Marketing Concepts

Objectives of marketing concepts

In this lesson, we will introduce you to the conceptual ideas that make up the marketing function of a business. After you work out this lesson, you should be able to:

• List out the concepts of marketing
• Understand how these concepts are interconnected
• Explain how marketing is changing in a connected world

In this lesson, we will discuss the following:

• Needs, wants and demands
• Products
• Value and satisfaction
• Exchange, transactions and relationships
• Markets
• Marketing in a connected world

Introduction in marketing concepts

Having defined marketing in the previous lesson as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others, this lesson examines the important concepts that are included and implied in this definition. These concepts are indicated in Figure 1.2.1 and it is important to note that they are linked, with each one building on the one before it.

Figure 1.2.1 Marketing concepts

Needs, Wants and Demands

The most basic concept underlying marketing is that of human needs. A need is a state of felt deprivation. It is a part of the human makeup. Humans have many needs, viz., physical needs, social needs, spiritual needs and so on. Wants are the form taken by needs as they are shaped by the one’s culture and personality. Wants are thus shaped by both the internal and external factors. Wants are described in terms of objects that will satisfy needs.

For example, thirst is a need. To quench this thirst, a person may consider a number of options - drink water or a soft drink or a fruit juice. These objects (which represent the different choices for a person to fulfill his/her need) comprise the potential want-list. As people are exposed to more objects that arouse their interest and desire, marketers try to provide more choices, that is, more want-satisfying products. People have almost unlimited wants but limited resources. Therefore, they want to choose products that provide the most satisfaction for their money. When backed by buying power (ability), a want becomes a demand.

Products

A product is anything that can be offered to a market to satisfy a need or want. People satisfy their needs and wants with products. Though the word suggests a physical object, the concept of product is not limited to physical objects. Marketers often use the expressions goods and services to distinguish between physical products and intangible ones. These goods and services can represent cars, groceries, computers, places, persons and even ideas.

Customers decide which entertainers to watch on television, which places to visit for a holiday, which ideas to adopt for their problems and so on. Thus the term ‘product’ covers physical goods, services and a variety of other vehicles that can satisfy customers’ needs and wants. If at times the term ‘product’ does not seem to be appropriate, other terms such as market offering, satisfier are used.

Value and Satisfaction

When the customers have so many choices to choose from to satisfy a particular need, how do they choose from among these many products? They make their buying choices based on their perceptions of a product’s value. The guiding concept is customer value. A customer will estimate the capacity of each product to satisfy his needs. He/She might rank the products from the most need-satisfying to the least need-satisfying. Of course, the ideal product is the one which gives all the benefits at zero cost, but no such product exists. Still, the customer will value each existing product according to how close it comes to his/her ideal product and end up choosing the product that gives the most benefit for the rupee - the greatest value.

Exchange, Transactions and Relationships

Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired object from someone by offering something in return. Thought it is only one of the many ways people can obtain a desired object, it allows a society to produce much more than it would with any alternative system. For an exchange to take place, several conditions must be satisfied. Of course, at least two parties must participate, and each must have something of value to the other. Each party also must want to deal with the other party and each must be free to accept or reject the other’s offer.

Finally, each party must be able to communicate and deliver. These conditions simply make exchange possible. Whether the exchange actually takes place depends on the parties’ coming to an agreement. If they agree, we must conclude that the act of exchange has left both of them better off or at least not worse off. After all, each was free to reject or accept the offer. In this sense, exchange creates value just as production creates value. It gives customers more consumption possibilities.

A transaction is marketing’s unit of measurement. It consists of a trade of values between two parties. A monetary transaction involves trading goods and services in return for money whereas a barter transaction involves trading goods and services for other goods and services. Transaction marketing is part of the larger idea of relationship marketing.

Marketing is shifting from trying to maximize the profit on each individual transaction to maximizing mutually beneficial relationships with consumers and other parties. This is based on the assumption that if good relationships are built, profitable transactions will simply follow.

Markets

The concept of transactions leads to the concept of a market. A market is the set of actual and potential buyers of a product. It may exist in a physical environment as a marketplace or in a virtual environment (on the internet platform) as a marketspace. To understand the nature of a market, imagine a primitive economy consisting of only four people - a farmer, a fisherman, a potter and a hunter. Figure 1.2.2 shows the different ways in which these traders could meet their needs.

In the first case, self-sufficiency, they gather the needed goods for themselves. In the second case, decentralized exchange, each person sees the other three as potential buyers who make up a market. In the third case, centralized exchange, a new person called a merchant appears and locates in a central area called a marketplace. Each trader brings goods to the merchant and trades for other needed goods.

Merchants and central marketplaces greatly reduce the total number of transactions needs to accomplish a given volume of exchange. As economies grow, exchange becomes even more centralized, as seen in the growth of huge companies. Large supermarkets now serve millions of people who formerly shopped in smaller outlets.

Figure 1.2.2 Moving towards centralized exchange

Marketing in a connected world

The internet and the resultant connected world has posed some special challenges and opportunities for marketers. Prof. Mohanbir Sawhney (Kellogg School of Management) has used two interesting metaphors (hunting Vs. gardening) to describe marketing hither-to and marketing hence-forth.

The underlying reason for this shift is the rise of information democracy made possible by the internet. For information symmetry (characterized by scarce information, ill-informed customers, monologue kind-of exchanges and ‘command-and-control’ marketing) the society is moving towards information democracy (characterized by ubiquitous information, well-informed customers, conversations kind-of exchanges and ‘connect-and-collaborate’ marketing).

Their members communicate in language that is natural, open, honest, direct, funny and often shocking... Most corporations, on the other hand, only know how to talk in the soothing, humorless monotone of the mission statement, marketing brochure, and your- call-is-important-to-us busy signal. Same old tone, same old lies. No wonder networked markets have no respect for companies unable or unwilling to speak as they do.