Marketing concept is customer orientation backed by integrated marketing aimed at generating customer satisfaction as the key to satisfying organisational goals”.
“The marketing concept is a corporate state of – mind that insists on the integration and co-ordination of all marketing functions, which in turn are welded with all the other corporate functions, for the basic objective of producing maximum long range corporate profits.”
1. Historical Background of Marketing Concept 2. Meaning of Marketing Concept 3. Definitions 4. Concepts 5. Evolution 6. Objectives 7. Approaches
8. Fundamental Pillars 9. Orientations 10. Process 11. Factors 12. Assumptions 13. Implementation 14. Application 15. Problems.
Marketing Concept: Meaning, Evolution, Approaches, Process, Factors, Application and Modern Concept of Marketing
Marketing Concept – Historical Background (With 3 Stages)
The history of marketing concept can be divided into three stages for the sake of convenient study:
First Stage (1900 to 1930):
Concept of marketing was very first brought in the American economy. The American production activity was in lesser degree that time in American economy. The American businessmen had therefore, emphasised more on increasing the production. Marketing therefore, could avail less attention. This is the reason for saying that stage as production oriented.
Second Stage (1930 to 1950):
American economy progressed in the field of production during that period. Bumper production of goods came into existence and it a new problem for the sale of goods, so produced. The businessmen therefore, shifted their focus to the sale in order to cope with the problem and it resulted enormous sale. This stage was therefore, called as sales oriented.
Third Stage (After 1950):
The American traders/Industrialists had to face strict competition at that time. To increase the sale to the extent the production could adjust was like a challenge for the marketing institutions. The concept of marketing therefore, took the modern shape. This modern form of concept is called Customer Oriented Market Concept.
Solution for the large scale production and severe competition, made by the production of commodities and services matching with the demand of customers. This marketing concept in the present form is now changing rapidly the marketing concepts prevailed in the economy of other countries. All plans for marketing today are customer oriented. The objective of present day business is for earning of long term profits instead of earning excess profit in the short term.
Marketing Concept – Meaning
There are rapid changes taking place in the business environment today. On one hand, there are rapid changes taking place in the field of science and technology. On the other hand people are responding to these changes by change in their food habits, change in social customs, change in cultural belief and values. Company, therefore, should be vigilant and adopt suitable strategies to create new products or services to meet the changing needs of the customers.
Therefore, understanding of customer need is vital for the success of marketing. Customer need may be either expressed or hidden. To understand expressed need may not be that difficult. Creating new product based on express demand is considerably an easier task. Understanding of hidden needs is really a challenging task in marketing. Concept marketing helps the marketer to reach further heights by identifying and tapping the hidden needs.
Concept marketing is the marketing process of understanding the hidden needs of the customer, creating awareness in the minds of the customer about product/service, initiate/effect changes in the customers’ minds and create a sense of need in customers to buy the product or service.
Concept marketing, in essence, is marketing a new product/service concept to the customers. It is creating a primary demand for the product- e.g. Instant food category (Maggi noodles), Gearless scooters (Kinetic Honda), Dishwashers, Vacuum cleaners, Credit cards, ATM’s, washing machines, micro-wave ovens, time -share holidaying.
Marketing Concept – Definitions (Defined by Popular Authors)
Some principal definitions of marketing concept are as under:
According to William J. Stanton – “In its fullest sense, the marketing concept is a philosophy of business which states that the customers want satisfaction is the economic and social justification of a company’s existence. Consequently, all company activities in production, engineering and finance as well as in marketing must be devoted to, first, determining what the customer’s wants are and then, satisfying these wants while still making a reasonable profit.”
According to Philip Kotler – “Marketing concept is customer orientation backed by integrated marketing aimed at generating customer satisfaction as the key to satisfying organisational goals”.
According to Cundiff, Still and Govoni – “Basically, the marketing concept is a philosophy of management that strongly influences the management of marketing efforts in those companies adopting it.”
According to Arthur P. Felton – “The marketing concept is a corporate state of – mind that insists on the integration and co-ordination of all marketing functions, which in turn are welded with all the other corporate functions, for the basic objective of producing maximum long range corporate profits.”
According to an Executive in the General Electric Company, America – “We experience the marketing as the fundamental philosophy. The first basis of this philosophy is to accept and recognise the consumer oriented method of business. The customer becomes a base and nucleus round which the business revolves for the interests of all concerned classes. The second base on which marketing philosophy stands is that the roots of this concept are profit oriented and not the quantum.”
Marketing Concept – Traditional and Modern Concept of Marketing
To use economic terminology, marketing covers those activities which relate to the creation of time, place and possession utilities. This means, in the first place, that goods have to be made available at the time when they are needed, thus creating time utility for them. Secondly, the goods may be needed at a place located at a great distance from the place of their origin.
Sugar produced in Uttar Pradesh may be required in Maharashtra or Kerala. Place utility will be created when goods are transported to the places where they are needed. Thirdly, goods may be lying in a salable state with the producer or the manufacturer or their agents while some other person needs them.
In such a case, possession utility will be created by the transfer of possession of the goods to the consumer. Marketing, therefore, consists in moving goods from the manufacturers, at a time when they are required, to the place where they are to be used, and for those who are to use them for various purposes (i.e., consumers).
Marketing is more than a mere physical process or a set of activities. It represents a distinct philosophy of business that has emerged over the recent years.
According to this view, “The purpose of a business is to create a customer.” Creation of a customer means the identification of consumer needs and organising the business to meet these needs.
According to the modern concept of marketing, then, a firm makes a conscious and organised effort to find out what the members of the community need and how it can provide the maximum measure of satisfaction to them. In performing the marketing function, the firm gears its organisation and efforts to meet this objective.
It produces that which the consumer needs, in the quantity that the consumer requires, at a price that consumer will pay for the satisfaction offered to him in the form of goods and services, through channels that suit the consumer convenience the most, and at the time when the consumer needs goods and services. Thus, the modern concept of marketing focuses on the ‘consumer’ and the satisfaction of his needs. That is why modern marketing is said to be ‘consumer-oriented’ in its approach.
From this it may appear that everything a firm does is marketing. However, it is convenient to separate marketing as a distinct activity. In this form, it is one of the basic divisions of effort in a typical industrial enterprise, the others being production and finance. “It begins by influencing the form the product should take to secure maximum acceptance in the market as well as the prices at which and the quantities in which it should be offered in any given period to secure the maximum return to the enterprise in the long term.”
As a basic function of a business firm, it normally includes the following:
(i) Identification and assessment of markets and sales forecasting.
