OBJECTIVES
At the end of this chapter, you will be able to:
- appreciate the need for the marketing functions;
- differentiate between marketing and selling;
- understand some of the key concepts used in marketing;
- analyze the tasks involved in marketing;
- define advertising and choose an advertising media;
- learn what strategic planning achieves in terms of an organization's objective.
INTRODUCTION
Marketing is the process of understanding what the customers need and want, arranging to make the same available to them and communicating clearly about the fact that here is the product that they have been wanting to have. In this sense, one could say that Marketing is the single most important function in an Organization. This is not to belittle the importance of other functions, but to put things in perspective.
Marketing Management involves ascertaining the quantum of demand for specific products, the profile, buying habits and purchase potential of customers and taking necessary steps to make the product available in right quantities, at the right price, at the right place and time. It is the aggregate of strategies and tactics for the sale undertaken before the actual selling of goods. It includes Market Research, Product Positioning, Packaging, Pricing, Distribution, Publicity, Advertisement and Sales Promotion.
Manufacturers need to know the profile of their potential buyers, their buying capacity, buying habits (where they buy), the processes (who they consult before buying), what alternatives are available to them and at what price their product will sell. The product needs to be packed in convenient lots for ready use and information about the product is to be made known to the public. Also, the product needs to be supplied to the seller in the right quantity at the right time and should be displayed prominently enough for people to notice in the shops.
All the above are part of what is called Marketing. The actual process of selling to the customer, either directly as in the case of industrial products or through dealers/wholesalers as in the case of consumer products, is not exactly a part of Marketing, though some people mistake selling for Marketing.
MARKETING VS SELLING
Although marketing and selling are closely related, their aims and roles are different. Some of the important differences are listed in the following page.
i. Marketing precedes selling. Before a product is introduced in the market, the Marketing department should have studied the need, demand, suitability and saleability of the product. Sales and its related functions follow the marketing process.
ii. Marketing involves study of the market and its potential in relation to the product. Selling refers to the handling of the product and its (physical) transfer from the producer to the consumer.
iii. Marketing is the process of explaining the product and its benefits and displaying it before the public, either physically in the shop window or through advertising. Selling involves trading of goods or services for money (cash or credit).
iv. Marketing includes collection of data from potential buyers and use them to refine production. Selling is the act of implementing the purpose of marketing.
v. Marketing is an R & D exercise. Selling is a field work on a daily basis, the nuts and bolts part of a business enterprise.
SOME KEY CONCEPTS IN MARKETING
Customer Wants, Needs and Demands
We
often fail to see the difference between want and need. Need is what the
customer actually requires, whether he has realized his requirement or
not. Want is what he desires to have, whether he really needs it or not.
To
go to office which may be just half a kilometer away, we can just go
across by walk. A cycle or a scooter may be a luxury. However, we may
want to use the car. Here, there was no 'need', but a strong 'want'
makes us follow a certain course of action.
Consider the example
of a toothpaste. A customer comes to the shop for a toothpaste which is
his need. The buyer wants a toothpaste with a favorite flavor, which
comes in an attractive
packing and in a convenient quantity, say 100 gms. What the customer ultimately demands is that brand
which he prefers, but at the right price,
namely, a nominal price that is affordable to him.
The Marketing Manager always keeps the interests of his organization in mind. However, by the nature of his role in finding out what the customer needs, he is forced to see things the way the customer sees them and thus keeps the interest of his customer in mind as well.
While buying a product, an ordinary customer looks at:
the money available with him
the price of the product in question, and
the price of the alternative product.
The Marketing Manager should consider these factors. He should also consider whether his organization can give the customer what he needs/wants, and if so, what are the limitations of production. The production personnel need to think only of their department's job of producing, whereas marketing involves an awareness of not only the market, but also the production capacity and limitations of the company.
