Commerce - V · Commerce - V Marketing (As Per the Revised Syllabus of T.Y. B.Com. from the Year 2018-19, Semester V, University of Mumbai) Dr. Khushpat S. Jain Associate Professor,

Commerce - VMarketing

(As Per the Revised Syllabus of T.Y. B.Com. fromthe Year 2018-19, Semester V, University of Mumbai)

Dr. Khushpat S. JainAssociate Professor,

D.Litt. (Hon., USA), Ph.D. (Banking), MBA (Human Resource Management),M.Com. (Banking), M.A. (Economic and Political Science), NET, SET

Dr. Prashant BhagatPh.D., M.Phil., M.Com., M.A. (Eco.),

MBA, DPMIR, SETAssistant Professor,

Department of Commerce,Chetana's H.S. College of Commerce &Economics, Smt. Kusumtai Chaudhari

College of Arts,Bandra (East), Mumbai.

Dr. Raj Ankush SoshtePh.D., M.Com., M.Phil., PGDFM,

GDC&A, SETAssistant Professor,

Department of Commerce,NSS College of Commerce & Economics,

Tardeo, Mumbai.

Dr. Satinder GujralM.Com, B.Ed., Ph.D., MBA

I/C Principal,Reena Mehta College of Commerce &

Management Studies, Bhayandar (West).

Janhavi V. RaoM.Com., NET, MBA, M.Phil.,

Vice Principal,HOD, Gurukul College of Commerce,

Ghatkopar, (East) Mumbai .

Dr. Nilendra LokhandeM.Com., Ph.D., UGC-NET, M.Phil., B.Ed. (NCERT Bhopal)

Head, Department of Commerce, S.N.D.T. Arts &S.C.B. College of Commerce & Science for Women,

SNDT Women’s University, Mumbai - 20.

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First Edition : 2015Reprint : 2016Reprint : 2017

Second Revised Edition : 2018(as per revised syllabus)

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DTP by : Khushpat JainPrinted at : Rose Fine Art, Mumbai. On behalf of HPH.

PrefaceIt gives us immense pleasure to put forth a book on revisedsyllabus in the subject of “Commerce - V (Marketing)”for T.Y.B.Com., Semester V for the students of theUniversity of Mumbai. The book has been divided intoFour Chapters based on Four Modules in the Syllabus. Thelanguage of the book is simple and lucid to enableundergraduate students to comprehend easily. A number ofexamples have been given to make understanding of thesubject matter easy. Objective questions in the form of fillin the blanks, match the columns and true or false havebeen given to facilitate quick revision and help students toprepare for the internal examinations.

We hope that the book meets the requirements of theStudents and Teaching Community.

Authors

Acknowledgements Dr. Maheshchandra Joshi, Principal, Chetana College, Bandra

Prof. V. Manikandan, I/C Principal, M.P.V. Valia College, Borivali, Mumbai

Dr. B.B. Kamble, HOD, Chinai College, Andheri, Mumbai

Dr. V.B. Zodage, HOD, Sant Rawool Maharaj Mahavidyalya, Kudal

Dr. S.B. Yadav, HOD, C.K.T. College, Panvel

Dr. Kishori Bhagat, Pragati College, Dombivli

Dr. Mayuresh Mule, K.J. Somaiya College, Vidyavihar, Mumbai

Dr. Deepak Salve, SGM College, Mumbai

Dr. Vinayak Raje, HOD, K.B. College, Thane

Prof. Ravindra Netawate, HOD, D.G. Ruparel College, Mumbai

Dr. Sanjay Khaire, Co-ordinator, Dr. Ambedkar College, Wadala, Mumbai

Prof. Dhiraj Ovhal, HOD, NSS College, Tardeo, Mumbai

Dr. Sandeep Podar, HOD, Smt. P.D. Tibrewala Lions College, Mumbai

Dr. Suryakant Lasune, Co-ordinator, M.Com., Lala Lajpatrai College, Mumbai

Dr. Varsha Mallah, HOD, Bhavan’s College, Chowpatty, Mumbai

Prof. Mahesh Jadhav, HOD, Patkar College, Goregaon, Mumbai

Prof. Vijay Mahida, HOD, Laxmichand Golwala College, Ghatkopar, Mumbai

Dr. B.R. Kamble, Kirti College, Dadar, Mumbai

Prof. Aushutosh Saxena, Jai Hind College, Churchgate, Mumbai

Prof. Ajit Jadhav, Shankar Narayan College, Bhayander

Dr. Rashmi Agnihotri, HOD, Joshi-Bedekar College, Thane

Dr. Ashish Jani, M.M.K. College, Bandra

Dr. Anuja Bapat, HOD, Pragati College, Dombivli

Dr. Snehal Patil, HOD, K.L.E. College, Kalamboli

Dr. Madhura Kulkarni, Assistant Director, IDOL University of Mumbai

SyllabusCommerce – V

MarketingModules at a Glance

Sr.No.

Modules No. ofLectures

1 Introduction to Marketing 122 Marketing Decisions – I 113 Marketing Decisions – II 114 Key Marketing Dimensions 11

Total 45

Sr.No.