(ii) Formulation of marketing policy to cater to the market chosen.
(iii) The planning and operation of the marketing organisation to achieve the desired level of sales and to deal with customers.
(iv) Organisation and conduct of sales promotion through salesmanship, advertising and other methods.
(v) The costing and budgeting of marketing effort.
(vi) Measurement and review of the result of marketing effort to check whether the firm is providing the desired level of consumer satisfaction.
Prof. Harry Hansen had tried to integrate the modern concept of ‘consumer-oriented’ marketing with the traditional view of marketing by defining it thus – “Marketing involves the design of the products acceptable to the consumers and the conduct of those activities which facilitate the transfer of ownership between seller and buyer.”
The concepts of marketing are as under:
1. The Production Concept:
The production concept is one of the oldest concepts in business.
It focuses on following:
i. Mass Production
ii. Mass distribution
iii. Low cost Production.
Assumption – It assumes that consumers favor those products that are widely available and affordable.
2. The Product Concept:
The product concept focuses on following:
i. Quality Product
ii. Superior Product.
Assumption – It assumes that consumers will favor those products that offer the most quality, performance, and features.
3. The Selling Concept:
The selling concept focuses on following:
i. Aggressive selling
ii. Aggressive promotion
iii. Needs of the seller.
Assumption – It assumes that the buyer will not buy the product unless we put aggressive sales and promotional efforts.
4. The Marketing Concept:
The marketing concept emerged in mid-1950s and challenged the previous concepts.
It focuses on following:
i. Identification of customer’s needs
ii. Meeting the needs profitably
iii. Find wants and fill them
iv. Love the customers not the product.
Assumption – It assumes that the key to achieving organizational goals consists in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors.
5. The Customer Concept:
The customer concept focuses on the following:
i. Customer satisfaction.
ii. Customer lifetime value.
iii. Customer loyalty.
iv. Customer relationships.
Assumption – It assumes that customer is the king and profitable growth is possible through capturing customer share, loyalty and lifetime value.
6. The Societal Marketing Concept:
The societal marketing concept focuses on following:
i. Social welfare
ii. Ethical marketing
iii. Balancing profit with societal welfare.
Assumption – It assumes that the customers will value and prefer buying products of the organization that conduct their business in a responsible and ethical manner. This concept ensures fairness in every transaction with all stakeholders both for short-term benefit and long-term goals.
Marketing Concept – 6 Important Stages in the Evolution of Marketing Concept
There are various stages in the evolution of marketing concept, which are as follows:
1. Self-Sufficient Stage:
In the olden days each family was a self-sufficient unit as far as production and consumption functions is concerned. They produced as per their requirements i.e., practically there was no surplus for exchange. Therefore, the concept of marketing was absent in this stage.
2. Exchange Oriented Stage:
In this stage the families produced more than their requirements leaving some surplus. This necessitated exchange of surplus products with others. For exchanges ‘Barter System’ came into existence. Under barter system goods are exchanged for goods. The greatest drawback of barter system is absence of double coincidence of wants. To overcome this defect-goods are brought to a central location so that exchange will take place smoothly. Thus ‘Markets’ came into existence.
3. Production Oriented Stage:
Under production oriented stage there is no need of any marketing effort if the product is good and its price is reasonable. This marketing concept was built on “Good wine needs no bush”. That is, if the product is of good quality and the price in reasonable there is no need of any special marketing efforts. It implies for good products, customer response is bound to be favourable. It appears that producers gave more emphasis to production than consumption. Under this concept, production is the starting point.
4. Sales Oriented Stage:
Industrial revolution brought technological changes in industrial activities. Consequently drastic changes were reflected in the buying patterns and behaviour of consumers. There were revolutionary changes in the growth of transport and communications. All these changes compelled the manufacturers to realise the importance of marketing.
According to this marketing concept, mere making available the best product in not enough. High pressure salesmanship and heavy doses of advertising are essential to move the products in the market. Even the best product cannot be sold out in the market without the help of sales promotion and aggressive salesmanship.
The essence of this concept is “Goods are not bought but sold”. This concept states that goods are not bought but they have to be sold with the help of salesmanship, advertising and publicity. This philosophy has been prevailing since 1940. It is popular in selling all kinds of insurance policies, durable products, automobiles etc.
5. Consumer Oriented Stage:
It is also called customer oriented stage. This philosophy was introduced after 1950. According to this the main task of any business unit is to study the needs, desires, and wants of the consumers and produce goods accordingly. Here the starting point is consumer or customer than the product. All Business operations revolve around customer satisfaction and service. Marketing research provides information relating to wants, desires, and aspirations etc., of the consumers.
Two radical changes were brought about when this marketing concept was introduced:
i. Move from production to market orientation.
ii. Gradual shift from caveat emptor (buyer beware) to caveat vendor (seller beware).
6. Social Oriented Stage:
It is the broadest marketing concept. It takes into consideration not only consumer satisfaction but also social welfare. Social welfare speaks of pollution-free environment and quality of human life. Every organisation should adopt socially responsible marketing policies and plans in order to assure social welfare in addition to consumer welfare.
The socially responsible marketing concept is based on the following assumptions:
i. The manufacturer is to produce, those goods which are wanted by the consumers.
ii. The manufacturer shall not offer a product to the consumer if it is not in the best interest of consumer.
iii. He-should offer long-run public welfare.
iv. The firm should discharge its social responsibilities.
Marketing Concept – 4 Main Objectives
The marketing concept refers to the philosophy of marketing as adopted by a firm. The present fashion of many units is to pronounce that their philosophy of marketing stresses on “consumer orientation”. But in reality, converting an organization into a consumer-oriented firm is not that simple.
For instance, Lazer and Kelly list the following criteria to consider a firm as consumer-oriented:
1. The firm appreciates and understands the strategic position of the consumers.
2. The marketing system is designed to serve consumer needs.
3. The marketing system is integrated and well-coordinated.
4. The marketing research is a continuous process.
5. Product innovation and product planning is recognized and emphasized.
6. There is continuous reshaping of company’s products and services to meet the changing demands of the consumers.
The objectives of the modern marketing concept are discussed below:
Objective # 1. Modern Marketing is Consumer-Oriented:
Modern marketing is a dynamic field of business activity and is becoming more and more complex. This is evident from the analysis of the growth of marketing over two centuries.
Years ago, the village craftsmen made wagons or shoes with their hands as per the requirements of their customers, whom they knew personally. In the simplest form, it contained three elements. Such a village craftsman had his shop in front of his house, made his products, sold them, and collected the money all by himself. He was in close contact with his customers.
