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marketing management final(crc)





M.Com. (Final)

Directorate of Distance Education

Maharshi Dayanand University
ROHTAK – 124 001


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Copyright © 2004, Maharshi Dayanand University, ROHTAK

All Rights Reserved. No part of this publication may be reproduced or stored in a retrieval system
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Maharshi Dayanand University
ROHTAK – 124 001
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Chapter 1

Marketing: An Introduction


Chapter 2

Strategic Marketing Planning


Chapter 3

Marketing Environment


Chapter 4

Market Segmentation, Targeting and Positioning


Chapter 5

Buyer Behavior and Consumer Decision Making Process


Chapter 6

Product Concept and Decisions


Chapter 7

Branding, Packaging and Labeling


Chapter 8

Product Life Cycle


Chapter 9

New Product Development


Chapter 10

Distribution Channel Management


Chapter 11

Retailing and Wholesaling


Chapter 12

Physical Distribution System


Chapter 13

Pricing Decision and Strategies


Chapter 14

Promotion: Communication with a Purpose


Chapter 15

Advertising and Sales Promotion


Chapter 16

Personal Selling, Publicity and Public Relations


Chapter 17

Marketing Research


Chapter 18

Marketing Organization and Marketing Control


Chapter 19

Social, Ethical and Legal Issues in Marketing


Chapter 20

Service Marketing and International Marketing


Chapter 21

Recent Development in Marketing



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Marketing Management
M.Com. (Final)

Max. Marks.: 100
Time: 3 Hrs
There will be three sections of the question paper. In section A there will be 10 short answer questions of 2
out of which candidates are required to attempt any seven questions. Section C will be having 5 questions of
15 marks each out of which candidates are required to attempt any three questions. The examiner will set the

Course Inputs:

Introduction: Concept, nature, scope and importance of marketing: Marketing concept and its evolution;
Marketing mix; Strategic marketing planning – An overview.
Market Analysis and Selection: Marketing environment-Macro and Micro Components and their impact
on marketing decisions. Market segmentation and positioning, Buyer behaviour, Consumer decision
making process.


Product Decisions: Concept of a product, Classification of products; Major product decisions; Product
line and product mix; Branding, Packaging and labeling, Product life-cycle-strategic implications, New
product development and consumer adoption process.


Distribution Channels and Physical Distribution Decisions: Nature, functions and types of distribution
channels; distribution channel intermediaries; Channel management decisions; Retailing and wholesaling.
Decision – areas in the Management of Physical Distribution.


Pricing Decisions: Factors affecting price determination; Pricing policies and strategies; Promotion
Decisions; Communication process; Promotion mix advertising, personal selling, sales promotion, publicity
and public relations; Determining advertising budget; Copy designing and its testing; Media selection;
Advertising effectiveness; Sales promotion – tools and techniques.


Marketing Research: Meaning and scope of marketing research; Marketing research process.
Marketing Organisation and Control: Organizing and controlling marketing operations.
Issues and Developments in Marketing; Social, ethical and legal aspects of marketing; Marketing of
services; International marketing; Green marketing; Cyber marketing; Relationship marketing and other
developments in marketing.

Marketing : An Introduction

Chapter 1
Marketing : An Introduction
Most of the people define marketing as selling or advertising. It is true that these are
parts of the marketing. But marketing is much more than advertising and selling. In
fact marketing comprises of a number of activities which are interlinked and the decision
in one area affects the decision in other areas.
To illustrate the number of activities that are included in marketing, think about all the
bicycles being peddled with varying degree of energy by bicycle riders in India. Most
bicycle are intended to do the same thing—get the rider from one place to another. But
a bicyclist can choose from a wide assortment of models. They are designed in different
sizes, with different frames for men and women and with or without gears. Trekking
cycles have large knobby tyres, and the tyres of racing cycles are narrow. Kids want
more wheels to make balancing easier; clowns want only one wheel, to make balancing
more interesting.
The variety of styles and features complicates the production and sale of bicycles. The
following list shows some of the many things a firm like Atlas Cycles or Hero Cycles
should do before and after it decides to produce a bicycle.

Analyze the needs of people who might buy a bicycle and decide if they want
more or different models.


Predict what types of bicycles like handle bar styles, type of wheels, weights and
materials different customers will want and decide to which firm will try to satisfy
their need.


Estimate how many of these people will be riding bicycles over the next several
years and how many bicycles they’ll buy.


Predict exactly when these people will want to buy bicycles.


Determine where in the India these bicyclists will be and how to get the company’s
bicycles to them.


Estimate the price they are willing to pay for their bicycles and if the firm can
make a profit selling at that price.


Decide which kinds of promotion should be used to tell potential customers about
the company’s bicycles.


Estimate how many competing companies will be making bicycles, how many
bicycles they’ll produce, what kind, and at what prices.


Figure out how to provide warranty service if a customer has a problem after
buying the bicycle.

The above activities are not the part of production—actually making goods or performing
services. Rather, they are part of a larger process—called marketing—that provide


Marketing Management


needed direction for production and helps make sure that the right goods and services
are produced and find their way to consumers. In order to understand the concept of
marketing, firstly you must understand what is “market” ?

The term “market” originates from the Latin word “Marcatus” which means “a place
where business is conducted.” A layman regards market as a place where buyers and
sellers personally interact and finalise deals.
According to Perreault and McCarthy, market is defined as a group of potential customers
with similar needs or wants who are willing to exchange something of value with sellers
offering various goods and/or services to satisfy those needs or wants. Of course,
some negotiation will be needed. This can be done face-to-face at some physical
location (for example, a farmer’s market). Or it can be done indirectly through a
complex network that links middlemen, buyers and sellers living far apart. Depending
upon what is involved, there are different types of markets which deals with products
and/or services such as :

Consumer Market: In this market the consumers obtain what they need or want
for their personal or family consumption. This market can be subdivided into two
parts—fast moving consumer goods market from where the consumers buy the
products like toothpaste, biscuits, facial cream etc. and services like internet,
transportation etc. Another is durables market from where, the consumers buy
the products of longer life like motorcycles, cars, washing machines etc. and
services like insurance cover, fixed deposits in the banks and non-banking financial
companies etc.