Modules/Units

1. Introduction to Marketing Marketing, Concept, Features, Importance, Functions,

Evolution, Strategic v/s Traditional Marketing Marketing Research: Concept, Features, Process Marketing

Information System: Concept, ComponentsData Mining: Concept, Importance

Consumer Behaviour: Concept, Factors InfluencingConsumer BehaviourMarket Segmentation: Concept, Benefits, Bases of MarketSegmentationCustomer Relationship Management: Concept, TechniquesMarket Targeting: Concept, Five Patterns of Target MarketSelection

2. Marketing Decisions – I Marketing Mix: Concept

Product: Product Decision AreasProduct Life Cycle: Concept, Managing Stages of PLCBranding: ConceptComponents Brand Equity: Concept, Factors InfluencingBrand Equity

Packaging: Concept, Essentials of a Good PackageProduct Positioning: Concept, Strategies of ProductPositioningService Positioning: Importance and Challenges

Pricing: Concept, Objectives, Factors Influencing Pricing,Pricing Strategies

3. Marketing Decisions – II Physical Distribution: Concept, Factors Influencing Physical

Distribution, Marketing Channels (Traditional andContemporary Channels)Supply Chain Management: Concept, Components of SCM

Promotion: Concept, Importance, Elements of PromotionMix, Integrated Marketing Communication (IMC), Concept,Scope, Importance

Sales Management: Concept, Components, EmergingTrends in Selling Personal Selling – Concept, Process ofPersonal Selling, Skill SETS Required for Effective Selling

4. Key Marketing Dimensions Marketing Ethics: Concept, Unethical Practices in

Marketing, General Role of Consumer OrganizationsCompetitive Strategies for Market Leader, MarketChallenger, Market Follower and Market Nicher MarketingEthics

Rural Marketing: Concept, Features of Indian Rural Market,Strategies for Effective Rural MarketingDigital Marketing: Concept, Trends in Digital MarketingGreen Marketing: Concept, Importance

Challenges Faced by Marketing Managers in 21stCentury: Careers in Marketing – Skill Sets Required forEffective MarketingFactors Contributing to Success of Brands in India withSuitable Examples, Reasons for Failure of Brands in Indiawith Suitable Examples.

Paper PatternMaximum Marks: 100Questions to be Set: 06Duration: 03 HoursAll questions are compulsory carrying 15 Marks each.

Particulars MarksQ.1 Objective Questions

(a) Sub-questions to be asked (12) and to beanswered (any 10)

(b) Sub-questions to be asked (12) and to beanswered (any 10)

(*Multiple Choice/True or False/Match the Column,Fill in the Blanks)

20 Marks

Q.2

Q.2

Full Length QuestionORFull Length Question

15 Marks

15 MarksQ.3

Q.3


15 Marks

15 MarksQ.4

Q.4


15 Marks

15 MarksQ.5

Q.5


15 Marks

15 MarksQ.6

Q.6

(a) Theory Questions(b) Theory QuestionsORShort NotesTo be asked (06)To be answered (04)

10 Marks10 Marks

20 Marks

Note: Theory question of 15 marks may be divided into two sub questions of7/8 or 10/5 Marks.

Contents

1. Introduction to Marketing 1 – 49

2. Marketing Decisions – I 50 – 86

3. Marketing Decisions – II 87 – 124

4. Key Marketing Dimensions 125 – 170

IInnttrroodduuccttiioonn ttoo MMaarrkkeettiinngg

Scope of Syllabus:

Marketing – Concept, Features, Importance, Functions, Evolution, Strategic v/s Traditional Marketing

Marketing Research – Concept, Features, Process

Marketing Information System (MIS) – Concept, Components – Data Mining – Concept, Importance

Consumer Behaviour – Concept, Factors Influencing Consumer Behaviour

Market Segmentation – Concept, Benefits, Bases of Market Segmentation

Customer Relationship Management – Concept, Techniques

Market Targeting – Concept, Five Patterns of Target Market Selection

Structure: 1.1 Concept of Marketing

1.2 Features of Marketing

1.3 Importance of Marketing

1.4 Functions of Marketing

1.5 Evolution of Marketing

1.6 Strategic Marketing vs. Traditional Marketing

1.7 Concept of Marketing Research

1.8 Features of Marketing Research

1.9 Process of Marketing Research

1

Commerce V – Marketing 2.

1.10 Concept of Marketing Information System (MIS)

1.11 Components of MIS

1.12 Concept of Data Mining

1.13 Importance of Data Mining

1.14 Concept of Consumer Behaviour

1.15 Factors Influencing Consumer Behaviour

1.16 Concept of Market Segmentation

1.17 Benefits of Market Segmentation

1.18 Bases of Market Segmentation

1.19 Concept of Customer Relationship Management (CRM)

1.20 Techniques of CRM

1.21 Concept of Market Targeting

1.22 Five Patterns of Target Market Selection

Questions Bank

Introduction to Marketing

3.

1.1 Concept of Marketing

Marketing occupies an important place in the organisation of a business unit. The traditional view of marketing, 'Caveat Emptor', i.e., ‘let the buyer beware’, underwent a sea change at the turn of the last century and transformed into 'Caveat Vendor', i.e., ‘let the seller beware’. With this philosophy, the consumer has become the focal point of all marketing activities.