Misjudgment of consumer demand was known to him directly and almost instantaneously. He was also in a position to make changes in his product to bring it in line with the demands of his customers. And this was possible only because of the instant flow of information about the customers’ needs and desires.
Objective # 2. Modern Marketing Starts and Ends with the Consumer:
Historically, production activities in free enterprise economies were meant to make the maximum profit (a profit possible within the legal and moral constraints of the system). But this idea has undergone an orientation along with changes in values that took place in the industrial society. Production orientation paved the way for financial orientation which later on changed into sales orientation.
This change is much evident in the words of Theodore Levitt, who said, “Instead of trying to market what is easiest for us to make, we must find out much more about what the consumer is willing to buy. In other words, we must apply our creativeness more intelligently to people, and their wants and needs, rather than to products.”
The concept of marketing that was concerned only with the flow of goods from the producer to the consumer has changed, to include also the flow of information from the consumer to the producer. In other words, to achieve maximum efficiency in marketing, there must also be a flow of information vis-a-vis, the flow of goods.
This information, for practical purposes, has to be collected even before a product is planned. Subsequent information would also enable the manufacturer to assess periodical changes that are required. That is why it is very often remarked that “marketing starts and ends with the consumer, with information flowing from the consumer to the producer and goods flowing back to the consumer from the producer.”
Objective # 3. Modern Marketing Precedes and Succeeds Production:
A market transaction takes place when there is a successful matching of a buyer and a seller. The power of either party to influence a transaction is basically dependent upon the competitive strength. The seller has the bargaining power over the features of the product, its price, competitiveness, etc. The buyer, on the other hand, acquires his bargaining power from the usefulness and acceptability of a product to him. This evidently is a conflicting and contradictory state which cannot be reconciled with ease.
For the earliest management, marketing was a peripheral problem in the same class as that of accounting. Firms tried to sell products that were successful in the past. They never made any effort to adapt themselves to the changing consumer needs. Some of them even underrated the critical importance of the customers and their behaviour. Rapid changes in consumer demands, however, left the manufacturing organization in turmoil.
Objective # 4. Modern Marketing is the Guiding Element of Business:
It would be clear now that marketing has become a pervasive force capable of guiding and even controlling production. In fact, it is the market potential and not production resources that guide a business today.
In past, it was thought that marketing was only concerned with getting goods and services into the hands of ultimate consumers. But later it was realized that goods must reach customers at a maximum speed but with minimum cost. This involves the integration of a number of activities from the conception of a product idea to its profitable selling and ultimate consumption.
In recent years marketing has assumed greater importance. This is mainly due to the rapidly increasing tempo of production of a wide range of goods and services. It is an undiscounted fact that sustained economic growth depends, to a large extent, on the performance of marketing activities, because it is only through marketing that the demands for goods and services are stimulated. This stimulation leads to the multiplication of products and. ultimately to higher production. Marketing, therefore, is at the heart of all industrial activity.
Marketing Concept – Top 11 Approaches
Different Approaches Regarding Marketing Concept:
Marketing occupies an important position in the organization of a business-unit but marketing has been defined by different people in different ways. Different definitions represent different views. But none has a quality of universal acceptability. Different concepts have been developed so far by the different authorities of management.
According to W.J. Stanton, “The marketing concept as a philosophy of business states that the customer’s want satisfaction is the economic and social justification of a company’s existence. Consequently all company activities in production, engineering and finance, as well as in marketing must be developed first to determine what the customer’s wants are and then to satisfying those wants while still making a reasonable profit.”
According to American Marketing Association, “Marketing is the performance of business activities that direct the flow of goods and services from producers to consumer or users.”
Some important approaches to marketing are as follows:
1. Distribution of goods and services
2. Creation of utilities
3. Delivery of the standard of living
4. System approach
5. Customer satisfaction approach
6. Marketing concept
7. Generation of revenue
8. Institutional approach
9. Social approach of marketing
10. Functional approach
11. Managerial approach
The oldest concept of marketing pertains to the distribution of goods and services. So, it is also known as the classical concept of marketing. According to this concept, “Marketing includes all those efforts which affect the transfer of the ownership of products and thus makes way for the physical distribution of the products.”
This concept was propounded by Tousley, Clark, Converse, Huegy, Mitchell and American Marketing Association. This concept is also called commodity approach because this includes all the activities which are undertaken to make the goods and services available to consumers from producers.
American Marketing Association also has similar views on this concept of marketing. According to this Association, “Marketing implies the performance of business activities which direct the flow of goods and services from producer to consumer.”
This concept of marketing remained popular for a long time. However, at present this concept is no longer in use.
This concept was criticized due to the following points:
i. Marketing function starts after the production of the commodities which, according to modern approach, is not correct. But the reality is that marketing function starts even before production on the basis of the consumer research.
ii. This concept is product-oriented and not consumer-oriented. The modern approach of marketing is consumer-oriented which makes it clear that goods and services are produced according to consumer tastes and requirements.
iii. This concept does not consider aftersales services and this is not effective in present times.
iv. This concept was proper in old times when trade and commerce as well as means of transport and communication were not well developed. Moreover, the standard of living was also low due to the low income of consumers.
v. There is no place for consumer satisfaction in this approach.
2. Creation of Utilities:
Some authors and experts on marketing are of the view that marketing is a “creation of utility” function. Any product commands a price due to its utility. Utility in any product emerges due to change in form, place, time and possession. Marketing activities help in the creation of such utilities.
Thus marketing is a system in which utilities are created in the products which start commanding prices in the market. For example, wood lying in the forest has no utility, but when a furniture company purchases that wood and changes its form i.e., preparing a table, chair, etc. then the same wood would become valuable.
This will be the creation of utility. Therefore, marketing is a “utility creation” function. Such views are expressed by Converse, Huegy and Mitchell. According to them, marketing is that part of Economics, in which place, time and possession utilities are studied. Similar views were put forward by Richard Buskirk.
According to him, “Marketing is an integrated system of action that creates value in goods through the creation of place, time and ownership utilities.”
“Creation of utilities” concept of marketing was also criticized by modern marketing experts. In this concept, only one function of marketing is considered important, while other activities are ignored.
Moreover, social responsibility and the consumer’s satisfaction have not been given any importance in this definition. Due to the criticism, this concept is also considered similar to the old concept of marketing.
Some experts on marketing are of the view that marketing creates the standard of living for the society. Among the propounders of this concept are Prof. Paul Mazur and Malcolm McNair. According to Paul Mazur, “Marketing is the delivery of standard of living to the society.”
