Chapter 10: Marketing

The marketing concept is a part of marketing management that puts more emphasis on customer satisfaction. It is the belief that customer satisfaction is vital for the success of any business. A business can grow if only it identifies the needs of customers and works towards getting those needs fulfilled. The business will maximise profits if it is customer-centric. The marketing concept is that people purchase a product to satisfy a need which can be social, psychological etc. Therefore, all the decisions must be taken by the organisation with the customer’s needs in mind.

Marketing concept puts emphasis on the customer, and therefore all the activities related to marketing of goods and services will be targeted towards the customer. As the customer is the focus, the goods or services will be very effectively sold.

The marketing mix is a set of marketing tools that a company uses to promote their product or brand in the market. Marketing tools are factors that determine the outcome of the business. The marketing mix consists of 4 P’s, which are product, price, place and promotion, and are described in detail below:

1. Product: A product is any good or service that offers the customer value and satisfies their needs. The product must satisfy the requirements of the customer then only it will be successful. It should also contain proper sales support and services.

2. Price: Price is the second factor of the marketing mix. It refers to the money customers pay to obtain any service or goods. Price is an essential factor for consumers. It affects the demand for a product. With the rise in price, the demand reduces and vice versa. Business organisations should analyse the various factors that will be suitable to determine the price of the product. The pricing should be determined by taking into consideration target customers and the pricing policy followed by competitors. The price fixed for a product must make the customer feel that it is adequate for the product.

3. Place: In addition to product and pricing, a firm must also decide on the place where it will be making the product available to the customers. A firm must find the appropriate distributors and dealers for the goods. Other important decisions that can be taken are the location of warehousing, inventory storage and transportation of goods.

4. Promotion: Promotion refers to those activities where consumers are made aware of the product availability utilising various strategies such as sales, advertising, banners, online promotion etc. The medium of promotion should be carefully decided by the organisation in order to derive maximum reach.

Branding is the process of giving a totally unique name, symbol and logo for the product so that it is easy to identify by the customer. By using branding, firms bring about differentiation (based on name, symbol, logo) in their product from other similar products available in the market.

Branding, in addition to helping in product differentiation, also helps in marketing of goods and services. The following points highlight the importance of branding towards marketing of goods and services.

1. Branding helps a firm in product advertisement, and advertisement is possible only when product branding is done. Without branding, the advertisement will be created for the whole product class.

2. Branding helps create loyalty among consumers. Firms can use this loyalty and charge prices which is different from their competitors. The consumer, due to the loyalty associated with the brand, will be willing to pay a premium for the product.

3. Branding helps in establishing a base which helps in pushing for a new product that is produced by the firm. Any new product launched by an already established brand name will make the users try the product as they have an already developed loyalty for the brand.

Price is the amount of money that is paid by the customers to obtain a product. The price will determine the demand for the product in the market. Price also plays an important role in product marketing. If there is any change in the price, it will impact the revenues and the profits of the business. Firms producing similar goods will compete with each other in the market on the basis of the price of the product.

Here are the factors that determine the price of any product or service:

1. Product cost plays an important role in determining the final price of the product. The product cost will involve costs related to production, distribution and the sale of the product. The type of cost associated with a product can be either fixed, variable or semi-variable in nature. Fixed costs are those costs that are a one-time cost and do not change with the output, while variable costs vary with the production, and these include labour cost, raw material etc. Semi-variable costs vary with the level of output, but the proportion is not the same. Therefore, before determining the price of a product, a firm has to make a note of all these costs so that profit can be obtained by selling the product.

2. To determine the pricing of a product, a firm has to also check the demand for the product in the market. To determine the demand, the concept of elasticity of demand is important. It refers to the proportion of change in the demand for an item due to a corresponding change in the price of the product. The demand can be said as elastic if, due to a small change in price, the demand gets changed by a large margin. In such a situation, a firm is unable to charge a high price as it will result in a reduction in the demand for the product. If the demand is inelastic, the change in price will not affect the demand that much.

3. If the level of competition in the market is more in the market, the firm cannot charge more for the product, as charging a high price in a competitive market will make customers move towards the competitors. Similarly, for a firm having less or no competition, it can charge a high price.