There are several definitions of marketing, which generally revolve around the primacy of customers as a part of an exchange process. Customers' needs are the starting point for all marketing activities. Marketing managers identify these needs through marketing research process and develop products which can satisfy them through an exchange process.

“Marketing is a total system of interacting business activities designed to plan, price, promote and distribute want satisfying products and services to the present and potential customers.” – William J. Stanton

“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.”… – American Marketing Association

“Marketing is a human activity directed at satisfying needs and wants through exchange processes.” – Philip Kotler

Thus, marketing is essentially about being driven by the needs of the customers as a means of achieving organisational goals.

1.2 Features of Marketing

Modern marketing concept is ever-evolving and so are its features. Some of the features of modern marketing concept are:


(a) Marketing is a total system: Marketing is the process of transferring ownership of goods and services from producers to consumers. Thus, it is a total system consisting of various integrated marketing functions such as buying, selling, assembling, storage and warehousing, transportation, grading and standardisation, marketing research and marketing information system (MIS).

(b) It is a managerial function: Marketing is the managerial process of laying down marketing objectives, planning marketing activities, organising resources, co-ordinating marketing functions, selection, placement and training of sales force, directing different departments towards marketing goals, evaluating their performances and controlling wastage and deviations to achieve marketing goals.

(c) It is customer-oriented: According to Peter Drucker, 'the purpose of business is to create customers'. The traditional view of marketing, 'Caveat Emptor', i.e., ‘let the buyer beware’, underwent a sea change at the turn of the last century and has transformed into 'Caveat Vendor', i.e., ‘let the seller beware’. Marketing begins with ‘the customer needs’ and ends with ‘the customer satisfaction’.

(d) It is related to goods, services and ideas: Marketing not only includes selling and distribution of goods but also marketing of services and ideas. Due to the phenomenal growth of service sector in recent years, the tertiary sector has assumed a great significance. Similarly, R&D activities have given boost to new discoveries and ideas which are also marketed on a very wide scale.

(e) It is a dynamic process: The various environmental factors and forces that surround and affect the marketing activities, such as demographic, economic, social, technological, global and political, keep on changing. A successful marketer must be dynamic enough to adjust and grab the opportunities


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created and prevent the threats posed by the ever-changing environment. This makes marketing a dynamic process.

(f) It precedes and follows production: Marketing is a complex system of many marketing functions such as buying, selling, transportation, storage, etc. Some of these functions precede production while some others succeed it. For example, marketing research is undertaken before production while selling is undertaken after production. Thus, marketing precedes and follows production process.

(g) It is an integrated approach: Marketing is an integrated process of all individuals and departments in the organisation and not only of the marketing department alone. Under the modern marketing approach, activities of all individuals and departments in the organisation, viz., purchase department, sales department, marketing department, etc. must be co-ordinated properly to achieve marketing objectives.

(h) It is target-oriented: Marketing, being a consumer-oriented process, is not targeted at masses but at a specific class of consumers. A market consists of heterogeneous group of consumers. Therefore, it is necessary to segregate it into smaller units on the basis of homogeneous variables such as gender, income, age, location, sex, etc. through the process of market segmentation.

(i) It is an art as well as a science: Marketing is an art as well as a science. The handling of marketing responsibilities calls for a diversity of human talents and personality traits such as judgement, intuition, analytical ability and creativity. It is not a perfect science but every marketing manager must possess scientific temper to handle marketing problems effectively.

(j) It is an evolutionary concept: The concept of marketing is closely related to the level of socio-economic and technological developments in the society. The concept of


marketing has been refined and upgraded with the progress of the society. It has passed through a number of stages during its evolution from the stage of self-sufficiency to the stage of modern customer-oriented philosophy.

(k) It creates utility: Marketing is an integrated system of actions that create value in goods. Production creates form utility (by changing form of materials), warehousing creates time utility (by making goods available at the right time), transportation creates place utility (by making goods available at the right place) and selling creates possession utility (by transferring ownership).

1.3 Importance of Marketing

Marketing plays an important role in the modern business world. It directly or indirectly benefits everyone in the society.

Benefits of Marketing for a Firm:

(a) Marketing generates revenue: Profit is the pre-requisite for the survival of any business activity. Marketing facilitates the transfer of goods and services from the centres of production to the centres of consumption and thereby, widens the market for them. This increases sales and sales revenue, which can be reinvested for generating further profits and initiating growth and expansion of business.

(b) It assists in marketing decision-making: The basic problems of any marketer are what, how, when, how much and for whom to produce. Marketing provides answers to these questions through marketing functions such as marketing research, demand forecasting, market segmentation, storage and transportation and thereby, assists in marketing decision-making process.

(c) It initiates innovations and changes: Consumer tastes and preferences change rapidly than they are absorbed. Hence,


7.

every marketer is expected to be dynamic and innovative. Information is the basis of such innovations, which is passed on through marketing intermediaries from consumers to retailers, from retailers to wholesalers and finally from wholesalers to the manufacturers.

(d) It facilitates the discovery of new products and new markets: Marketing research is an important function of marketing process. Marketing research assesses the market potentials in terms of present offerings and need for product innovation, product adaptation and product modification. It explores the new markets for the existing products and the requirements of the new markets.