In the words of Malcolm McNair, “Marketing is the creation and delivery of standard of living to the society.”
Thus marketing delivers the standard of living to the society. The function of marketing is the creation of the standard of living to society.
Creation means manufacturing new products and increasing the use of such products so that the society may get either new standard of living or there may be an improvement in the old standard of living. Moreover, once the society has achieved a particular standard of living, there should not be any downfall in it later on.
The definitions pertaining to “Delivery of standard of living” are consumer-oriented and lay emphasis on the point that there should be satisfaction of consumers. This concept includes product planning. It is necessary to arrange for the products having particular characteristics demanded by the society so as to achieve the desired standard of living.
According to this concept, marketing refers to the total process by means of which goods and services are exchanged. It involves all business activities. Today the business environment is faced with mass production, stiff competition and complex channels of distribution, so there is an urgent need for proper system or process which will help the producer as well as the consumer in the exchange of goods and services.
According to Cundiff and Still, “Marketing is the managerial process by which products are matched with markets and through which transfers to ownership are affected.”
5. Consumer Satisfaction Approach:
The new concept lays more emphasis on the consumer satisfaction.
According to Hansen, “Marketing is the process of discovering and translating consumer needs and wants into product and service specifications, creating demand for these products and services and then, in turn, expanding this demand.”
In this way, marketing performs all those functions which are necessary to pass on goods from producers to consumers in a process to satisfy their needs. The prime objective of modern marketing is the satisfaction of consumer needs.
Philip Kotler has also the same view, “Marketing is the analyzing, organizing, planning and controlling of the firm’s customer impinging resources, policies and activities with a view to satisfy the needs and wants of chosen customer groups at a profit.”
Thus marketing concept is consumer-oriented. Production is done according to the wants of consumers. The marketing programme starts from the time when the concept of any product takes its birth and it does not finish till consumer wants are satisfied. These definitions are based on the consumer satisfaction and make it clear that profit is the result of the consumer’s satisfaction.
The modern concept of marketing emphasizes on the complete satisfaction of customers’ needs. This concept is also known as Marketing Concept. This concept integrates marketing function with the other functions of the management with the realisation that business is basically a marketing organization.
It is based on two fundamental concepts:
(i) That the company’s policies and operations should be customer-oriented, and
(ii) That the goal of the firm should be profitable sales. The philosophy behind the concept is the satisfaction of customers’ wants.
According to Peter F. Drucker, “The purpose of a business is to create a customer.”
The creation of customer means the identification of a consumer’s needs and organizing the business to meet those needs. A firm makes sincere efforts to find out the needs of the members of the community and tries to provide the maximum satisfaction to them.
From the view, it appears that everything a firm does is marketing. However, it is convenient to separate marketing as a distinct activity.
7. Generation of Revenue:
This concept presents that the main object of any business-firm should be to generate revenue or income. The income can be generated only by selling the products. The products should be sold out at a price which allows a reasonable profit to the firm after meeting the cost and all other reasonable expenses.
Marketing should stress on increasing the profits of the firm by reducing various production and selling costs and not by increasing the selling price.
Richard Buskirk has explained the concept as “It is marketing responsibility to generate revenue at a cost which will allow a reasonable profit to be realized from operations. Thus, marketing consists of all activities which are performed with a view to allow the firm to earn a reasonable profit.”
8. Institutional Approach:
This approach explains the requirement of several mediatory institutions for the distribution of a large-scale production. The activities executed by these institutions together are called marketing. This approach does a study of those producers, and other marketing institutions that establish equilibrium between supply and demand.
9. Social Approach of Marketing:
This concept was introduced by William J. Stanton. According to him, this concept is just like social system. Marketing is not only one activity; it is a sum-total of several business activities. Rather it is the interaction of many activities.
According to William J. Stanton, “Marketing is a total system of interacting business activities designed to plan, price, promote and distribute want-satisfying products and services to present and potential customers.” Thus, under this concept the entire system of business action is market-oriented or customer oriented.
This approach of marketing studies all those activities which are related to moving the commodities from the centres of production to the consumption centres.
In marketing, a series of transactions is involved in moving the ownership and possession of goods.
According to Converse, Huegy and Mitchell, “A marketing function is an act, operation or service performed in the process of distributing goods and services.”
In this approach the study of marketing includes many functions such as- i. Research, ii. Product planning, iii. Branding, iv. Purchase, v. Standardization and Grading, vi. Storage, vii. Transport, viii. Packaging, ix. Selling, x. Advertising, xi. Pricing, xii. Finance, xiii. Risk Taking, xiv. Insurance, xv. After-sale services.
This is modern focus on decision-making process. According to this approach, marketing is a management function.
Managerial approach includes the following functions:
The management activity centres around all these functions. In this regard, W.J. Stanton says, “Today the field of marketing is very vast and it changes business organization to marketing organization.” This managerial approach is mainly concerned with the management problem. Managerial process is connected with certain controllable and non-controllable elements.
Controllable elements are within the hold of an organization, such as:
(i) Product planning
(iv) Sales promotion
(v) Personal selling
(vi) Physical distribution
(vii) Market research
(viii) Internal Competition
(i) Consumer’s buying behaviour
(ii) Trader’s behaviour
(iii) Competitor’s behaviour
(iv) Government behaviour.
Marketing Concept – Fundamental Pillars of Modern Marketing Concept
Following are the fundamental pillars of modern marketing concept:
1. Customer Orientation
2. Integrated Marketing
3. Customer Satisfaction
4. Consumer Welfare.
1. Customer Orientation:
Modern marketing concept considers the customer/ consumer as the king or treats him supreme. This concept therefore, concentrates on the choice of customer instead of the capacity of firm to produce any particular thing or what the firm actually has produced. The business concerns based on this principle always take care of customers while devising the policies and programme of the organisation.
Thus, this thought reposes confidence on the sovereignty of the customer. Actually, the pillar of marketing concept is the customer. The colour, type, size, design etc., too of the product are made according to the demand and necessity of the customers.
Actually, customer is the nucleus of the marketing concept and all business activities revolve round it. Customer oriented companies reveal this concept in several forms:-
According to Philip Kotler — the firm should opt for following acts in order to enforce the customer oriented outlook:
i. A General Need Definition:
The firm should very first opt for a common definition for all those fundamental necessities to which it wants to satisfy. An American national was asked about the items produced by his company. He replied – “In the factory, we make cosmetic and in the drugstore we sell hope.”