Industrial/Business Market: In this market, the industrial or business buyers
purchase products like raw materials (iron ore, coke, crude oil etc.), components
(wind-screen, tyres, picture tubes, micro-processors etc), finished products
(packaging machine, generators etc.), office supplies (computers, pens, paper
etc.) and maintenance and repair items (grease, lubricating oil, broom etc.). Apart
from products, now-a-days due to outsourcing the industrial buyers also require a
number of services like accounting services, security services, advertising, legal
services etc. from the providers of these services.


Government Market: In most of the countries central/federal, state or local
governing bodies are the largest buyers requiring and number of products and
services. Government is also the biggest provider of services to the people,
especially in a developing country like India where army, railways, post and
telegraph etc. services are provided by the Central Government and State Govt.
and local municipality provides services like roadways and police and sewage
and disposal and water supply respectively.


Global Market: The world is rapidly moving towards borderless society thanks
to information revolution and the efforts of WTO to lower the tariff and nontariff barriers. The product manufacturers and service providers are moving in
different countries to sustain and increase their sales and profits. Although the
global companies from the developed countries are more in number (AT & T,
McDonald’s, Ford Motors, IBM, Sony, Citi Bank etc.); the companies from
developing countries are also making their presence felt in foreign countries

Marketing : An Introduction


(Aditya Vikram Birla Group, Maruti-Suzuki, Infosys, IRCON etc.). The ultimate
winners are the consumers who are getting world class quality products and
services at an affordable prices.

Non-profit Market: On one hand the society is making progress in every field,
on the other hand the number of problems that it is facing are also increasing.
Most of the people don’t care for these problems due to variety of reasons such
as—lack of awareness, lack of time, selfish nature etc. So in order to fill the
void, the non-profit organisations came into being. These organisations support a
particular issue or a charity and create awareness among the general public
towards these issues and try to obtain financial and non-financial support. For
example there are NGOs who are working towards the conservation of flora
and fauna, Narmada Bachao Andolan, Chipko Andolan (to conserve the trees in
Himalayan region) etc. These non-profit organisations basically need monetary
support from the individuals, institutions and governments to promote a cause or
a charity like old age home, free dispensary, free education, home for destitutes

These are the major markets which exist in country. These can also be different
markets which deals in a particular product or service such as Grain market (anaj
mandi), vegetable and fruit market (Subzi Mandi), fish market, political market
(comprising of political parties and voters) etc. which serve a specific need or want of
the consumers and marketers.

Numerous definitions were offered for marketing by different authors. Some of the
definitions are as follows :

Creation and delivery of a higher standard of living.


Marketing is the process that seeks to influence voluntary exchange transactions
between a customer and a marketer.
—William G. Zikmund and Michael d’Amico


Marketing is the process of discovering and translating consumer needs and
wants into products and services, creating demand for these products and services
and then in turn expanding this demand.
—H.L. Hansen.


Marketing is the business process by which products are matched with markets
and through which transfer of ownership are affected.
—Edward W. Cundiff


Marketing consists of the performance of business activities that direct the flow
of goods and services from producers or suppliers to consumers or end-users.


—American Marketing Association
Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering and freely exchanging products and
services of value with others.
—Philip Kotler

Marketing Management


7. Marketing is the performance of activities that seek to accomplish an organization’s
objectives by anticipating customer or client needs and directing the flow of need
satisfying goods and services from producer to customer or client.
—William D. Perreault and E. Jerome McCarthy
Let’s take a look at the last definition and try to interpret it .

Applies to profit and non-profit organisations—This definition applies to
both profit and non-profit organizations. Profit is the objective for most business
firms. But other type of organisations may seek more members or donations or
acceptance of an idea. Consumer or clients may be individual consumers, business
firms, non-profit organizations, government agencies or even foreign nations.
While most customers and clients pay for goods and services they receive, others
may receive them free of charge or at a reduced price through private or
government support.


More than just persuading customers—Marketing is not just selling and
advertising, as most of the people thinks. In fact, the aim of marketing is to
identify customer’s needs and meet those needs so well that the product almost
“sell itself”. This is true whether the product is a physical good, a service or
even an idea. If the whole marketing job has been done well, customers don’t
need much persuading. They will be ready to buy. And after consuming the
product if they are satisfied then they will come back for more.


Begins with customer needs—Marketing should begin with potenial customer
needs–not with production process. Marketing should try to anticipate needs
and then it should determine what goods and services are to be developed—
including decisions about product design and packaging; prices or fees; credit
and collection policies; use of middlemen; transporting and storing facilities;
advertising and sales policies and after the sale, installation, customer service,
warranty and perhaps even disposal policies.


Does not do it alone—It means that marketing by interpreting customer’s
needs–should provide direction for production activities accounting and financial
activities and research and development activities and try to coordinate them.
Marketing by itself can never be able to satisfy the needs and wants of the
customers. It cannot exist in vacuum. In fact, marketing needs the cooperation
of other functional areas to be successful.


Builds a relationship with the customer—Marketing tries to identify and
satisfy customer needs and wants. Its activities does not end with the single sale
but rather it tries to develop a relationship with the customer. So that in the
future, when the customer has the same need again—or some other need that
the firm can meet—other sales will follow. The long lasting relationship is beneficial
to both the firm and the customer.