(e) It leads to large-scale production and economies of scale: Marketing widens the distributive limits for goods through its various promotional tools such as advertising, sales promotion and public relations. This increases the demand for goods and services and their production, resulting in economies of large-scale operations and cost savings. This increases revenue and competitive abilities of the marketer.

(f) It brings about effective allocation of resources: Resources are scarce and therefore, should be optimally utilised. Marketing forecasts the demand for goods and services and discovers new markets and likes and dislikes of consumers through marketing research process. This prevents wasteful production and brings about effective allocation of scarce resources.

Benefits of Marketing for Consumers:

(a) Marketing improves the quality of goods and services: Marketing Research (MR) and Marketing Information System (MIS) provide necessary information for research and development. Research and development leads to product innovations, product inventions, new product development and


improvement in the quality of products and services. Thus, marketing provides consumers with quality goods and services.

(b) It reduces costs and prices: Marketing widens the market for goods and services. The increased production and distribution bring down costs and prices of goods and services and make them available to the consumers at reduced prices. Marketing also facilitates price control by striking a balance between demand and supply by transferring goods from the centres of abundance to that of scarcity.

(c) It provides services to the consumers: Marketing provides consumers with various services such as information about existing and new products and services, their maintenance, availability, after-sales service, etc. through marketing functions such as advertising, sales promotion and distribution channels. Thus, consumers get many essential services free of cost through marketing at their doorsteps.

(d) It educates the consumers: Marketing not only informs the consumers but also educates them. It is through the marketing function of advertising and publicity that the present and potential consumers are educated about various benefits of using a product or service. The concept of social marketing can be used to bring about social awareness among the masses.

Benefits of Marketing for the Society:

(a) Marketing increases national income and per capita income: National income is defined as the money value of goods and services produced in an economy in an accounting year. Marketing stimulates the demand for goods and services, and thereby contributes to the national product of the economy. This increases the national income and per capita income of the country.


9.

(b) It improves the general standard of living: Standard of living depends on the economic, social, cultural and educational environment of an economy. Marketing improves the general standard of living by educating people through advertising, creating cultural and social bond through transportation and communication and improving economic conditions by providing employment.

(c) It generates employment opportunities: Development of marketing activities creates multiple employment avenues and opportunities in the economy. It not only increases employment avenues in the manufacturing and marketing sectors but also in other related sectors such as warehousing, storage, banking, insurance, advertising, sales promotion, transportation, etc.

(d) It ensures economic stability: Economic stability can be ensured only when there is a proper balance between the forces of demand and supply. Excess of supply over demand leads to depression while excess of demand over supply causes inflationary pressure. Marketing equates demand and supply in the economy, and thereby brings about economic stability and prosperity.

(e) It creates utilities: Marketing, as an economic activity, creates utilities: Exchange creates ownership and possession utilities. Transport creates place utility. Storage creates time utility. Promotional activities create information utility.

1.4 Functions of Marketing

The functional approach to marketing consists of a number of activities called marketing functions.


Fig. 1.1 Classification of Marketing Functions

"Marketing function is a major specialised activity performed in marketing. It is an act, operation or service by which original product and the final consumer are linked together." – Professors Tousely, Clark and Clark

There is no unanimity among authorities on marketing regarding the classification of marketing functions. Many marketing professors and experts like J.F. Pyer, Converse Huegy, Mitchell, Clark and Clark and others have given their own classifications. These writers have listed from 5 to as many as 150 marketing functions. The following is the classification of marketing functions given by Professors Tousley, Clark and Clark. Various marketing functions can be studied under the following broad heads:


11.

On the Basis of Exchange:

(a) Buying and Assembling: Buying is the first step in the marketing process. A scientific buying refers to buying materials of the right quality, at the right time, from the right place and the right source. Assembling refers to the task of collecting goods from various sources of supply to a central place for processing and distribution. It is mainly essential in the case of agricultural goods.

(b) Selling: Selling is the most important function in the entire marketing process. This is because all marketing activities are directed towards the maximisation of sales revenue and profit. Selling refers to the process whereby goods and services flow from the producer or the seller to the ultimate consumer. It is the sum total of all those activities that push commodities to the buyers.

On the Basis of Physical Handling:

(a) Packing and Packaging: Packaging is a part of the function of product planning. It refers to the inner wrapping, which covers one or more units of a product. On the other hand, packing is the outer casing, which is used to transport a number of units of a product. Attractive and durable packaging not only protects the product but also acts as a silent salesman for the promotion of the product.

(b) Transportation: Transportation creates place utility. It transfers goods from the centres of production to the centres of consumption or from the places of abundance to the places of scarcity. Roads and railways are the most commonly used means of transportation in internal trade while waterways and airways are used in global trade. The concept of multimodal transport is becoming popular in international trade.

(c) Storage and Warehousing: Storage creates time utility. Storage is necessary because there is a time gap between the


production and consumption of goods. During this time gap, it is necessary to protect and preserve goods quantitatively as well as qualitatively. There are different types of warehouses, viz., public and private, bonded and duty-paid and specialised warehouses which perform this function.