To clarify the theme, some examples can be given here. The companies working on telephone should realise that it is basically doing efforts for the necessities of communication. Similarly, the company’s manufacturing soaps, should think that it endeavours basically to solve the cleaning problems.
ii. Target Groups Definition:
It is not possible for an institution to reach in all markets and do continuous service so as to catch all needs. The firm or company should therefore, extend its field of work through market segmentation and product diversification. For example, the soap manufacturing company should decide whether it will manufacture toilet soap or washing soap.
iii. Differentiated Products and Messages:
We know that there are many types of consumers, their preference is also varied. Hence, concept of marketing recognises the diversification. The concern after production should make available the commodities on competitive price and that too at an appropriate time to the customers.
iv. Consumer Research:
In order to manufacture products matching with the needs, choices and interests of consumers for prolong period, it is necessary for the firm to run with consumer research programmes regularly. Information about the new production is gathered by keeping an eye on the necessities of consumers. It joins the customers with the institution.
i. It assists tapping the new prospects of production.
ii. The product/commodity gets more lustre when consumers accept the price of the product.
iii. More equality in the interests of society and the institution sets-in.
iv. The company realises that the necessities of customers/consumers are more important than producing the peculiar products.
2. Integrated Marketing:
Integrated marketing reveals the necessity of change in the organisational structure of the company. This approach emphasises on integrating all activities of marketing system as also proceeding them forward in the direction of attainment of marketing objective. Integration means composite function of all departments of an organisation. The marketing targets cannot be achieved until all departments of organisation do work jointly.
For example, the depts. like production, finance, sale development of batch and research etc., functions under lead of a special officer. Under modern concept, the various departments of an institution should integrate their working instead of functioning in decentralised manner.
3. Customer Satisfaction Approach:
Customer satisfaction is the third pillar of the marketing concept. The customer do efforts to purchase the item again and again when he receives satisfaction. In the age of competition, it should be the objective of every firm/ company to satisfy the customer with the quality of product. Particularly because consumer is treated as king in this age. Customer is that nucleus around which, all business activities revolve. The marketing activity actually begins and ends with the customer itself.
4. Consumer Welfare:
Consumer welfare is the fourth and the latest pillar of modern marketing concept. Customer’s satisfaction not only is enough under it but his welfare should also be taken care of, so that welfare to society could be made. The companies therefore, should decide the marketing activities with keeping the social welfare in mind.
Marketing Concept – 4 Main Orientations by Philip Kotler
Marketing concept resulted with the changed philosophy of management includes following four orientations as laid down by Philip Kotler:
1. Production Orientations:
Initially, the commodities as also the services were not so existed as these are today. The principal problem therefore, was of increase in numbers by production and not that of their sale. Hence, the old concept was production oriented.
2. Financial Orientation:
The business firms realised at this stage that the principal opportunity for profits depends on formulating the industrial structure by discretionary merger and financial consolidations of it.
3. Sales Orientation:
Industrial production at this stage began in bulk quantum but there were not customers to the extent consume it all. Hence, expenses incurred on advertising, sale campaign innovated and customers were inspired for bulk purchases through branding, packaging and sales promotion drives.
4. Marketing Orientation:
At the stage of acute changes in techniques and society, throat cut competition aroused and in need of highly satisfied consumer demands; the business cannot be run on profit on the basis of sales orientation. Hence, business forms tended towards the marketing orientation.
5. Modern Concept of Customer Oriented Marketing:
The modern concept of marketing is customer oriented and it emphasises on the satisfaction of customer because it is the essence of marketing. It stresses on profit earning by providing the customer with his desired products. Hence, all-policies, methods and programmes of the institutions should be made so efficient that they might cater the demand of customer.
Marketing Concept – 3 Stages in the Process of Marketing Concept
Concept marketing is an act of converting a new concept into a product. The process is said to be successful if the new concept is commercially accepted in the market.
There are three stages in concept marketing:
Of all the three stages, third stage is very crucial for the marketer. Therefore, the success of the concept largely depends on how fast the awareness is created in the minds of the target customers and influences them to act. Marketer should use mass communication media to ensure that the consumer understands and perceives the benefit of the new concept or new product.
Category need has to be present at full strength before purchase of a brand within that category can occur. Category need refers to the buyer’s perception of requiring something (a product or service) to remove or satisfy a perceived deficiency between the current motivational state and the desired motivational state.
Category need is the perceived connection between a product category and a buyer ability/motivation. The motives are- problem removal, problem avoidance, incomplete satisfaction or a mix of these motives. By successfully establishing a perceived connection between the product category and a relevant connection, the firm can stimulate primary demand. Ex. Credit cards- Citibank. – Cash when you need it.
To reiterate, Concept marketing involves:
(i) Understanding of hidden needs of the customers;
(ii) Design a product which would suit these needs;
(iii) Develop brands using perception;
(iv) Create attitudes which are favourable to a new product.
The customer might hold a number of beliefs about the product and these may become attitudes towards a product. Once a favourable attitude is created, marketer makes all possible efforts to position his brand in the minds of the customers.
Companies spend a huge amount of money towards innovation and it is vital for these companies to study how consumers react to innovative products. A product may have technological excellence but how customers perceive it determines its destiny. Market-based innovation occurs when consumers realize its potential and adopt it- that is meeting of minds of the marketer and consumers in absence of which innovation is not successful.
In the initial stages of introduction of the new concept, usually there will be an element of resistance from customers.
Broadly, consumer resistance can be classified into four types:
(iii) Risk and
(i) Usage Resistance:
Concept that is not compatible with the existing habits is likely to create consumer resistance. Even a number of successful products such as televisions, computers and telephone took decades before consumers adopted them. To take the example: Video teleconferencing is an innovation that allows people to meet without the trouble of expense, travel and physical presence of people in one place.
Putting the concept into practice in a corporate setting involves a number of aspects that includes planning ahead, coordination of communication and finally training employees and related costs and also availability / affordability of technology by all concerned.
One more example is- An electronic car which is eco friendly. But it is not widely accepted by the customers. It is because the consumer has to adjust his habit to a new set of usage prerequisites- recharging the batteries overnight, getting used to the slow speed of travel, getting used to a different feeling of acceleration, limited seating capacity and also getting used to the driving range limits.
(ii) Value Resistance:
The customers are always looking out for a better product, more convenience, and newer fashion. Above all, he will always strive to get a product which would offer money for value. If the value is less than what they are paying, customers really resist to buy a new product.
(iii) Risk Resistance:
If the product concept is entirely new, the resistance is likely to be high. Customers may wait a little longer time to buy the product if they feel that there may be risk in using new products. Example- Electric shavers, hair spray etc. are still not that popular due to the element of risk perceived by the customers.