Scope of Marketing
Marketing is typically seen as the task of creating, promoting and delivering goods and
services to consumers and businesses. In fact, marketing people are involved in
marketing 10 types of entities : goods, services, experiences, events, persons, places,

Marketing : An Introduction

properties, organizations, information and ideas. Marketing concepts can be used
effectively to market these entities.
1. Goods—Good is defined as something tangible that can be offered to market to
satisfy a need or want. Physical goods constitute the bulk of most countries
production and marketing effort. In a developing country like India fast moving
consumer goods (shampoo, bread, ketchup, cigarettes, newspapers etc.) and
consumer durables (television, gas appliances, fans etc.) are produced and consumed
in large quantities every year.
2. Services—As economies advance, the share of service in gross domestic product
increases. For example, in USA, service jobs account for 79% of all jobs and 74%
of GDP. A service can be defined as any performance that one party can offer to
another that is essentially intangible and does not result in the ownership of anything.
Its production may or may not be tied to a physical product. Services include the
work of hotels, airlines, banks, insurance companies, transportation corporations
etc. as well as professionals like lawyers, doctors, teachers etc. Many market
offerings consists of a variable mix of goods and services. At the pure service end
would be psychiatrist listening to a patient or watching movie in a cinema hall; at
another level would be the landline or mobile phone call that is supported by a huge
investment in plant and equipment; and at a more tangible level would be a fast
food establishment where the consumer consume both a good and a service.
3. Experiences—By mixing several services and goods, one can create, stage and
market experiences. For example water parks, zoos, museums etc. provide the
experiences which are not the part of routine life. There is a market for different
experiences such as climbing Mount Everest or Kanchanjunga, travelling in Palace
on Wheels, river rafting, a trip to Moon, travelling in Trans Siberian Railways across
five time zones etc.
4. Events—Marketers promote time–based, theme-based or special events such as
Olympics, company anniversaries, sports events (Samsung Cup—India Pakistan
Cricket Series), artistic performances (Lata Mangeshkar live concert, Jagjit Singh
live concert), trade shows (International Book Fair at Pragati Maidan, Automobile
fair), award ceremonies (Filmfare awards, Screen awards), beauty contests (Miss
World, Miss Universe, Miss India, Miss Chandigarh), model hunts (Gladrags Mega
Model). There is a whole profession of event planners who work out the details of
an event and stage it. In India event management companies are growing and in
case of organising Miss World at Bangalore and World Cricket Cup (Hero Cup)
they won the acclaim from all over the world. Our Election Commission Organises
biggest event in the world—Elections for upper house in the largest democracy in
the world. Other notable example is organising of Ardh Kumbh and Maha Kumbh
at Hardwar, Ujjain, Nasik etc. during different years.
5. Persons—Celebrity marketing has become a major business. Years ago, someone
seeking fame would hire a press agent to plant stories in newspapers and magazines.
Today most of cricket players like Sachin Tendulkar, Saurav Ganguly, Rahul Dravid
etc. are drawing help from celebrity marketers to get the maximum benefit. Even
Star Plus TV channel focussed more on Amitabh Bachhan to promote their
programme Kaun Banega Crorepati and this programme turned around fortunes of
both Star Plus and Amitabh Bachhan. Even in the 14th Lok Sabha election BJP’s



Marketing Management

election strategy revolves around Mr. Atal Bihari Vajpayee, that’s power of
personality. Mr Shiv Khera is busy in building his business empire and is busy
telling others how to achieve this or that through books and lectures.
6. Places—Places–cities, states, regions and whole nations—compete actively to
attract toutists, factories, company headquarters and new residents. India and
China are competing actively to attract foreign companies to make their production
hub. Cities like Bangalore, Hyderabad and Gurgaon are promoted as centre for
development of software. Bangalore is regarded as software capital of India and
Hyderabad is emerging as the hub of biotechnology industry. Gurgaon and Noida
are competing for call centres to open their offices. Kerala, Himachal Pradesh,
Uttranchal Pradesh and Rajasthan and aggressively promoting themselves to attract
local as well as foreign tourists. Due to its cost effectiveness and competitive
ability of Indian doctors coupled with ancient therapies, India is fast emerging as
country that can provide excellent medical treatment at minimum costs. If developed
properly, Bihar has strong potential to emerge as ultimate destination for Buddists.
7. Properties—Properties are intangible rights of ownership of either real property
(real estate) or financial property (share and debt. instruments). Properties are
bought and sold, and this requires marketing effort. Property dealers in India work
for property owners or seekers to sell or buy plots, residential or commercial real
estate. In India some builders like Ansal, Sahara Group, both build and market
their residential and commercial real estates. Brokers and sub-brokers buy and
sell securities on behalf of individual and institutional buyers.
8. Organizations—Organizations actively work to build a strong, favourable image
in the mind of their publics. We see ads of Reliance Infocomm which is trying to
provide communication at lower rates, Dhirubhai Ambani Entrepreneur programme
to promote entreprenenrship among the Indians. Companies can gain immensly by
associating themselves with the social causes. Universities and colleges are trying
to boost their image to compete successfully for attracting the students by mentioning
their NAAC grades in the advertisements and information brochures.
9. Information—Information can be produced and marketed as a product. This is
essentially what schools, colleges and universities produce and distribute at a price
to parents, students and communities. Encyclopaedas and most non-fiction books
market information. Magazines such as Fitness and Muscle provide information
about staying healthy, Business India, Business Today and Business World provide
information about business activities that are taking place in various organizations.
Outlook Traveller provides information about various national and international tourist
destination. There are number of magazines which are focussed an automobiles,
architecture and interior designing, computers, audio system, television programmes
etc. which cater to the information needs of the customers. We buy CDs and visit
internet sites to obtain information. In fact, production, packaging and distribution
of information is one of the society’s major industry. More and more companies
are using professional research agencies to obtained information they need.
10. Ideas—Film makers, marketing executives and advertising continuously look for a
creative spark or an idea that can immortalise them and their work. Idea here
means the social cause or an issue that can change the life of many. Narmada
Bachao Andolan was triggered to bring the plight of displaced people and to get

Marketing : An Introduction


them justice. Endorsement by Amitabh Bachhan to Pulse Polio Immunization
drive and pledge by Aishwarya Rai to donate her eyes after her death gave immense
boost to these. Various government and non-government organizations are trying
to promote a cause or issue which can directly and indirectly alter the life of many.
For example
Traffic police urges to not to mix drinks and drive, central and state government
urging not to use polyethelene as carrying bag for groceries.

Nature of Marketing
1. Marketing is both consumer oriented and competitor oriented. The consumer and
competitor orientations can be easily understood by the following diagram.




Competitor Emphasis








Self centred companies does not give any concern to the consumers and
competitors. This type of company can exist in the situation of monopoly.
In the competitive economy, these companies cannot remain in the business
for long.


