but may not need designer clothes. Wants are the form taken by

human needs as they are shaped by culture and individual personality. These are

essentially dependent upon needs

The needs are few but the wants are many. Human wants are continuously shaped

and reshaped by social forces and institution.

Demands

Demands are wants for specific products that are backed by an ability and

willingness to buy . We may want to dine out in a five star hotel. But the question is do we

have money to dine at Taj? If yes, then it will become demand.

Wants backed by willingness and purchasing power is known as demand.them. Wants

become demands when supported by purchasing power.

For e.g. you might want a BMW or a Mercedes for a car. You might want to go for a

cruise. But can you actually buy a BMW or go on a cruise? You can, provided, you

have the ability to buy a BMW or go on a cruise.

The top marketing companies like HUL, Idea and Airtel etc. first understand needs and

wants of customers and then fulfil the needs, wants and demands by conducting consumer

research and get regular feedback from their salesmen in the market about unfulfilled

customer needs. For example : Big Bazaar a retail store of Future group, shop floor

managers regularly mingle with customers on the shop floor and try to satisfy every

customer.

Products, Services, Idea

Needs and wants can be satisfied with products and services offered to the

market. A product is not limited to physical objects or tangible items i.e they

can be touched, seen and felt rather it is anything that satisfies a need is called

a product. Product also includes services which are intangible along with

tangible goods. It consists of physical goods and services which can be also

in the form of services information and experiences, ideas and personalities

Services

Services are deeds, processes and performances coproduced/provided by one person for

another person. Services are intangible products which can’t be touched, seen and felt. As

economy grows, the service sector also starts flourishing. The same can be seen in Indian

scenario here services contribute more than 55% to the GDP. Service sector includes banking,

insurance, teaching, advertising, consultancy etc.

E.g. pizza inn-restaurant

Product - pizza

Services - cooking, serving etc.

Idea - time saving, enjoying etc.

Product - computer

Idea - information, scanning, faxing etc

Servicing - installing

Create a Market Offering Why do we purchase or own anything? Many of us own iPods. We own one because we want to hear music. Or we own one because we have been influenced to buy one. After iPod’s were introduced, few purchased the device because the image it had was they were “cool”. Owning an iPod became a cool fashion statement. But now iPods have become quite common but the impact that iPods had on the music and entertainment industry has been

huge because the product was a revolution in the entertainment industry which replaced walkman a device used earlier. People buy things to solve needs. In the case of the iPod, the need is to have better access to music or to look cool, or both. ‘Market Offerings’ are products and services designed to deliver value to customers—either to full fill their needs, satisfy their “wants,” or both. Market offering refers to a complete offer for a product or service. The product or service that is sold into the marketplace is called as a market offering

Customer Value As discussed in the example of buying an iPod, we buy an iPod because it not only gives good music output (benefit) but also the cool fashion statement associated with it. Imagine one buying a product? When we buy a product, aren’t we thinking of the benefits the product brings to you. It’s not only benefit it is rather the bundle of benefits associated with the product in the form of product quality, after-sales services, warranty, repairs costs, free home delivery, user friendliness etc. Customers are smart and they evaluate between benefits they are acquiring and price they are paying for those benefits. Customer value is difference between the values benefits the customer gains from owning a product and cost of obtaining the product. The cost of product is not limited to price but also time and energy spent shopping. Customer value can be shown as an equation as below: Customer Value = Total Customer Benefits – Total Customer Costs Cost includes not only the price of the product but also the cost of other things. He may have

to give up other things for choosing the product that has the most value.

Thus the marketer’s role is to add more value to product in terms of benefits so that customer prefers the product in relation to competitor’s product.

Customer Satisfaction It is the mental fulfillment gained by using the product Customer satisfaction is the measure of success of an organization. A Customer is said to be satisfied if their expectations match with the actual performance of the product. Customer satisfaction is the match between customer expectations of the product and the product’s actual performance. Customer satisfaction differs from one person to another;it’s an experience which is different for different individuals. A proper evaluation of a product or service can only be done by experiencing it. So, customer satisfaction is a post-purchase phenomenon. Satisfaction can only be measured by comparing pre-purchase expectation and post-purchase experience.The equation used to determine the level of a customer’s satisfaction is: Customer Satisfaction = Experience – Expectation Customer satisfaction is only obtained once the customer has experienced a product or service. It is always a post purchase phenomenon which is quite emotional in nature.