(d) Inventory Control: Inventory control means maintaining the optimum level of inventories, viz., raw materials, work-in-progress and finished goods. It is necessary in order to avoid the problem of overstocking and understocking. Overstocking leads to wastage of resources and blockage of funds while understocking leads to bottlenecks in the process of production.

On the Basis of Services:

(a) Standardisation: Standardisation is a mental process of setting standards, norms or criteria for goods and services. These standards are generally determined on the basis of colour, weight, quality and other special or general features of a product. In India, for example, Indian Standards Institute (ISI) issues ISI mark to manufactured goods. Standardisation is followed by grading.

(b) Grading: The words 'grade' and ‘standard’ are used interchangeably. However, standard is a broad term and established standards are known as grades. Grading begins where standardisation ends. Grading refers to the physical process of sorting of goods according to the set standards and norms. For example, in India, AGMARK is the grade issued to the agricultural products.

(c) Branding: Branding is done on a product or on the package of a product for easy identification. It is the name, mark, symbol, design or distinctive number or letter(s) (or a combination of these) given to a product for distinguishing it from other products. By using or establishing well-known


13.

brands, companies obtain public acceptance, mass distribution and higher prices.

(d) Pricing: Price is the value of the utility of goods and services expressed in terms of money. It is an important marketing decision as demand, sales, market share, profit margin and ability of a marketer to face competition directly depend upon his pricing policy. Thus, an appropriate pricing policy should be formulated after considering the factors such as market demand, elasticity of demand, competition, etc.

(e) Financing: Although financing is considered to be an ancillary function of marketing, its importance in the present-day economy cannot be underestimated. It has been rightly remarked that finance is the lifeblood for any industrial or commercial business activity. It is difficult to carry on smooth marketing function without the availability of adequate and cheap finance.

(f) Risk-taking: Risk-taking is the primary function of any marketing activity and profit is the reward for taking such risks. Marketing risks can be classified into insurable and non-insurable risks. Insurable risks are risks arising out of theft, fire and natural calamities. Non-insurable risks are change in demand pattern, change in consumer preferences, increasing competition, etc.

(g) Promotion: Many good products fail in the market for the want of appropriate and adequate promotion strategy. The various elements of promotion mix are advertising, sales promotion, public relations, personal selling, publicity, packaging and trade fairs and exhibitions. These factors must be blended together to accomplish the firm’s promotional and marketing objectives.


On the Basis of Research and Development:

(a) Product Planning and Development: Product planning is a systematic process of decision-making with regard to all aspects of the development and management of a product. A well-structured product planning enables a company to pinpoint potential opportunities, develop appropriate marketing programme, co-ordinate a product mix and extend the life cycle of a product.

(b) Marketing Research: Marketing Research is the systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services. It is composed of a series of activities, viz., the definition of the problem, examination of data source, generation of primary data, analysis of information and recommendations and implementation of findings.

(c) Marketing Information System (MIS): MIS is a continuing and interacting structure of people, equipment and procedures to gather, sort, analyse, evaluate and distribute pertinent, timely and accurate information for use by marketing decision-makers to improve their marketing planning and control. The data required for MIS can be gathered from both internal as well as external sources.

1.5 Evolution of Marketing

There are seven competing concepts under which business and other organisations conduct their marketing activities. These concepts have been evolved out of the needs of the business to survive and earn profit. During its evolution from the exchange concept to the modern marketing concept, marketing had always been responsive to the cultural demands, social and political changes, economic growth and changes in business. Let us analyse these concepts in detail:


15.

(a) The Exchange Concept: The exchange concept is the oldest philosophy or in fact, the base of all marketing activities.

The exchange concept holds that it is only through exchange that people can obtain a desired level of satisfaction and hence, exchange is the starting point of all marketing activities.

The exchange concept led to the emergence of barter exchange, i.e., exchange of goods against goods. But, barter system suffered from various drawbacks such as double coincidence of wants, indivisibility of certain goods, etc.

(b) Production Concept: The production concept was the direct outcome of the industrial revolution.

The production concept holds that consumers will favour those products, which are easily available at affordable prices and therefore, management should concentrate on improving production and distribution efficiency.

The production concept led to increased production through the use of machines. However, this concept led to increased supply in relation to demand and finally culminated into the Great Depression of 1929.

(c) The Product Concept: The product concept emerged as a result of increased research and development and innovation and invention.

The product concept holds that consumers will favour those products, which offer the most quality performance and innovative features and therefore, the organisation should devote its energy in making continuous product improvement.

The product concept also failed as it led to marketing myopia, i.e., giving undue consideration to the product


contents, designs and features rather than needs and requirements of consumers.

(d) The Selling Concept: Failure of the product concept led to the emergence of selling concept.

The selling concept holds that consumers will not buy enough of the organisation's products unless the organisation undertakes a substantial selling and promotion effort.

Initially, the concept did boost up sales but at the later stage, it failed as most studies show that an average satisfied customer tells three others about good experiences while an average dissatisfied customer tells ten others about bad experiences.

(e) The Marketing Concept: The marketing concept originated in fifties. It focuses more on the needs and requirements of consumers.

The marketing concept holds that the key to achieving organisational goals lies in determining the needs and wants of target markets and delivering the desired satisfaction more efficiently and effectively than competitors do.