Competitor oriented companies mainly focus on competitor’s activities,
what the competitors are doing and what they are likely to do in the near
future are the major areas of concern. The companies can be either reactive
or proactive. The reactive company will follow the moves of competitors.
For example, if the competitor reduce price of its product or service then
the reactive competitor oriented company will also reduce its prices.
Whereas the proactive competitor oriented company will try to identify
what its major competitor is going to do.


Customer oriented companies believes in satisfying the customers at any
cost. These companies obtain inputs from the customers and then develop
their product or service as per customers requirements and then earn
profit through-customer satisfaction. The biggest problem is that they don’t
consider what their competitors are doing and in the long run it might prove


Market driven companies are concerned about customers as well as
competitors. These companies regularly interact with the customers to
know about their satisfaction levels and their future requirements and then
try to develop the product or service which is better than their competitors.
In the era of cut throat competition, these companies one more likely to be
successful than the other companies.

Marketing Management


2. Marketing is a dynamic activity because a number of variables keep changing. For
example marketing environment, customer’s requirements, competitor’s actions
etc. keep changing thereby necessitating the changes in the company’s offer. The
companies may have to modify product, price, place or promotion due to changes
in any of the numerous variables. For example, Indian manufacturer’s either have
to improve the quality or reduce the cost to meet the competition from foreign
3. Long term objective of marketing is profit maximization through customer
satisfaction. This is so because a satisfied customer will come back again for the
same or different need to the company. Apart from this, the satisfied customer is
the company’s best advertisement because word of mouth communication by the
customer has more credibility than any other form of marketing communication
and he’ll recommend the companies products/services to his friends and relatives.
4. Marketing is an integrated function and all the marketing decisions are linked with
each other. One decision will automatically lead to another decision. For example
if a company has decided to launch a product for limited number of customers then
its price will be high and that product will be available through exclusive distribution
system and the promotion strategy will depend on the media preferred by the target
market. So, if a company decides the first step then decisions regarding the remaining
steps will follow automatically.
5. Marketing is the core functional area of modern day organisations and is the driving
force behind every organisation. Marketing provides the vital input for corporate
planning which in turn dictates the plans for other functional areas.
6. Marketing is interlinked with other functional areas of the organisation. Marketing
people collects the information regarding (customer’s requirements and pass it to)
the research and development and engineering people who‘ll turn the customer
requirements into the product or service features. The finance and accounts people
help in obtaining the money for the development of new product and also helps in
arriving at the final price decision. The human resource department provides the
necessary manpower for carrying out various activities not only in the marketing
area but also in the other functional areas.

Importance of Marketing
(A) To the Society
1. It is instrumental in improving the living standards. Marketing continuously identifies
the needs and wants satisfying products or services which can propel the people to
do an extra to earn money which can be exchanged for the desired products or
services. The people are likely to spend the additional income over and above the
disposable income on the products or services which helps in minimizing the physical
efforts. Thus marketing by indirectly increasing the earning ability will help in
improving the standard of living of the customers.
2. Marketing generates gainful employment opportunities both directly and indirectly.
Directly, marketing provides employment to the people in various areas like in

Marketing : An Introduction

advertising agency, in the company sales force, in the distributor’s sales force, in
public relation firms etc. Indirectly, marketing is responsible for selling the offerings
of the organisation. If the organisation’s products or services are able to satisfy the
customers, then customers will demand organisation’s products or services again
and again, thereby sustaining the production activities. Thus marketing indirectly
provides employment in other functional areas like finance, production, research
and development, human resource management etc.
3. Marketing helps in stabilising economic condition in the sense that marketing helps
in selling the products or services, which keeps the various organizations functioning
and gainful employment is available to the people. With the earnings from the
employment, the people will purchase the products and/or services, thus sustaining
the demand. This will happen in all the industries, then gainful employment will be
available throughout the time period and economy will remain stable, healthy and

(B) To the firms/companies
1. Marketing sustains the company by bringing in profits. Marketing is the only activity
that brings revenue to the firm, whereas other activities incur expenditure. If the
company’s products or services satisfy the customer’s requirements, then the
satisfied customers will keep the company in business by repeat orders and
recommending other profitable customers. Thus marketing is the driving force
behind a successful company.
2. Marketing is the source of new ideas. New product or service ideas usually comes
from the research laboratories, employees or from marketplace. It’s the marketing
people who are in continuous touch with the consumers and marketing intermediaries.
Interaction with them helps in identifying strong and weak points of company’s
product or services as well as competitor’s products or services. This interaction
can also help in identifying unmet needs or wants of the consumers and the features,
consumers are looking into the products or services which can satisfy those unmet
needs or wants. Thus marketing can help immensely in identifying new product or
service ideas which can help in sustaining the firm’s operations. Successful
companies are those which identifies customer’s requirements early and provides
the solution earlier than the competitors.
3. Marketing provides direction for the future course. The marketing oriented company
continuously brings out new product and service ideas which provide the direction
for corporate strategic planning for longer time horizon.

(C) To the Consumers
1. Meeting the unmet needs or wants. Marketing identifies those needs or wants
which were not satisfied and helps in developing the product or service which can
satisfy those unmet needs or wants of the people. For example a number of drugs
were invented to treat various physical problems of the people. Again the low cost
formulations were developed to treat the people who are unable to afford the
expensive drugs.


Marketing Management


2. Reducing the price of products or services. Marketing helps in popularising the
product or service which attracts the customers as well as competitors towards
that product or service categories. Due to increase in demand, the manufacturing
capacity increase which brings down per unit fixed costs of the product or service.
Furthermore increase in competititon led to decrease in the prices charged by the
firm. Thus the growing demand and increasing competition both help in bringing
down the price of the product or service. For example price of both mobile phone
handset and mobile phone service are showing a continuous downward trend thereby
making the mobile phone service affordable to more and more people.

