LESSON 3 :Marketing Concepts and Comparison with Selling Concepts Marketing constitutes one of the important functions of an organization. Along with production, finance and accounting, human resource management, research and development, purchase and stores, and numerous other functions, marketing contributes to the ability of the organization to succeed. The marketing concepts hold that the key for the achievement of the organizational goals consists in determining the needs and wants of the target markets and delivering the desired satisfactions more effectively and efficiently than the competitors. Under marketing concepts, the emphasis is on selling satisfaction and not merely on the selling the product. The objective of marketing is not the maximization of profitable sales volume, but to earn profits through the satisfaction of the customers. In spite of some claims that the knowledge of the society with regards to marketing is improving, there are opinions which indicate that the marketing is not yet very well understood subject in several organizations. The arbitrary nature of the marketing stems from the constantly shifting perspectives in socio-cultural and technological contexts, with marketing today considered to be of a dynamic nature rather than a static concept. Marketing in the present day environment is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others. The core issues related to the marketing of the products are shown in Fig 1. Fig 1 Core issues related to the marketing of the products The origins of the present day marketing lie around the time of the industrial revolution of the eighteenth century, when technological developments and production increases resulted in the termination of the personal customer contact of the organization and there were issues of surplus goods. During this period, preference towards customer needs was largely over-shadowed by the production and selling orientations. This continued until the mid-twentieth century. The marketing concepts are evolving on a continuous basis since 1960s when the marketing function was recognized as a distinctive discipline and field in the organization. This is being reflected from the definitions of marketing which are changing continuously with time. Several definitions of marketing have been put forward over the years as each generation tries to capture what marketing is at its time and what it means to the organizational functioning. Over the years, marketing function has been redefined to fit new contexts. In more recent years, the technological developments, new techniques and media have brought with them more opportunities for re-defining marketing. These definitions frequently appear to dilute the meaning of the marketing in some way, with the words marketing, sales, advertising, customer service and interactions used interchangeably and adapted by marketing professionals or sales personnel to suit their own job focus. Many definitions describe different facets and related terms but they do not always convey the much broader ideology and processes which are the part of the marketing. The evolution of various definitions of marketing also reflects change in the concepts of product marketing. Overall, product marketing concepts can be categorized into five concepts consisting of (i) production concept, (ii) product concept, (iii) selling concept, (iv) marketing concept, and (v) societal marketing concept (Fig 2). 2 Concepts of product marketing These five marketing concepts have their dominance during different period of time with the last two concepts being followed presently by most of the organizations. The evolution of the marketing concepts with time is shown in Fig 3. Fig 3 Evolution of marketing concepts Production concept – This is the oldest concept. The production concept can be trailed back as far as 1850s, through to the 1900s. This was the period of industrial revolution. During this period, there was growth in electric power generation, division of labour, rail transportation, assembly lines, and mass production. These made it possible to produce goods more efficiently with new technologies in mass quantities with new ways of using labour. Despite the increase in production of goods with these emerging ways of production, there was heavy demand for manufactured goods. The production concept is based on the assumption that consumers favour those products which are easily available and highly affordable. This required that the concentration of the organizations was directed toward product improvement and efficient distribution of their products. The production concept assumes that the ‘consumers are mostly interested in product availability at low prices; its implicit marketing objectives are cheap, efficient production and intensive distribution’. In the production concept era, the manufacturers typically concentrated on increasing output with the assumption that customers would look for, and buy, reasonably priced, and well made products. The production concept worked well for the organizations in the 1850s for achieving their organizational objectives. Today, such an organizational orientation can only make sense when the objective of the organization is to expand the market. However, production orientation hardly works in the present day environment. Organizations with such a marketing concept today risk focusing their effort too narrowly with their own operation losing sight of the core idea of producing to meet customer expectation and needs to create customer value. The trend which is prevailing in the present day scenario indicates that production concept does not have any part in most of the organizational practices today. However, where the organizational objective is for expansion to meet unsolicited demands, or where new products are introduced, the production concept can be a good complement to other more dominant concepts. Product concept – The product concept was the dominant marketing concept in the beginning of 1900s and continued to the 1930s. For more than a generation the concept of the product era dominated the understanding of the marketing. The product concept assumes that consumers prefer product based on its quality, performance, and innovative features. This means that the organization knows its product better than all others. The organization knows all the aspects of the design and the production of the product. Further, since the organization has the higher knowledge and skill in making the product, it is also assumed that it knows what is best for the consumer. The product concept compelled organizations to ensure