This is the major source of resistance which eventually leads to individual resistance. Social values and tradition may act as barriers to promote new concept. Kentucky Fried Chicken (KFC) / McDonalds outlets in Bangalore which met with severe resistance from the local people in view of the ingredients used and also on religious grounds.
In conclusion we can say that concept marketing involves developing a product on the basis of the perceived needs of the consumer. In doing so the marketer has to keep in view the likely resistance to the product from the customer and the society. He can be successful once he comes up with a product which meets social approved and general requirement.
Marketing Concept – Factors Affecting Adoption of Marketing Concept
The factors relating to the atmosphere effecting an adaption of marketing concept are following and least control of institution can be imposed on them:
Factor # 1. Technical Progress:
In public as also in private sector, technical progress has made the period very short between introduction of products/goods and decline. Several thousands new products are being introduced in the market every year. Any of the producers cannot claim that their products will remain unaffected from the progress of technology. The changed technology has not only ousted the products from market but the industry as a whole has also been made obsolete and outdated.
Factor # 2. Changed Market:
Markets are changing rapidly in the modern era and these are severely affecting the marketing concepts. Increase in population, income and savings is changing the market and it is affecting marketing policies as also the programmes implemented thereunder.
Factor # 3. Changed Distribution Channel and Physical Distribution:
The distribution channels are changing rapidly in the modern age. Several kinds of middle-men are living into existence. The physical distribution activity too is being performed with rapid speed through various means and in minimum time. This has brought in new problems for distribution and new marketing opportunities thereby concept of marketing is affected.
Factor # 4. Organised Consumers:
Consumer protection movement in the present era has organised the consumers and awoke them for asserting their rights. This has resulted in special drive of producers to prefer customer oriented concept of marketing.
Factor # 5. Developed Means of Communication:
The newspapers, radio, TV’s, telex, phone, teleprinter etc., and means of communications are assisting the producers providing customers far and wide in the world with the information related to the goods and services within moments. These developed and changed means of communications have started making the concept of marketing more efficient.
Marketing Concept – Assumptions
The assumptions of marketing concept are the following:
i. Marketing concept is synonym of “business” and “marketing” and it converts business organisation into marketing organisation.
ii. Marketing concept is based on the principle of socio-economic satisfaction and it is nucleus of the marketing process of customer’s satisfaction. This concept, stresses on the planning of company’s policies, programmes etc., and their implementation as well. It thus, does efforts providing satisfaction to the customer better way and reflects their buying tendencies and interests changed with the passage of time.
iii. Concept of marketing focuses on profitable sale without least care of its quantum.
iv. Concept of marketing stresses upon integrated marketing and providing the marketing executive with the supreme position in the organisation.
v. The concerns following concept of marketing, very first trace the existing and future necessities of the consumer and then explores the prospective markets with taking in account its own capacities and the means available. Then only, the products and services are marketed in order to give complete satisfaction to customers and adequate profit to the firm.
Principal Assumptions of Marketing Concept:
According to Philip Kotler –
i. It is the prime function of the organisation to cater the necessities and desires of the specific group of customers.
ii. The organisation capable of providing customers with satisfaction, become popular in the public as a whole.
iii. Organisation requires controlled integrated marketing.
iv. An active marketing process is required for the satisfaction of customers and it continuously supervises the demands of the customers.
Marketing Concept – How to Implement the Marketing Concept?
The marketing concept is an appealing idea, but it must be converted into specific activities to be useful for managers. Over the years it has been interpreted and applied in a number of different ways. “No questions asked” return policies to satisfy customers and automated warehouses to improve efficiency and support discounted prices are examples from the past. Today the marketing concept is being applied in a number of other ways.
Several of the most important developments are introduced below:
The value of a good relationship is not a new idea. However, it is only recently that organizations, with the benefit of extensive data, have made a concerted effort at customer relationship management (CRM)-establishing multidimensional connections with a customer such that the organization is seen as a partner. By sorting and analyzing data supplied by customers, gathered from third parties, and collected from previous transactions, a marketer is able to better understand a customer’s needs and preferences.
But there is more to relationship management than data. By examining successful partnerships in business and elsewhere, marketers have discovered that enduring relationships are built on trust and mutual commitment, require a lot of time and effort to create and maintain, and are not appropriate for every exchange situation. Applying this concept to their marketing programs, many firms are dedicating much of their marketing effort to building lasting relationships with selected customers.
The modern marketing system was built on identifying a need experienced by a large number of people (a mass market), anti-using mass production techniques and mass marketing (relying heavily on network television advertising) to satisfy that need. By producing and selling large quantities of standardized products, firms were able to keep the unit costs low and offer need-satisfying products at attractive prices.
However, the market has changed. Mass marketing is being challenged by mass customization that is, developing, producing, and delivering affordable products with enough variety and uniqueness that nearly every potential customer can have exactly what he or she wants.
Deere and Co., maker of John Deere farm machinery, produces 45 different models of seed planters with a total of 1.7 million options in order to meet the varied needs of all types of farmers. What may be more remarkable is that they can all be built on the same assembly line in Moline, Illinois.
The movement toward mass customization is made possible by the tremendous advances in information, communications, and manufacturing technology. Firms are now able to learn a lot more about their current and prospective customers, and use that information in designing products, manufacturing, and distribution.
They also can advertise to very specific audiences through cable television and via the Internet. The result is a proliferation of products in many product categories. Consider, for example, the variety of dry breakfast cereals available from General Mills and the snack alternatives offered by Frito-Lay.
Marketers are coming to realize, however, that more variety is not always better. In some areas the number of choices creates as much confusion as satisfaction. Consider, for example, the number of different pain relievers available in the drugstore. Retailers are also concerned by the explosion of products because they are pressed to find shelf space for them.
Although most firms do not ignore quality, there is a tendency to think in terms of “acceptable” levels of quality as determined by engineers and manufacturing people. However, when some firms added quality as defined by customers as a key ingredient of their strategies, it wasn’t long before consumers responded. Soon the benefits of a commitment to quality became evident in the success of firms such as – Sony and Honda. Thus, beginning in the 1980s improving quality became a priority for most organizations.
Some suggest that American executives became complacent about quality. However, it is more likely that American businesspeople had come to believe that quality and cost were directly related. That is, as quality is increased, costs must go up. Although that is generally true, the relationship is not as strong as first thought.