Core Concepts of Marketing
Marketing can be further understood by defining several of its core concepts.
Needs, wants
and Demands —→

Product or
Value and
offering ——→ Satisfaction —→

Exchange and
Transaction –→


Needs, Wants and Demands
The marketer must try to understand the target market’s needs, wants, and demands.
Needs describe basic human requirements. People need food, air, water, clothing and
shelter to survive. People also have strong needs for recreation, education, and
entertainment. These needs become wants when they are directed to specific object
that might sastisfy the need. An Indian needs food but wants a rice, chhapati’s vegetable
and dal. A person in Mauritius needs food but wants a mango, rice, lentils and beans.
Wants are shaped by one’s society.
Demands are wants for specific products backed by an ability to pay. Many people
want a big & beautiful house; only a few are able and willing to buy one. Companies
must measure not only how many people want their product but also how many would
actually be willing and able to buy it.
These distinctions shed light on the frequent criticism that “marketers create needs” or
“marketers get people to buy things they don’t want.” Marketers do not create needs
: Needs preexist marketers. Marketers, along with other societal influences, influence
wants. Marketers might promote the idea that a Mercedes would satisfy a person’s
need for social status. They do not, however, create the need for social status.

Product or Offering
People satisfy their needs and wants with products. A product is any offering that can
satisfy a need or want. We mentioned earlier the major types of basic offerings :
goods, services, experiences, events, persons, places, properties, organizations,
information, and ideas.
A brand is an offering from a known source. A brand name such as McDonald’s
carries many associations in the minds of people: hamburgers, fun, children, fast food,
Golden Arches. These associations make up the brand image. All companies strive to
build brand strength—that is, a strong, favourable brand image.

Marketing : An Introduction

Value and Satisfaction
The product or offering will be successful if it delivers value and satisfaction to the
target buyer. The buyer chooses between different offerings on the basis of which is
perceived to deliver the most value. We define value as a ratio between what the
customer gets and what he gives. The customer gets benefits and assumes costs.
The benefits include functional benefits and emotional benefits. The costs include
monetary costs, time costs, energy costs, and psychic costs. Thus value is given by :
Value =


The marketer can increase the value of the customer offering in several ways :
Raise benefits
Reduce costs
Raise benefits and reduce costs
Raise benefits by more than the raise in costs
Lower benefits by less than the reduction in costs
The customer who is choosing between two value offerings, V1 and V2, will examine
the ratio V1/V2. She will favour V1 if the ratio is larger than one; she will favour V2 if
ratio is smaller than one; she will be indifferent if the ratio equals one.
+ emotional benefits
and Transactions
Monetary costs
+ time iscosts
+ in
of fourcost
which costs
a person can obtain a product. The person
can self-produce the product or service, as when a person hunts, fishes, or gathers
fruit. The person can use force to get a product, as in a hold up or burglary. The person
can beg, as happens when a homeless person asks for food. Or the person can offer a
product, a service, or money in exchange for something he or she desires.

Exchange, which is the core concept of marketing, involves obtaining a desired product
from someone by offering something in return. For exchange potential to exist, five
conditions must be satisfied :

There are at least two parties.


Each party has something that might be of value to the other party.


Each party is capable of communication and delivery.


Each party is free to accept or reject the exchange offer.


Each party believes it is appropriate or desirable to deal with the other party.

Whether exchange actually takes place depends upon whether the two parties can
agree on terms that will leave them both better off (or at least not worse off) than
before. Exchange is a value-creating process because it normally leaves both parties
better off.
Exchange is a process rather than an event. Two parties are engaged in exchange if
they are negotiating—trying to arrive at mutually agreeable terms. When an agreement
is reached, we say that a transaction takes place. A transaction is a trade of values


Marketing Management


between two or more parties : A gives X to B and receives Y in return. Ramesh sells
Arun a television set and Arun pays Rs 4000/- to Ramesh. This is a classic monetary
transaction. But transactions do not require money as one of the traded values. A
barter transaction involves trading goods or services for other goods or service, as
when lawyer Vijay writes a will for physician Satish in return for a medical examination.
A transaction involves several dimensions : at least two things of value, agreed upon
conditions, a time of agreement, and a place of agreement. Usually a legal system
exists to support and enforce compliance on the part of the transactors. Without a law
of contracts, people would approach transactions with some distrust, and everyone
would lose.
A transaction differs from a transfer. In a transfer, A gives X to B but does not
receive anything tangible in return. Gifts, subsidies, and charitable contributions are all
transfers. Transfer behaviour can also be understood through the concept of exchange.
Typically, the transferer expects to receive something in exchange for his or her gift for
example, gratitude or seeing changed behaviour in the recipient. Professional fund
raisers provide benefits to donors, such as thank-you notes, donor magazines, and
invitations to events. Marketers have broadened the concept of marketing to include
the study of transfer behaviour as well as transaction behaviour.
In the most generic sense, marketers seek to elicit a behavioural response from
another party. A business firm wants a purchase, a political candidate wants a vote, a
church wants an active member, and a social-action group wants the passionate adoption
of some cause. Marketing consists of actions undertaken to elicit desired responses
from a target audience.
To effect successful exchanges, marketers analyze what each party expects from the
transaction. Simple exchange situations can be mapped by showing the two actors and
the wants and offerings flowing between them.


Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering and freely exchanging products and services
of value with others.

For a managerial definition, marketing has often been described as “the art of selling
products.” But people are surprised when they hear that the most important part of
marketing is not selling! Selling is only the tip of the marketing iceberg. Peter Drucker,
a leading management theorist, puts it this way:
There will always, one can assume, be need for some selling. But the aim of
marketing is to make selling superfluous. The aim of marketing is to know
and understand the customer so well that the product or service fits him and
sells itself. Ideally, marketing should result in a customer who is ready to buy.
All that should be needed then is to make the product or service available.
When Sony designed its Walkman, when Nintendo designed a superior video game,
and when Toyota introduced its Lexus automobile, these manufacturers were swamped
with orders because they had designed the “right” product based on careful marketing

Marketing : An Introduction


The American Marketing Association offers the following definition :

Marketing (management) is the process of planning and executing the conception,
pricing, promotion, and distribution of ideas, goods, services to create exchanges
that satisfy individual and organizational goals.