Exchange Process Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing works through exchange. Exchange process is simply when an individual or an organization obtain and satisfy a need or want by offering some money in exchange of products or services. For example we go get a haircut at a salon, we pay for the hair cut. The money paid in lieu of the service taken is an exchange process. This exchange process extends into relationship

marketing and we enter into exchange relationships all the time. With

relationship marketing the purpose is to build a long-term relationship with the customer. In the above example if we are satisfied by the haircut service we may intend to take more services from the same saloon and intend to become a permanent customer with the salon. By delivering value to customers, a relationship with customers is developed. So marketing is earning profit by building relationship with customer through satisfying his needs and wants. The same can be applicable for a product too. These lead to creation of market and marketing. Smart marketers try to build long term

(win-win) relations with valued customers, distributors, dealers and suppliers. They

accomplish this by promising and delivering high quality goods & services. The ultimate

relationship marketing is building of a unique company asset called as marketing network.

Therefore, for successful stimulation and fulfillment of the demand, a marketer must address

the needs and wants of the consumers. Hence, in true sense, marketing does not only means

promoting and selling things but also understanding consumers’ needs and wants, and then

offering things that fulfill these needs and wants. Because the primary objective of any

commercial business is to earn profit, the meaning of marketing can be summarized for

commercial business as “meeting needs profitably” in the words of Philip Kotler.

Nature of marketing:

The marketing is both science as well as art.

Marketing is art because many marketing functions like sales and advertising require

people with certain personality traits in order to be able to do justice to the functional

role. Salespersons for example, should have extroversive personality and flair for

interaction with people, and not just the good knowledge of the products and sales

processes etc. Also, a good advertisement can come from highly creative minds.

Therefore, a good marketing calls for certain innate traits that cannot be transferred

easily, and hence it is an art.

On the other hand, good marketing can be classified as science as well. Because many

marketing processes like distribution, and setting prices are quite standardized and

scientific. Besides this, the marketing on the whole can also be described as the standard

process of understanding consumer needs and wants, creating things aimed at

satisfying these needs and wants, and making such things available to consumers in

exchange of profit. Because of these standard and scientific processes of marketing, that

can be transferred easily, marketing can be termed as scientific. Marketers’ performance

can markedly improve by receiving formal training on this body of knowledge.

Assessment Fill in the blanks (1mark)

1. To allow flow of goods from producer to consumer needs creation of _________. 2. People who connect producers and consumers are called _______. 3. Marketing is set of activities that fosters and facilitates _________. (Need, wants, demand, exchange) 4. Marketing is more than promoting or selling things as it requires understanding of _____also.(Products,

needs and wants, consumers) 5. ________ markets are for highly perishable goods. 6. In _______ market once the transaction takes place, delivery takes place. 7. Wants become _________ when backed by purchasing power 8. Marketing is _______because many marketing functions like sales and advertising require people with

certain__________. (Science, art, personality traits, knowledge, qualification) 9. _______ is the consumer’s estimate of the products overall capacity to satisfy his or her need. 10. Because of __________and scientific processes of marketing, that can be __________easily, marketing

can be termed as scientific. (Transferred, standard, flexible, established, understood)

2 markers

1. Define Marketing.

2. Define the term market.

3. Explain the meaning of marketing.

4. In Marketing Distinguish between needs and wants?

5. How can markets be classified on basis of transactions?

6. Distinguish between a. regulated and unregulated markets b. commodity and capital markets

3 markers 1. Why do we need markets? 2. In the words of Paul Hoffman “it is illusory to think that a country would be industrialized by

building factories”. Explain. 3. Explain the meaning of ‘market’. What does it imply? 4. Define Marketing. 5. Examine Maslow’s hierarchy of needs. 6. Explain the need for studying marketing. 7. Distinguish between market and marketing. 8. What are the components of marketing? 9. Explain ‘Exchange’ in marketing. 10. Explain with an example how product includes services information and experiences, ideas. 11. What challenges marketing being an art poses for an organization?

5 markers

1. Marketers do not create needs. Needs pre-exist marketers. Explain

2. Clearly differentiate between needs, wants, and demand.

3. Is marketing an art or science? Explain.

4. What are concepts of Markets? Classify them appropriately

Assignment

In a recent assignment your school asked you to persuade people and collect money for school’s social service

initiative. You could successfully convince your neighbor for contributing money. Did marketing take place in the

process? Explain why or why not.

Activity

1. List all the activities of your chosen product brand that are aimed at demand stimulation and demand fulfillment.

2. Identify an unmet need and the possible product or service which can fulfill it.

3. Talk to your friend and try to identify the reasons of difference in your and your friend’s ‘wants’ for a chosen need.

How marketers handle these reasons for greater demand for their products?