Managers began to discover the vastness of marketing activities. As the marketing environment became more complex and aggressive, marketing tools became more significant. Consumer became the focal point of all marketing activities.

However, in their bid to deliver maximum satisfaction to consumers, producers overexploited nature and natural bounties, causing a direct harm to society and social welfare.

(f) The Societal Marketing Concept: The societal concept tries to strike a balance between consumer satisfaction and social welfare.


17.

The societal marketing concept holds that the organisation's task is to determine the needs, wants and interests of target markets and to deliver the desired satisfaction more effectively and efficiently than the competitors, in a way that preserves or enhances the consumers' and the society's well-being.

The societal marketing concept calls upon marketers to balance three considerations. Society (Human welfare) Consumers (Want satisfaction) Company (Profits).

(g) The Relationship Concept: The relationship concept of marketing is the direct outcome of increasing international competition and globalisation.

Relationship marketing (RM) marks a paradigm shift in marketing – a movement from thinking solely in terms of competition and conflict towards thinking in terms of mutual interdependence and co-operation. It recognises the importance of various parties – suppliers, employees, distributors, dealers and retailers – co-operating to deliver the best value to the target customers.

Due to globalisation, various stakeholders of the company such as customers, employees, suppliers, distributors, dealers and retailers are spread in different parts of the world with little direct communication between them. Any slips in these relationships will hurt the company’s performance. Thus, it is necessary for companies to maintain healthy relationships with these stakeholders through constant communication and feedback mechanism.


1.6 Strategic Marketing vs. Traditional Marketing

Strategic marketing is an umbrella term used for the marketing process that aims at creating, communicating and delivering value to customers and in the process achieving long-term objectives of growth and survival of business organisation in the competitive environment. Strategic marketing is a continuous process that mainly (but not exclusively) takes place at the top management level in the organisation. The process of strategic marketing includes: (a) Developing a marketing strategy.

(b) Selecting market type and market segmentation.

(c) Designing competitive and co-operative behaviours.

(d) Shaping the internal organisational environment – market orientation in research and development, organisational culture and market knowledge.

(e) Shaping the external organisational environment – customer relations, marketing communications and corporate social responsibility.

The above process of strategic marketing can be categorised into the following three steps: (a) Analysis: Analysing the organisation, customers, competitors

and business environment in which the organisation operates.

(b) Planning: Matching business environment and mission and values of business organisation. It focuses on two aspects: Developing products and services with a sustainable

competitive advantage, and Designing an attractive and appealing brand.

(c) Execution: Communicating the company offerings to people through advertising, public relations, sales promotion, direct marketing, e-marketing, etc.


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Fig. 1.2 Strategic Marketing Management Process

Strategic Marketing Traditional Marketing (a) Meaning:

Strategic marketing is a scientific process that relates to the business environment and long-term mission and values of the business organisation.

Traditional marketing deals with the day-to-day marketing issues and problems that have relevance in short period, generally current financial year.

(b) Time-frame:

Strategic marketing is future-oriented and therefore, its decisions have long-term implications.

Traditional marketing deals with current marketing issues. Its decisions have relevance only in the current period.

(c) Orientation:

Strategic marketing is inductive and intuitive.

Traditional marketing is deductive and analytical.

(d) Objective:

Strategic marketing deals with the activities of a number of interrelated strategic business units (SBUs).

Traditional marketing deals with the marketing activities of a particular strategic business unit (SBU).

(e) Decision Process:

The decision process in strategic marketing is generally bottom-up.

The decision process in traditional marketing is generally top-down.

Analysis Planning Execution

Image Product Audience Market

Product Planning

Brand Development

Advertising Public Relations

Promotion


(f) Information Need:

Strategic marketing is based on information about future collected from a varied sources.

Traditional marketing is based on information collected through marketing research process.

(g) Environmental Considerations:

Decisions are taken considering the external environment to be dynamic and ever-changing.

Decisions are taken considering the external environment to be constant and analytical.

(h) Opportunity Seeking:

Strategic marketing process is focussed on seeking current as well as future opportunities.

Traditional marketing seeks to focus only on adhoc and current marketing opportunities.

(i) Competence Needed:

Strategic marketing requires high degree of creativity and originality.

Traditional marketing requires maturity, experience and analytical ability.

(j) Organisational Behaviour:

Strategic marketing constantly strives to achieve synergy between different functional departments.

Traditional marketing mainly focuses on the goals and interest of marketing department alone.

1.7 Concept of Marketing Research

Marketing research is the systematic gathering, recording and analysing of data about the problems connected with the marketplace, i.e., problems relating to the four Ps of the marketing mix – product, price, place and promotion.

“Marketing research is a systematic problem analysis, model building and fact finding for the purpose of improved decision-making and control in the marketing of goods and services.” – Philip Kotler


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“Marketing research is process of gathering, recording and analysis of all facts about problems relating to the transfer and sale of goods and services from producer to customer." – American Marketing Association

From the above definitions, it is clear that marketing research is concerned with tackling the problems emerging from the beginning to the final stage of marketing process.

1.8 Features of Marketing Research

The features of the marketing research are: (a) Scientific Process: Marketing research is a scientific process

of collecting, analysing and interpreting data. There are five basic criteria for determining whether a particular process is scientific or not – objectivity, reliability, definiteness, coherence and comprehensiveness. Marketing research process fulfils all these criteria.