Coping with exchange processes calls for a considerable amount of work and skill.
Marketing management takes place when at least one party to a potential exchange
thinks about the means of achieving desired responses from other parties. We see
marketing management as the art and science of choosing target markets and getting,
keeping, and growing customers through creating, delivering, and communicating superior
customer value.
Apart from these core concepts there are additional concepts which will help in
understanding the marketing. These concepts are as follows :

Target Markets and Segmentation
A marketer can rarely satisfy everyone in a market. Not every one likes the same soft
drink, hotel room, restaurant, automobile, college and movie. Therefore, marketers
start with market segmentation. They identify and profile distinct groups of buyers
who might prefer or require varying products and marketing mixes. Market segments
can be identified by examining demographic, psychographic and behavioural differences
among buyers. The firm then decides which segments present the greatest opportunity—
those whose needs the firm can meet in a superior fashion.
For each chosen target market, the firm develops a market offering. The offering is
positioned in the minds of the target buyers as delivering some central benefit(s). For
example, Volvo develops its cars for the target market of buyers for whom automobile
safety is a major concern. Volvo, therefore, positions its car as the safest a customer
can buy.
Traditionally, a “market” was a physical place where buyers and sellers gathered to
exchange goods. Economists now describe a market as a collection of buyers and
sellers who transact over a particular product or product class (the housing market or
grain market). But marketers view the sellers as constituting the industry and the
buyers as constituting the market. Fig 1.2. shows the relationship between the industry
and the market. Sellers and buyers are connected by four flows. The sellers send
goods and services and communications (ads, direct mail) to the market; in return they
receive money and information (attitutdes, sales data). The inner loop shows an
exchange of money for goods and services; the outer loop shows an exchange of
(a collecton
of sellers)



(a collection
of buyers)

Figure 1.2: A Simple Marketing System

Marketing Management


Business people often use the term markets to cover various groupings of customers.
They talk about need markets (the diet-seeking market); product markets (the shoe
market); demographic markets (the youth market); and geographic markets (the Indian
market). Or they extend the concept to cover other markets, such as voter markets,
labour markets and donor markets.
Modern economies abound in markets. Five basic markets and their connecting flows
are shown in Figure 1.3. Manufacturers go to resource markets (raw-material markets,
labour markets, money markets), buy resources and turn them into goods and services,
and then sell finished products to intermediaries, who sell them to consumers. Consumers
sell their labour and receive money with which they pay for goods and services. The
government collects tax revenues to buy goods from resource, manufacturer, and
intermediary markets and uses these goods and services to provide public services.
Each nation’s economy and the global economy consist of complex interacting sets of
markets linked through exchange processes.
Today we can distinguish between a market place and markets pace. The marketplace
is physical, as when one goes shopping in a store; marketspace is digital, as when one
goes shopping on the Internet. Many observers believe that increasing amount of
purchasing will shift from the marketplace.


Goods and services





Goods and services

Figure 1.3: Structure of flows in a Modern Exchange Economy

Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of
complementary products and services that are closely related in the minds of consumers
but are spread across a diverse set of industries. The automobile metamarket consists
of automobile manufacturers, new car and used car dealers, financing companies,
insurance companies, mechanics, spare parts dealers, service shops, auto magazines ,
classified auto ads in newspapers, and auto sites on the Internet. In planning to buy or
buying a car, a buyer will get involved in many parts of this metamarket. This has
created an opportunity for metamediaries to assist buyers to move seamlessly through
these groups, although they are disconnected in physical space. One example is
Edmund’s (www.edmunds. com), a Web site where a car buyer can find the stated
prices of different automobiles and easily click to other sites to search for the lowest
price dealer, for financing, for car accessories, and for used cars at bargain prices.

Marketing : An Introduction

Relationships and Networks
Transaction marketing is part of a larger idea called relationship marketing. Relationship
marketing has the aim of building long-term mutually satisfying relations with key
parties—customers, suppliers, distributors—in order to earn and retain their long-term
preference and business. Marketers accomplish this by promising and delivering highquality products and services at fair prices to the other parties over time. Relationship
marketing builds strong economic, technical and social ties among the parties. It cuts
down on transaction costs and time. In the most successful cases, transactions move
from being negotiated each time to being a matter of routine.
The ultimate outcome of relationship marketing is the building of a unique company
asset called a marketing network. A marketing network consists of the company and
its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad
agencies, university scientists, and others) with whom it has built mutually profitable
business relationships. Increasingly, competition is not between companies but rather
between marketing networks, with the prize going to the company that has built the
better network. The operating principle is simple; Build an effective network of
relationships with key stakeholders, and profits will follow.

Marketing Channels
To reach a target market, the marketer uses three kinds of marketing channels. The
marketer uses communication channels to deliver and receive messages from target
buyers. They include newspapers, magazines, radio, television, mail, telephone, billboards,
posters, fliers, CDs, audiotapes, and the Internet. Beyond these, communications are
conveyed by facial expressions and clothing, the look of retail stores, and many other
media. Marketers are increasingly adding dialogue channels (e-mail and toll-free
numbers) to counterbalance the more normal monologue channels (such as ads).
The marketer uses distribution channels to display or deliver the physical product or
service(s) to the buyer or user. There are physical distribution channels and service
distribution channels. They include warehouses, transporation vehicles, and various
trade channels such as distributors, wholesalers, and retailers. The marketer also
uses selling channels to effect transactions with potential buyers. Selling channels
include not only the distributors and retailers but also the banks and insurance companies
that facilitate transactions. Marketers clearly face a design problem in choosing the
best mix of communication, distribution, and selling channels for their offerings.
Supply Chain
Whereas marketing channels connect the marketer to the target buyers, the supply
chain describes a longer channels stretching from raw materials to components to final
products that are carried to final buyers. The supply chain for women’s purses starts
with hides, tanning operations, cutting operations, manufacturing, and the marketing
channels bringing products to customers. The supply chain represents a value delivery
system. Each company captures only a certain percentage of the total value generated
by the supply chain. When a company acquires competitors or moves up stream or
downstream, its aim is to capture a higher percnetage of supply chain value.
Competition includes all the actual and potential rival offerings and substitutes that a
buyer might consider.


Marketing Management


We can broaden the picture further by distinguishing four levels of competition, based
on degree of product substitutability :
Brand competition: A company sees its competitors as other companies offering
a similar product and services to the same customers at similar prices. Maruti
Zen might see its major competitors as Tata Indica, Santro, and other manufacturers
of medium-price automobiles. It would not see itself as competing with May
bach or with Mahindra Scorpio.