Product Category
Usually business organizations produce and sell several products or variations of the same product (also called product category or type). Some of the product types may sell more than others. An organization interested in promoting the sales of a particular product type may conduct studies to find out why the alternate product types sell more than the one they want to promote. Thereafter, production of the more saleable products may be stepped up, or marketing efforts may be made to increase the sales of other products. For example, companies which wanted to promote sales of alternate edible oils (like sunflower oil, soyabean oil, etc.) carried out detailed studies of why conventional edible oils (like groundnut oil, mustard oil, etc.) sold more, found ways of promoting alternate oils and have succeeded in changing the mindset of the consumer. Here, you can say that conventional edible oils and alternate cooking oils are two product categories.
Product Life Cycle
Each product (or product category) has a life cycle as given below:
The Introductory stage
The Growth stage
Maturity Stage
Decline Stage
In the introductory stage (or phase), the new product enters the market, and efforts like Sales Promotion induce the customers to try the product. The market accepts the product only slowly. Therefore, the volume of sales is low and the product is sold at a heavy loss.
In the next stage, namely, the growth stage, sales increases as customers begin to accept the product and the profitability improves.
As the product gains popularity, it reaches the maturity stage, thus retaining a fairly steady market size for a fairly long time. This is the stage when the product brings in significant profits.
Then
comes the decline stage which occurs when a new product category with
improved features hits the market and cuts into the existing product
category's market size.
The popularity of 'Sunlight' soap in the
1950s is a case in point. It lasted for a little more than a decade and
in the late 1960s it declined mainly due to the introduction of blue-colored 'detergents'.
The concept of 'shampoo', likewise, was popularized when people were using either soaps or natural products like 'Shikakai' for cleaning the hair. Each brand vied with the other in proclaiming its superiority. However, with the introduction of shampoo packaged in small 'sachets', the importance of the ingredients in the shampoo took a back seat. Through bombarding of advertisements, economy (single-use), low-pricing and easy availability at all the wayside shops, the 'shampoo sachets' became the rage of the middle classes.
Brand
Brand relates to the identification given to a product in the form of name, sign or symbol ('logo') to distinguish it from other brands of the same product. The makers of instant coffee powder name their products 'Sunrise', 'Bru', etc., so that customers will be able to use them and cultivate their buying and usage habits by identifying their choice with the 'brand' in question. They do not merely ask the shopkeeper for 'instant coffee powder', they ask for their favorite brand by its name. Loyalty to a brand is useful both to the producer and the customer. Over a time, people tend to call a product by its leading brand name; the brand name has such a forceful effect on the psyche of the people. For example, 'Xerox' for photocopying, 'Goodnight' for mosquito mat.
Leaders/Followers
The
producer whose product has the highest share in the market is called
the 'market leader'. For instance, 'Colgate' brand of toothpaste (with
all its different variations like 'floride' and 'gel') still holds about
60% of the market share of toothpaste in India. The brands marketed by
Hindustan Lever, like 'Pepsodent', 'Close-up', etc., come second.
To
hit at the 'Colgate' market, the makers of 'Promise' toothpaste decided
to follow the 'Colgate' color scheme of pink and white (pink denoting
healthy gums and white representing clean teeth), for packaging the
product. They also brought in an advertising slogan of 'I wonder how no
one thought of it before', when they said that 'Promise' contained
'clove oil' for healing bleeding gums. Although almost all toothpastes
contain clove oil, it was not advertised earlier. The result was
'Promise' made a big dent in the sales of 'Colgate'. Still, 'Colgate'
continues to be the leader and others are followers.
Quality
Quality pertains to fitness of a product for the customer's use to meet a certain need. If it delights him, all the better. Uniform rendering of good service over a period of time, coupled with high quality products, results in continued customer patronage. The customer soon expects high standards from the producer and continues his relationship as long as his expectations are met.
Price
Pricing of a product largely depends on the demand for the product. Unless the buyer is satisfied with the price of the product in question, he will not go through with the purchase, however popular the product is.