(b) Applied Research: Marketing research is not a pure discipline in itself. It is an applied science. In fact, marketing research may be defined as the application of scientific methods for the solution of marketing problems. Thus, the basic principles of scientific research are applied to marketing in order to solve marketing problems.

(c) Problem-solving Approach: Marketing research is limited not only to mere description of the facts and figures but goes beyond that to explain the causes and consequences. It suggests suitable measures to avoid or minimise the problems. It is predictive and forecasts future with reasonable certainty.

(d) Systematic and Continuous Process: The needs, preferences, income, purchasing power, fashion and such other factors affecting demand for goods and services keep on changing and a successful marketer has to adjust to the ever-changing


environment in order to survive. Thus, marketing research is a continuous process.

(e) Comprehensive Scope: Marketing research is not merely a process of collecting data, it has a comprehensive scope. It includes several other research activities such as market research, sales research, product research, advertising research, business economics analysis, export marketing research and motivation research.

(f) Aid in Decision-making Process: Marketing research is a tool in the hands of marketing managers for identifying and analysing marketing problems and finding out alternative solutions for the same. The marketing manager selects the best alternative for solving the marketing problems. This aids in effective decision-making.

(g) Use of Models and Data: Marketing research process makes the use of statistical bank and model bank. A statistical bank is a collection of statistical procedures for extracting meaningful information from data and a model bank is a collection of models that may provide a better insight into marketing problems.

(h) Creative Process: Marketing research is not simply a process of collecting and analysing data. It is a creative process of arriving at the conclusions about the causes of marketing problems and their possible solutions. This calls for a diversity of human talents and personality traits, viz., judgement, intuition and analytical ability.

1.9 Process of Marketing Research

The various stages in the marketing research process are: (a) Identifying the Research Problem: The first step in the

process of marketing research is to define research problem carefully and also to agree on the objectives of research. It is


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said that 'a problem well-defined is half solved'. It is true in the case of marketing research too. Once the problem is carefully and precisely defined, research can provide pertinent information to attain stated objectives of the research.

(b) Situational Analysis: Once the research problem is identified, the next step is to undertake situational analysis. Situational analysis consists of collection of information about the factors surrounding the business. These factors are industry elements, competitive elements, market elements and company elements. The basic objective of the situation analysis is to have familiarity of the situation surrounding the business.

(c) Developing Research Design: A research design is a formal written set of specifications and procedures for conducting and controlling a marketing research process. It is a blueprint that is followed in completing a research study. It also provides the cost estimate or budget of the research plan or project. There are three types of research designs, viz., exploratory study, descriptive study and causal study.

(d) Determining the Data Source: This is a crucial step in the marketing research process because the data collected is finally converted into information, which forms the basis of decision-making. There are two main sources of research data: Primary Data: Primary data are the original data

collected by the researcher himself. Secondary Data: Secondary data are collected by someone

else other than the researcher.

(e) Data Collection: After determining the source of data, the next step is to collect data through one or more of the following methods: Observational Method: Directly observing the

phenomenon.


Experimental Method: Conducting experiments in order to generalise conclusions.

Survey Method: Contacting consumers directly or indirectly to tap their views.

(f) Analysis and Interpretation of Data: Once the survey work is complete and necessary data has been collected, the researcher has to start analysis and interpretation of data. Data analysis involves editing, coding and tabulation of data. It also makes use of various statistical tools and techniques to describe data and make them more meaningful, to test hypotheses and to make predictions or estimates.

(g) Preparing Research Report: The most important and concluding activity in the process of marketing research is the preparation and presentation of research report. The research report consists of title of the report, table of contents, introduction to the marketing problem, methodology used, findings, conclusions and suggestions. An ideal report should be concise, accurate, clear, complete and understandable.

(h) Follow-up Action: Although the process of marketing research comes to an end as soon as the marketing research report is submitted to the marketer, it is useless unless follow-up action is taken and the measures suggested in the report are implemented in their true spirit. The research report also serves as the basis of evaluation of steps taken by the marketing manager to solve marketing problems.

1.10 Concept of Marketing Information System (MIS)

The term ‘Marketing Information System (MIS)’ is the extension of the processes and methods of ‘Management Information System (MIS)’ to the field of marketing. Management information system (MIS) provides information that organisations require to


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manage themselves efficiently and effectively. It is a continuous system of data collection, analysis and interpretation to help managers to take timely decisions in the highly competitive environment. Marketing Information System (MIS) is the process of collecting, analysing and storing facts, figures and reports pertaining to products, prices, market conditions, customers’ needs and desires, competition, advertising, selling methods, transportation and also many other elements of marketing mix.

“Marketing Information System (MIS) is a continuous and interfacing structure of people in order to gather, sort and distribute timely and accurate information for use by marketing decision-makers to improve their marketing planning, implementation and control.” – Philip Kotler

1.11 Components of MIS

The various components of marketing information system provide for collection, processing and utilisation of data. There are five components of Marketing Information System:

Fig. 1.3 Components of Marketing Information System (MIS)

(a) Internal Report System: Internal report system provides data from internal sources which form the most basic information that a marketing manager needs to arrive at marketing decisions.