Industry competition: A company sees its competitors as all companies making
the same product or class of products. Maruti Zen would see itself as competing
against all other automobile manufacturers.


Form competition: A company sees its competitors as all companies
manufacturing products that supply the same service. Maruti Zen would see
itself competing against not only other automobile manufacturers but also against
manufacturers of motorcycles, bicycles and trucks.


Generic competition: A company sees its competitors as all companies that
compete for the same consumer rupees. Maruti Zen would see itself competing
with companies that sell major consumer durables, foreign vacations, and new

Marketing Environment
Competition represents only one force in the environment in which the marketer operates.
The marketing environment consists of the task environment and the broad
The task environment includes the immediate actors involved in producing, distributing
and promoting the offering. The main actors are the company, suppliers, distributors,
dealers, and the target customers. Included in the supplier group are material suppliers
and service suppliers such as marketing research agencies, advertising agencies, banking
and insurance companies, transportation and telecommunications companies. Included
with distributors and dealers are agents, brokers, manufacturer representatives, and
others who facilitate finding and selling to customers.
The broad environment consists of six components : demographic environment,
economic environment, natural encironment, technological environment, politicallegal environment, and social-cultural environment. These environments contain
forces that can have a major impact on the actors in the task environment. Market
actors must pay close attention to the trends and developments in these environments
and make timely adjustments to their marketing strategies.

Evolution of Marketing
Once upon a time, when the needs and wants were satisfied by the barter trade, there
was no need for marketing. Two parties interested in each other’s poducts simply
negotiate with each other regarding the quantities of each product that must be exchanged.
Even at the time of industrial revolution when the demand for different products was
far greater than the supply, even in that scenario there was no need for marketing. In
fact producers were focussed on production aspects. With the advancement of
production technology and the increase in competition, the focus shifted through various

Marketing : An Introduction

functional areas towards marketing. The evolution of marketing can be easily understood
by understanding the company orientations toward the market place.

Company Orientations toward the Marketplace
We have defined marketing management as the conscious effort to achieve desired
exchange outcomes with target markets. But what philosophy should guide a company’s
marketing efforts ? What relative weights should be given to the interest of the
organization, the customers, and society ? Very often these interest conflict.
Clearly, marketing activities should be carried out under a well-thought-out philosophy
of efficient, effective, and socially responsible marketing. However, there are five
competing concepts under which organizations conduct marketing activities : the
production concept, product concept, selling concept, marketing concept, and societal
marketing concept.

The Production Concept
The production concept is one of the oldest concepts in business.

The production concept holds that consumers will prefer products that are widely
available and inexpensive.

Managers of production-oriented businesses concentrate on achieving high production
efficiency, low costs, and mass distribution. They assume that consumers are primarily
interested in product availability and low prices. This orientation makes sense in
developing countries, where consumers are more interested in obtaining the product
than in its features. It is also used when a company wants to expand the market.
Some service organizations also operate on the production concept. Many medical and
dental practices are organized on assembly-line principles, as are some government
agencies (such as unemployment offices and licence bureaus). Although this
management orientation can handle many cases per hour, it is open to charges of
impersonal and poor-quality service.

The Product Concept
Other businesses are guided by the product concept.

The product concept holds that consumers will favour those products that offer
the most quality, performance, or innovative features.

Managers in these organizations focus on making superior products and improving
them over time. They assume that buyers admire well-made products and can appraise
quality and performance. However, these managers are sometimes caught up in a love
affair with their product and do not realize what the market needs. Management might
commit the “better-mousetrap” fallacy, believing that a better mouse-trap will lead
people to beat a path to its door.
Product-oriented companies often design their products with little or no customer input.
They trust that their engineers can design exceptional products. Very often they will
not even examine competitors’ products. A General Motors executive said years ago:
“How can the public know what kind of car they want until they see what is available?”
GM’s designers and engineers would design the new car. Then manufacturing would


Marketing Management


make it. The finance department would price it. Finally, marketing and sales would try
to sell it. No wonder the car required such a hard sell ! GM today asks customers
what they value in a car and includes marketing people in the very beginning stages of
The product concept can lead to marketing myopia. Railroad managemnet throught
that travellers wanted trains rather than transportation and overlooked the growing
competition from airlines, buses, trucks and automobiles. That happened in America
and is likely to happen in India where middle class families are opting for their own
vehicle. Slide-rule manufacturers thought that engineers wanted slide rules and
overlooked the challenge of pocket calculators. Colleges, departmental stores, and the
post office will assume that they are offering the public the right product and wonder
why their sales slip. These organizations too often are looking into a mirror when they
should be looking out of the window.

The Selling Concept
The selling concept is another common business orientation.

The selling concept holds that consumers and businesses, if left alone, will ordinarily
not buy enough of the organization’s products. The organization must, therefore,
undertake an aggressive selling and promotion effort.

This concept assumes that consumers typically show buying inertia or resistance and
must be coaxed into buying. It also assumes that the company has a whole battery of
effective selling and promotion tools to stimulate more buying.
The selling concept is practised most aggressively with unsought goods, goods that
buyers normally do not think of buying, such as insurance etc. These industries have
perfected various sales techniques to locate prospects and hard-sell them on their
product’s benefits.
The selling concept is also practised in the non-profit area by fund-raisers, college
admissions offices, and political parties. A political party vigorously “sells” its candidate
to voters. The candidate moves through voting precincts from early morning to late
evening, shaking hands, kissing babies, meeting donors, and making speeches. Countless
money is spent on radio and television advertising, posters, and mailings. The candidate’s
flaws are concealed from the public because the aim is to make the sale, not worry
about post purchase satisfaction. After the election, the new official continues to take
a sales-oriented view. There is little reaearch into what the public wants and a lot of
selling to get the public to accept the politician the party wants.
Most firms practise the selling concept when they have overcapacity. Their aim is to
sell what they make rather than make what the market wants. In modern industrial
economies, productive capacity has been built up to a point where most markets are
buyer markets (the buyers are dominant) and sellers have to scramble for customers.
Prospects are bombarded with TV commercials, newspaper ads, direct mail, and sales
calls. At every turn, someone is trying to sell something. 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 badmouth it or complain to consumer organizations and will forget their disappointment and