Price depends also on factors other than the cost of production. Cost plus a reasonable profit is the minimum incentive for a manufacturer to keep producing. Other factors are as follows:
i. Brand Name - Some brands become famous over a period of time; For example, Yardley, Chanel, etc., for perfumes and toiletry. Whatever the price, people will continue to buy them.
ii. Price of the alternative product - When a new soap is introduced, the price is determined more by the price of its competitors already in the market than by its own cost of production.
iii. Packaging - For example, perfumes come in
expensive, attractive containers, and are priced very high. No one
questions the pricing of an expensive bodyspray.
MARKET STUDY / MARKET RESEARCH (MR)
In today's highly competitive world, where resources are limited, the manufacturer who wants to sell the maximum volume in quick time must know his 'market', (i.e., that portion of the population which would require the product and is likely to buy it) precisely. Hence, the need for a group of specialists who can understand/identify the market even before the manufacturing plant is set up. This group is called the Market Research/Market Study group.
The purpose of MR is to understand the fulfilled and unfulfilled needs and wants of the consumer and to produce one's own products to meet these needs and wants in the right proportions (also called as mix of production), to achieve maximum overall sale and profitability.
Market Research, in other words, is the process of probing, evaluating and predicting the market's response to products intended to be produced and sold, even before they are produced.
Customer's needs and wants must be studied in relation to:
price
quality
content
packaging
presentation
distribution
after-sales service.
MR is done in various ways. A common method is collection of data by devising a questionnaire (or form) and getting it filled up by a representative cross-section of consumers. The filled-up form contains the consumer's individual preferences pertaining to the product, opinions regarding the alternative/competing products, his/her income group, money spent (or willing to be spent) by the consumer on the specific product (every month or in one shot), etc.
Data is also collected in respect of:
i. volume of sale of the product vis-a-vis (other brands) in the recent past, say, last one year.
ii. potential market for one's own brand.
iii. specific localities/areas where increased sales is possible e.g., due to large concentration of population of lower/higher income class.
iv. seasonal variations in sales.
From
these information, the Market Researcher arrives at the potential
market size and the market share for his own product. This helps the
production planner to plan his production accordingly. In the case of
new product introduction, this helps in setting up a plant of the right
capacity.
ADVERTISING
Advertising is defined as any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor - Philip Kotler.
The need for advertising arises in view of consumers' preference for branded products and services. Advertisements should be an influencing stimuli to make customers react positively to what is being offered. One of the important elements of advertising is the choice of media through which to communicate.
Some of the forms (or media) of communication are:
| Indoor Media | Outdoor Media |
|---|---|
| Newspaper Advertisements | Hoardings |
| Television | Banners |
| Radio | Leaflets/Flyers |
| Magazines | Cinema Slides |
Advertising involves five major factors which are called the 5-Ms. They are as follows:
i. What are the advertising objectives? (Mission)
ii. How much money can be spent? (Money)
iii. What message should be sent? (Message)
iv. What media should be used? (Media)
v. How should the result be evaluated? (Measure)
In many large organizations, there is a department called 'Corporate Communications' which is the co-ordinator for promoting all other communications. It co-ordinates with Advertising and other agencies to take care of the 5-Ms on behalf of the organization.
SALES PROMOTION
Sales Promotion campaigns consist of introducing the product into the market by first selling the 'concept' through Advertisements. This is followed by door-to-door campaigns and distribution of samples. Another way of promoting sales is making available various small volumes of the product free of cost or at low prices at various temporary outlets in prominent places.
'Pepsi' soft drink was introduced in India through its local brand name 'Lehar Pepsi', with the help of a vigorous sales promotion.
Sales Promotion differs from advertising in that, while advertising offers a reason to buy, sales promotion offers an incentive to buy. It is a special offer, to a particular segment of people, and is offered for a specific period of time.
PUBLIC RELATIONS (PR)
PR helps develop and encourage positive attitudes and behavior by the public, in general, and potential consumers and opinion leaders, in particular, towards the organization and its products/services.