Through careful study, firms found it is possible to substantially increase quality without unacceptable cost increases by –
i. Obtaining and responding to input from customers about how they define quality and what they expect in a particular product.
ii. Improving designs to reduce problems in manufacturing, and identifying and correcting problems early in the production process to reduce expensive reworking and waste.
iii. Encouraging employees to call attention to quality problems, and empowering them to initiate action to improve quality.
Concerns about quality are not limited to manufacturing and service. Every business function has a quality component. Within marketing there are quality aspects to making sales calls, answering customers’ questions, preparing advertisements, and every other activity. The breadth of quality issues, along with the realization that achieving and maintaining quality depends on the efforts of employees led to the development of total quality management (TQM) in the 1980s.
TQM is a system for implementing organization-wide commitment to quality that involves every employee accepting responsibility for continuous quality improvement. Despite the good intentions that surrounded TQM programs, their focus on introducing change led many proponents to overlook the costs and benefits of the changes. As a result, firms are now evaluating the impact of quality proposals on customer satisfaction, and treating quality improvements as investments. This refinement of TQM is known as a return on quality (ROQ) approach.
The customer’s perception of all the benefits of a product weighed against all the costs of acquiring and consuming the product is its value. The benefits can be functional (the roominess of a minivan for a large family), aesthetic (the attractiveness of the minivan), or psychological (the peace of mind that the van is designed to withstand a collision).
Besides the money paid to the seller, the costs might include learning about the product, negotiating the purchase, arranging financing, learning how to use the product, and disposal of the product when it is no longer useful.
Marketers are taking a closer look at what customers’ value in a product. The heavy emphasis on mass production and mass marketing were largely driven by the desire to offer products at the lowest possible price. The focus on price overshadowed other benefits sought by customers. With better information about what customers’ desire and constant improvements in technology that make meeting those desires possible, marketers are engaging in value creation that extends beyond just offering the lowest possible prices.
Two points are important to note here. First, value means much more to the buyer than the amount of money charged for a product. For example, some consumers have found the Palm Pilot handheld electronic device indispensable for keeping track of appointments, phone numbers, and other day-to-day information.
Second, the perception of value varies among individuals. Recently Palm initiated a marketing program aimed at corporate chief information officers when its research found that Palm has high awareness as a company that makes devices for consumers, but low awareness of the use of its devices for business applications.
Recall that one element of the marketing concept is the accomplishment of organizational goals. In the past the impact of marketing on organizational goals has been defined rather broadly. Because marketing is only one of many factors that influence how customers behave, it was assumed that a specific cause-and-effect relationship between marketing efforts and sales or profits could not be measured.
As a result, marketing expenditures generally have been treated as expenses rather than investments, and managers adopted a short-term approach of trying to minimize these expenses as opposed to investing in marketing for both the short and long term. Today that thinking is changing.
Recognizing that marketing now accounts for at least 50% of all corporate costs while manufacturing has gone from 50% to less than 30%, managers are demanding greater accountability. In response, organizations are searching for creative ways to measure marketing’s effect, or the return on the marketing investment.
Marketers are now expected to demonstrate a link between traditional measures of marketing performance such as – positive attitudes toward a brand, customer satisfaction, and customer retention to the firm’s financial performance. As a result, efforts are underway in many firms to put a dollar value on their brands (referred to as brand equity) 16 and to determine the lifetime value of a customer (referred to as customer equity).
Not surprisingly, these are difficult to isolate and measure. For example, estimating customer equity requires that a firm predict all future revenue from a current customer and subtract from that the marketing costs of acquiring the customer, retaining the customer, and servicing the customer.
Not long after the marketing concept became a widely accepted approach to doing business, it came under fire. For more than 40 years critics have persistently charged that marketing ignores social responsibility. That is, although the marketing concept may help an organization achieve its goals, it may at the same time encourage actions that conflict with society’s best interests.
From one point of view, these charges are true. A firm may totally satisfy its customers (and in the process achieve a hefty profit), while also adversely affecting society. To illustrate, a pulp and paper mill in the Pacific Northwest might be supplying its newspaper customers with quality newsprint at a reasonable price, but to do so it might be polluting the air and water near the mill.
However, this need not be the case. A firm’s social responsibility can be quite compatible with the marketing concept. Compatibility depends on two things – how broadly a firm perceives its marketing goals and what the firm is willing to invest to achieve those goals. A firm that sufficiently extends the breadth and commitment dimensions of its marketing goals to fulfill its social responsibility are practicing what has become known as the societal marketing concept.
When the marketing concept’s breadth is extended, a company recognizes that its market includes not only the buyers of its products but also anyone directly affected by its operations. In our example, the paper mill has several markets to satisfy; including – (1) the newspaper publishers, (2) the consumers of the air that contains impurities given off by the mill, and (3) the recreational users of the local river where the mill releases its waste matter.
Extending the commitment dimension of its marketing goals means a firm must recognize that meeting the broader needs of society may require more time, technology, and skill than meeting just the needs of its immediate customers. Although these investments seem costly when they are made, they reflect a long-term view of customer satisfaction and performance objectives, rather than a focus only on today. For a company to prosper in the long run, it must satisfy its customers’ social needs as well as their economic needs.
If the marketing concept and the refinements we’ve just discussed direct a modern marketer’s approach to the marketing task, just what is it that marketers do?
Ordinarily it is impractical for a firm to satisfy all or even most of the segments of a market. Instead, a company first identifies the segments and then selects one or more at which to target its e forts. Thus a target market refers to a market segment at which a firm directs a marketing program.
Usually several firms are pursuing a particular target market the same time, and each attempts to be viewed in a distinct and attractive way by prospective customers. That is, each firm uses strategies and tactics in an effort to establish a unique position in the prospects’ minds. For example, Volvo’s marketing strives to have its cars perceived by consumers as safe. Segmenting markets, selecting targets, and devising positioning strategies are fundamental marketing tasks.
Usually firms do a considerable amount of research to identify markets and define segments. Among the many questions market research seeks to answer, one of the most important is the sales potential of particular market segments. To determine sales potential, a firm must forecast demand (that is, sales) in its target markets. The results of demand forecasting will indicate whether the segments are worth pursuing, or whether alternatives need to be identified.
Marketing Concept – Applications
Organisations applying the marketing concept will be committed to:
i. A customer orientation
ii. Coordinated efforts by all parts of the organisation
iii. Profitability, rather than sales volume.
Customer orientation has already been touched on – everyone in the organisation must aim to serve the customer, whether directly or indirectly. This is customer sovereignty – it places the customer effectively at the top of the organisation chart.
The substance and credibility of this customer-centredness will daily be put to the test in all sorts of ways (e.g., how long to answer the telephone, promptness of delivery, product quality). The performance and integration of all these activities requires management and training. They cannot be left to chance.