Marketing : An Introduction


buy it again. These are indefensible assumptions. One study showed that dissatisfied
customers may bad-mouth the product to 10 or more acquaintances; bad news travels
The Difference Between Selling and Marketing
Before we move on to the marketing concept, let us analyse the difference between
selling and marketing.
Marketing is much wider than selling, and much more dynamic. In fact, there is a
fundamental difference between the two. Selling revolves around the needs and interests
of the seller; marketing revolves around the needs and interests of the buyer. Selling
starts with the existing products of the corporation and views business as a task of
somehow promoting these products. Marketing on the contrary starts with the
customers—present and potential—and views business as a task of meeting the needs
of the customers by producing and supplying those products and services that would
meet such needs. Selling seeks profits by ‘pushing’ the products on the buyers.
Marketing too, seeks profits, but not through aggressive pushing of products, but by
meeting the needs of customers and by creating value satisfactions for them. In other
words, marketing calls upon the corporation to choose products, prices and methods of
distribution and promotion, which will meet the needs of the customers. It does not
unwisely limit its role to persuading the customers to accept what the corporation already
has or what it can offer readily.
To quote Theodore Levitt, “The difference between selling and marketing is more than
semantic. A truly marketing-minded firm tries to create value-satisfying goods and
services which the consumers will want to buy. What it offers for sale is determined
not by the seller but by the buyer. The seller takes his cues from the buyer and the
product becomes the consequence of the marketing effort, not vice-versa. Selling
merely concern itself with the tricks and techniques of getting the customers to exchange
their cash for the company’s products; it does not bother about the value satisfactions
that the exchange is all about. On the contrary, marketing views the entire business as
consisting of a tightly integrated effort to discover, create, arouse and satisfy customer
Chart 1.1: The Difference Between Selling and Marketing


Selling starts with the seller, and is preoccupied
all the time with the needs of the seller.

Marketing starts with the buyer and focuses
constantly on the needs of the buyer.

Seller is the centre of the business universe;
activities start with the sellers’existing products.

Buyer is the centre of the business universe;
activities follow the buyer and his needs.

Emphasises on saleable surplus available within
the corporation.

Emphasises on identification of a market

Seeks to quickly convert ‘products’ into ‘cash’.

Seeks to convert customer ‘needs’ into ‘products’.

Concerns itself with the tricks and techniques of
getting the customers to part with their cash for
the products available with the salesman.

Emphasises on fulfilling the needs of the

Views business as a ‘goods producing

View business as a ‘customer satisfying

Overemphasises the ‘exchange’ aspect, without
caring for the ‘value satisfactions’ inherent in the

Concerns itself primarily and truly with the ‘value
satisfactions’ that should flow to the customer
from the exchange.

Marketing Management

Sellers ‘preference dominates the formulation of
the ‘marketing mix’.

Buyer determines the shape the ‘marketing mix’
should take.

The firm makes the product first and then figures
out how to sell it and make profit.

What is to be offered as a product is determined
by the customer.

Emphasis on staying with the existing technology The firm makes a ‘total product offering’ that will
match and satisfy the identified needs of the
and reducing costs.
Sellers’ motives dominate marketing

The ‘product’ is the consequence of the marketing
effort; the marketing effort leads to products that
the customers actually want to buy in their own
Emphasis on innovation in every sphere; on
providing better value to the customer by adopting
better technology.

Cost determines the price.
Transportation, storage and other distribution
functions are perceived as mere extensions of
the production function.

Marketing communications is looked upon as the
tool for communicating the benefits/satisfactions
provided by the product.

Emphasis is on ‘somehow selling’ : there is no
coordination among the different functions of the
total marketing task.

Consumer determines price; price determines

Different departments of the business operate as They are seen as vital services to be provided to
the customer, keeping customer’s convenience in
separate watertight compartments.
In firms practising ‘selling’, production is the
central function of the business.

Emphasis is on integrated marketing; an integrated
strategy covering product, promotion, pricing and

‘Selling’ views the customer as the last link in the

All departments of the business operate in a highly
integrated manner, the sole purpose being
generation of consumer satisfaction.
In firms practising ‘marketing’, marketing is the
central function of the business; the entire
company or business is organised around the
marketing function.
‘Marketing’ views the customer as the very purpose
of the business; sees the business from the point
of view of the customer; customer consciousness
permeates the entire organisation—all
departments and all people in the organisation—
all the time.

The Marketing Concept
The marketing concept is a business philosophy that challenges the three business
orientations we just discussed. Its central tenets crystallized in the mid-1950s.

The marketing concept holds that the key to achieving its organizational goals
consists of the company being more effective than competitors in creating, delivering,
and communicating customer value to its chosen target markets.

The marketing concept has been expressed in many colorful ways :
“Meeting needs profitably.”
“Find wants and fill them.”
“Love the customer, not the product.”
“Have it your way.” (Burger King)
“You’re the boss.” (United Airlines)

Marketing : An Introduction


“Putting people first.” (British Airways)
“Partners for profit.” (Milliken and Company)
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing
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.
The marketing concept rests on four pillars : target market, customer needs, integrated
marketing, and profitability. They are illustrated in Figure 1.5, where they are contrasted
with a selling orientation. The selling concept takes an inside-out perspective. It starts
with the factory, focuses on existing products, and calls for heavy selling and promoting
to produce profitable sales. The marketing concept takes an outside-in perspective. It
starts with a well-defined market, focuses on customer needs, coordinates all the activities
that will affect customers, and produces profits by satisfying customers.
Starting point






Figure 1.5: Selling vs marketing concept

Target Market
Companies do best when they choose their target market(s) carefully and prepare
tailored marketing programs. Palmolive is offering different types of soaps depending
on the different types of skins.

Customer Needs
A company can define its target market but fail to understand correctly the customers’
Understanding customer needs and wants is not always simple. Some customers have
needs of which they are not fully conscious. Or they cannot articulate these needs. Or
they use words that require some interpretation. What does it mean when the customer
asks for an “inexpensive” car, a “powerful”, a “fast” lathe, an “attractive” shirt, or a
“restful” hotel ?

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