4. Government, at times, may intervene in the pricing mechanism for the public interest.

5. Each firm will have a separate objective for pricing. Some of the objectives of pricing are as follows:

i. Firm aim to maximise the profit, the firms may have a short or long-term objective for maximising profit, and in such case, their pricing strategy will be accordingly.

ii. For a firm looking to capture a greater portion of the market, it would charge a price that is lower than its competitors.

iii. In situations of stiff competition, a firm will reduce its price to be more acceptable to consumers.

iv. For firms focusing on quality products, a higher price can be charged.

6. The types of marketing used by the firm will also determine the price. The marketing techniques will involve advertisement and branding campaigns, which will determine the price. If more budget is used in running an advertisement campaign, then prices will be high.

Channels of distribution are those institutions, agents or individuals who help in the process of providing distribution. Due to the spread of customers across large areas, it is not possible for businesses to reach them alone. In this case, these channels of distribution will help the customers in making the product available.

The functions of the channels of distribution are as follows:

1. Supply of goods is received from different sources. But the goods can be of different shapes and sizes, it needs to be taken care of by the intermediary as per the characteristics.

2. The segregated items will be collected by a middleman and stored to ensure a good supply.

3. Goods are packed into units by another middleman.

4. Intermediaries such as retailers will keep a stock of different items for selling to the consumer.

5. Retailers will help manufacturers in promoting the product by offering sales promotions.

6. The intermediaries form a link between the producer and the consumer.

7. Intermediaries also bear the risk of storing goods in uncertain situations or situations of low demand.

The movement of products from the place of production to the place of consumption is called physical distribution. The major activities involved in the physical distribution of products are as follows:

1. Order processing: Order processing consists of steps such as order placement, order transmission, inventory maintenance, goods delivery etc. As such processes are time-consuming, a physical distribution system must ensure proper order processing. Customer satisfaction can be achieved by fast and accurate order processing.

2. Product transportation: Product transportation is the physical movement of goods from the production unit to the consumers.

3. Warehousing: It is the process of storing the goods obtained from manufacturers before being introduced for sale to the customers. Warehouses provide ready stock of goods that can be made available in the market.

4. Inventory maintenance: Inventory is maintained to provide a timely supply of goods; it promotes customer satisfaction. Inventory maintenance is cost intensive; therefore, a firm must find the balance between inventory and customer satisfaction.

Advertising expenditure is considered as social waste due to multiple factors, such as it adds to the cost of the production of the company and also increases customer requirements for more such products. The following points will help in determining whether advertising is a social waste or not.

1. Advertising is high-cost intensive; the businesses thus pass on this cost to the consumers at the time of determining the price of the product. But the positive point that can be seen is that advertisement can help in reducing the cost of production by increasing customer demand for the product.

2. The major point which impacts advertising is that it weakens social values and promotes the sense of materialism in society. Customers want to acquire any new product to fulfil their desires. But this process will run forever as long as any new product is prepared.

3. Advertisements are said to create confusion among customers as so many different varieties of the same product will be available in the market. Customers get confused as to which brand to buy.

4. Advertisement is done for both good and bad quality products. Again, the good and bad quality concepts will vary from customer to customer.

5. Advertisements are said to erode social values by using content, images, action, gestures or language, which is not acceptable by all sections of society. Again, the same rule will apply that what is perceived as bad by someone may be seen as good by the other.

The most important decision in marketing is the use of a channel of distribution. It is influenced by the following factors:

1. Distribution will depend on the type of product that is produced. It should be checked if the product is of the following characteristics:

i. Perishable or non-perishable

ii. High or low-value product

iii. Industrial or Consumer product

iv. The degree of complexity of the product.

2. The company characteristics will also play a major role in determining the choice of product, the major points are the degree of control the company wants to have on intermediaries and the financial strength of the company. As a rule of thumb, shorter distribution channels offer more control to financially strong companies.

3. The level of competition and the distribution channel strategies adopted by the competitors is critical in determining the distribution adopted by the company. The company can adopt a similar strategy or use a different one after analysing the competitor.

4. Various environmental factors such as legal policies and financial constraints also impact the channel of distribution decision. If more legal complexities are involved in the association of larger channels of distribution, then companies will be more interested in opting for shorter channels of distribution.

5. The choice of channel distribution can also be affected by various market factors such as demand, size of the market, and demographics of buyers. If the user base spans a large area, then larger distribution channels can be opted for, and vice versa.

Concepts covered in this chapter are listed below:

• Meaning of Market
• Meaning of Customer
• Marketer or Seller
• Definition of Marketing