The Accounting Department provides information on sales, inventories, costs, cash flows, account receivables and payables, etc.

The Production Department supplies information on production schedules, route sheets, quality control and inventories.

The Marketing Department furnishes information on consumer demography, psychographic details and consumer behaviour.

(b) Marketing Intelligence System: Marketing intelligence system supplies data from external sources. It provides information about current marketing environment and changing conditions in the market. The information which is collected from the external sources cannot be used directly. It must be first evaluated and analysed. Census data, market news and reports, newspapers, trade papers, magazines, trade shows, company annual reports, publications of trade associations, etc. provide valuable sources of market intelligence. The marketing intelligence information can also be collected from company's own personnel – executives, engineers, scientists, agents, distributors and sales force.

(c) Marketing Research System: Marketing research is used to solve specific marketing problems. It is a systematic collection and analysis of data pertaining to the specific marketing problem such as falling sales, increasing competition, aggressive advertising by competitors, etc. Marketing researchers offer special information on request when marketing executives encounter any marketing problem. In this sense, marketing research studies are mainly project-oriented. They, generally, involve studies relating to buyer behaviour, product or brand preferences, product or brand usage, advertising awareness, sales promotion, physical distribution, dealer behaviour, competition and so on.


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(d) Analytical Marketing System: Analytical marketing system consists of various quantitative tools and statistical methods that assist marketers to find the best possible solutions to marketing problems. It also consists of mathematical models that are useful in the improvement of marketing processes. Management science or operations research is the latest addition to the marketing information system. Operations research analysts help marketing executives in decision-making in areas such as new product development, marketing mix planning, sales analysis, media selection, queuing problems in retail institutions, location of warehouse, inventory control and so on.

(e) Marketing Decision Support System: The fifth and the last component of MIS is ‘Marketing Decision Support System’. Marketing decision support system consists of tools which help the marketing managers to analyse data and to take effective marketing decisions. They include computer hardware and software programs. Computers and computer programs help marketing manager in analysis and presentation of marketing information in meaningful form. There are many software programs, which help marketing managers to segment market, fix prices and formulate marketing plans and advertising budgets. It also helps them to arrive at better decisions. In fact, today, marketing managers cannot work without computers.

1.12 Concept of Data Mining

In simple words, data mining is defined as a process used to extract usable data from a larger set of raw data. It implies analysing data patterns in large batches of data. Data mining can be used by businessmen to learn more about their customers and develop effective marketing strategies. The goal of data mining is to allow a corporation to improve its marketing, sales and


customer support operations through a better understanding of its customers. Large companies centralise their data into one database or program called data warehousing. Data mining is also known as Knowledge Discovery in Data (KDD).

“Data mining is the process of sorting through large data sets to identify patterns and establish relationships to solve problems through data analysis. Data mining tools allow enterprises to predict future trends.”

“Data mining (also called data or knowledge discovery) is the process of analysing data from different perspectives and summarising it into useful information – information that can be used to increase revenue, cut costs, or both.”

1.13 Importance of Data Mining

Data mining can be used in many different sectors of business to both predict and discover trends. The following points highlight the importance of data mining: (a) Identifying Pattern or Relationships: Data mining is the

process of discovering patterns or relationships in large data sets. In the age of information explosion, it is necessary to convert large data sets in some meaningful form for taking marketing decisions. Data mining assists marketing decision-making process by identifying such patterns and relations.

(b) Assisting Marketing Activities: Data mining has acquired a special significance in the global market. It helps in various marketing activities such as market segmentation, sales analysis, marketing research and marketing information system by recognising trends, identifying patterns and establishing relationships in data over a period of time.

(c) Developing Effective Marketing Mix: Data mining can be used in product research, price research, market research (place) and promotion research for developing effective


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marketing mix. It can be used to undertake marketing research and conduct surveys for collecting useful information about market and customers.

(d) Understanding Customer Behaviour: Data mining helps marketing professionals improve their understanding of customer behaviour. Better understanding of customer behaviour allows them to align their marketing campaigns more accurately to the needs, wants and attitudes of customers and prospects.

(e) Profiling the Online Buyers: In the case of online marketing, it is difficult to understand the buying behaviour of buyers as there is no personal contact between the buyer and the seller. Data mining provides detailed information about online buyers such as their geographic locations, personal details and interests to understand their buying pattern.

(f) Analysing Credit History of Customer: Data mining assists large manufacturers in framing their credit policy. It helps in tracing the credit history of large buyers to decide whether to extend them credit, and if yes, how much and for what period. Even banking sector makes use of data mining while sanctioning loan to their customers.

(g) Assisting Customer Relationship Management (CRM): The secret to an effective CRM is not just in what data is collected but in the organising and interpretation of such data. Data mining helps to collect and process vast information about customers on day-to-day basis and makes it available to marketing managers for developing good customers’ relations.

(h) Importance in Other Fields: Data mining is used in many other fields such as: Hospitality and tourism. Telecommunications industry.

Documents

Commerce - V · Commerce - V Marketing (As Per the Revised Syllabus of T.Y. B.Com. from the Year 2018-19, Semester V, University of Mumbai) Dr. Khushpat S. Jain Associate Professor,