Coordination of efforts will itself relate directly to management and the commitment of the organisation to marketing. Marketing management is really all about the coordination of customer-directed activities. Particularly, good practice and competitive pressure should ensure that a customer focus prevails throughout the organisation.
It must be present during each and every activity, rather than fall casualty to the sectional interests and biases of individuals or functional groups. For resource reasons, too, marketing activities should be tightly and smoothly scheduled, without undue delays, cost-overruns or other problems that would affect profitability and competitiveness.
The acid-test of marketing orientation will be how consistently over time the organisation manages to abide by these conditions good marketing requires a stable or improving relationship with customers over a period of time. Marketing is therefore future-orientated and dependent on performance, rather than on promises or former achievements.
The issues of good marketing practice can be summarised as:
i. Choosing and targeting appropriate customers
ii. Positioning your offering
iii. Interacting with those customers
iv. Controlling the marketing effort
v. Continuity of performance.
The marketing concept requires commitment to customer satisfaction, and a flexibility to respond to customer requirements and changes in the commercial environment. In turn, this may require following policies that are guided by key principles consistent with good marketing.
While marketing is probably too new to have developed a ‘general theory’, and in any case markets are too dynamic and diverse to support formula approaches, many writers have commented on the key principles underlying successful marketing. As an example, John Howard, an American marketer, proposes that a structured approach rests on six ‘pillars’ of good practice.
An alternative, though compatible, set of key principles is offered by Hugh Davidson, a British writer, who argues that successful marketing requires the application of POISE.
That is, marketing should be:
P – Profitable
O – Offensive (rather than defensive)
I – Integrated
S – Strategic (= future-orientated)
E – Effective (it gets results)
The common thread in these observations, and those of other writers, is the recognition that marketing has to be consciously planned and integrated. Organisationally, marketing involves a set of activities that has to be managed.
The management process involved might be generalised as the following sequence:
1. Research and Information
2. Analysis – informed decisions
3. Plans and forecasts – informed decisions
4. Organisation and coordination – Integration
5. Implementation – Integration
6. Control – Responsiveness
7. Review – Results – orientation.
The process might be viewed as a continuous cycle of managed activities, guided by key principles such as those presented by Howard and Davidson. The management tasks involved would be broadly the same for all functions within marketing – good planning and management are seen as critical ingredients for success throughout.
Marketing Concept – Major Problems of Marketing of Small Industry Products
Production is meaningless without market. Therefore, the very purpose of an enterprise is to produce what the customer will buy. All industries, whether small or large, face problems in marketing their products or services. But, small scale enterprises are more plagued by the marketing of their products is commonly noticed over time and clime. Notwithstanding, there are two main reasons conditioning the marketing of products produced by small enterprises.
First, small enterprise cannot withstand with cut-throat competition in respect of quality, cost, and standardization of the products with medium and large scale industries. In fact, the same is attributed to one of the major reasons limiting the fuller utilization of their production capacity. Second, the small enterprises of our country neither have the full appreciation of the importance of marketing not had they employed and implemented effective marketing techniques in their enterprises.
In this regards, the observation made by the Ford Foundation seems worth quoting “In spite of an extensive potential market, the Indian small entrepreneurs were most reluctant towards efficient marketing technique and consequently have met with failure on the front of marketing of their products. When it comes to the question of markets for which the products are produced, most of the small entrepreneurs appear to be as much anchored to the past as they are in the methods of manufacturing.
Types and areas of consumption are shifting but only few products try to follow them. This, in part at least, is due to the prevailing system of distribution. Few channels of communication exits between the small manufacturer and the ultimate customer, hi many cases, the manufacturer does not even know in what part of the country his wires are used, or who buys them”.
The Japanese delegation on small-scale industries in India also gave similar view that the most knotty point in the operation of small-scale enterprises and cottage industries is that the industry is isolated from the market and unable to understand quickly and accurately the prevalent trend of the market.
Major problems of marketing of small industry products are:
1. Competition with Modern Sector:
The market competition of the small enterprises with the modern sector has aggravated due to several factors over the years. Although the traditional hallmarks of the small-scale industries are slowly yet steadily changing. There is an implicit assumption of poor quality for goods manufactured in small enterprises. This sector needs to cater to wide diversity and changing tastes and preferences of their clientele which they do fail.
2. Lack of Sales Promotion:
Advertisement of the products through the elaborate sales promotion methods such as cadres of trained salesmen, advertisement in cinema slides, Posters, papers, magazines and soon have become increasingly fashionable particularly in the case of medium and large scale industries. But, small scale industries lack in the required resources as well as knowledge to practice the methods or sales promotion.
As a result, the former usually have patented names which facilitate the dealers in selling their products without making much effort. It can also be postulated that in the case of the products of small scale industries, at least at their initial stage, persuasive capacity of the dealer plays on important role in influencing their sales.
In such case, the dealers demand and producers are bound to pay a relatively higher rate of commission than those paid by the large-scale producers. This reckets high unit cost and, thus, impinges on their capacity to compete with the large sector. In this way the small enterprises are unstirred. If these small enterprises make a modest start too, it is stagnated and dies out or devoured by the successful bigger enterprises.
3. Weak in Bargaining Power:
In case of handicraft units such as – copper smithy and carpet weaving units, the price realized is usually better than the sales are made at the place of production itself than when these products are marketed in the fairs. It looks that, very possibly, the manufacturers are in a better bargaining position at home than in other locations like fairs where they take their products for selling. Other studies also support this finding. One can add some other problems depending upon the type of enterprise, yet these are the major ones encompassing various problems in one way or other.
4. Financial Weakness:
Due weak financial base, a small industrialist cannot afford to spend as heavily as a large unit does while marketing his products. A rare exception is the pharmaceutical industry, in which the gap between the manufacturing cost and the selling price is very large.
This is a special situation, in which marketing techniques are different, and therefore the cost of marketing is very high, particularly the marketing cost of those drugs for which there is stiff competition. The small industrialists in this line have to follow this trend in order to survive.
5. Absence of Own Marketing Channel:
In the absence of a marketing channel of their own, many small units sell their products to large selling houses. Voltas, for instance, markets a number of products produced by small units. Similarly, the Bata Shoe Company sells the shoes manufactured by the small sector.
As a result, small units invariably get a raw deal. The large companies make handsome profits from marketing the products of small units by charging a much higher price from the consumer. In this respect, there is a need for a large number of marketing consortia, whose primary responsibility will be to assist small units.