Public Relations, in the marketing context, involves:
a. Assisting in the launch of a new product.
b. Assisting in the re-positioning of a new product (by arranging seminars, press conferences, etc., to spread new messages about the product).
c. Building up interest in a product category.
d. Influencing specific target groups. (For example, women, children, athletes, etc.).
e. Defending products that have faced problems.
f. Building the corporate image.
g. Building credibility and awareness.
h. Stimulating the sales force.
i. Holding down advertising and promotional costs.
DIRECT MARKETING
Direct Marketing means marketing without the use of intermediaries, i.e., the producer or dealer communicates with the ultimate user directly. This may be done through phone calls, direct mailers, road shows, presentations, participation in fairs, etc.
Companies send letters to important customers about their products and their benefits. Departmental stores offer gifts to customers buying goods worth more than a specified amount or offer special prices on purchases.
Mail order sales and telemarketing are some forms of direct marketing.
STRATEGIC PLANNING
Strategy means the overall thrust of an organization's aims, the direction in which the organization is moving or proposes to move. Without a strategy, the organization is likely to stumble from crisis to crisis. It has time only for solving a crisis, in other words, fire-fighting.
A marketing strategy involves visualization of long-term goals and a plan to achieve them from the marketing viewpoint by taking advantage of the marketing media available like, MR, Advertising, PR, Sales Promotion and Direct Marketing.
Strategic Planning involves answering the following questions:
Where have we been so far? Where are we now?
Where do we want to go in the next few years?
How can we get there?
The purpose is to generate new ideas, probe market opportunities, and develop plans on how to secure the market desired.
For example, when Pepsi was getting entrenched in the Indian soft drinks market, as a late entrant to the Indian Market, Coca-Cola had to devise a strategy to overtake Pepsi swiftly and emerge as the undisputed leader of the Indian soft drinks market. Coca-Cola did this by buying out Parle Soft Drinks Ltd, the leading indigenous soft drink marketer with reputed brands such as Thums Up, Limca and GoldSpot. Using Parle's infrastructure, bottling capacity, distribution network and the immense goodwill of the established brand names, Coca-Cola has stormed ahead of its international rival Pepsi. Aggressive advertising and promotions using international imagery has been part of CocaCola's armory against Pepsi.
CONCLUSION
Marketing is an exciting, challenging, rewarding field. In the coming years, it is likely to grow to even greater heights. It offers enormous job opportunities for bright, young graduates. One could, depending on one's interests, aptitude and skills, become a Market Research Executive, Market Research Analyst, Market Research Field Executive, Advertising Account Executive (also called as Client Service Executive), Copywriter, Creative Artist, (Advertising/Promotion Executive), Public Relations Executive, Direct Marketing Executive, Telemarketing Executive, or a Marketing Executive who co-ordinates many of the above marketing activities.
4.11 RECAPITULATION
- Marketing is the aggregate of strategies and activities that one adopts for selling a product.
- Marketing involves the study of the market and its potential in relation to the product. Selling refers to physical transfer of the product from the producer to the consumer.
- Need is what the customer actually requires, whether he has realized his requirement or not. Want is what he desires to have, whether he really needs it or not.
- Every product goes through a life cycle which consists of the following stages:
- The Introductory stage
- The Growth stage
- The Maturity stage
- The Decline stage.
- The market leader is one whose product holds the highest share in the market.
- Branding and Pricing largely determine the demand for a product.
- Market Research is the process of probing, evaluating and predicting the market's response to the product meant to be sold.
- Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor.
- The 5-M's of Marketing are:
- Mission, Money, Message, Media and Measure.
- The successful launching of a new product largely depends on the sales promotion campaign which initially offers an incentive to buy a product.
- Strategic Planning answers the following questions:
- Where have we been?
- Where are we now?
- Where do we want to go?
- How can we get there?