improving product quality, and introduce new features in the product to enhance the performance as much as possible. These were done without consulting the customers to find their view on the product features, though the products were produced with the customer in mind. The product concept era reached the climax in the development of innovative products which did not have substitutes and with the customer needs not in too much a demand since customers did not know their needs in such innovative market situation. In the product concept era, organizations were able to sell all of the products which they made. The success of this concept was because of the time and level of technology in which this concept flourished. The product concept survived much of the time after the ‘industrial revolution’ since the demand exceeded supply and the emphasis on production rather than on the customer was quite an appropriate product selling thought at that time. Majority of the products were in such short supply that the organizations sell all that they made. Consequently, organizations did not need to consult with the consumers about designing and producing their products. Although some organizations still continuing to have a production oriented marketing thinking which direct their operations, the concept is not popular in the present day market environment. A product concept frequently leads to the organization focusing on the product rather than on the consumer needs which is needed to be satisfied and this leads to the ‘marketing myopia’. With the nature of customers and market environment of the present day, the production concept can be a failure in the present day environment, except in the cases of introduction of new products where there can be insufficient customer knowledge and competition. Selling concept – The selling concept was the concept of the organizations which proceeded the product concept era, and has the shortest period of dominance compared to the two preceding concepts. It began to be dominant concept from 1930s and stayed in widespread use until 1950s. The emphasis of selling concept was to create a department to be solely responsible for the sale of the organizational products, while the rest of the organization is left to concentrate on the production of the products. The orientation of the selling concept was that the organization can sell any product it produces with the use of various techniques, such as advertising, sale promotion, and personal selling. The concept assumes that consumers are unlikely to buy the product unless they are aggressively persuaded to do so, mostly through ‘hard sell’ approach. The emergence of the selling concept was necessary since there was big increase in the production of variety of goods after the ‘industrial revolution’ and also since the organizations became more efficient in production. The increase in quantity of the products and the types of products led to competition which eventually led to the end of product shortages and hence the emergence of surpluses. Due to this, there was obvious pressure on the organizations to make the customer buy the product though it can lead to loosing the customer for the future. This concept helped in the immediate sales of the products. In the concept, the surpluses of funds which the organizations generated were turned to the use of advertising and personal selling in order to reduce their inventories. The primary focus in this concept remained to sell the products with an aggressive approach. The selling concept takes an ‘inside-out’ perspective. It starts with the production plant, focuses on the organizational existing products, and calls for heavy selling and promotion to obtaining profitable sales. It focuses primarily on customer conquest by getting short-term sales with little concern about who buys or why. The selling concept also enables part of the organization to keep focusing on the product, through the product concept. In addition, the selling concept era was characterized by an orientation that a sales or marketing department can sell whatever the organization has produced. Apart from the aggressive selling approach, the selling concept era was also noted for other unhealthy features, such as the idea that ‘selling is the goal of the organization and not the customer satisfaction’. Despite the fact that the selling concept has almost seized to be a preferred organizational orientation over time, its acceptance or rejection is not to be determined by the concept itself, but the concept era and the dominant organizational orientation. Even in the era of a market oriented concept, few organizations which deal with ‘unsought’ products (such as life insurance), political parties who sell their candidates aggressively to apathetic voters in an election, and also by the organizations who have excess stock still follow this concept and use the selling orientation successfully. This means the selling concept though being less recognized in the environment of the present day, it is not completely abolished since it can be used to support some more dominant concepts in certain types of organizations. Though the marketing concept has become the prescription for facing competition, ‘old habits die hard’. Even today some organizations still hold to the fact that they must use the ‘hard sell’ approach for the organizational success and prosperity. Marketing concept – The marketing concept started to dominate organizational orientation during the 1950s, and continues in the twenty first century. This concept assumes that the starting point for any marketing process is the customer needs and wants, and no longer the aggressive selling. The key assumption underlying the marketing concept is that the organization to make only those products which it can sell, instead of trying to sell what it has made. The marketing concept focuses on the needs and wants of the customer rather than the needs of the seller and the product. The concept presumes that the principal task of marketing is not just persuading the customer to buy, but also to provide the needs of the customer with the right quantity and quality. These views are consistent with an earlier proposition which was based on the notion that the ‘goods are being made to satisfy rather than to sell’. As per this notion, in the present environment the more progressive organization is searching out the unconscious needs of the consumer, and is then producing the goods to gratify them. The marketing concept takes an ‘outside-in’ perspective. The marketing concept starts with a well-defined market, focuses on the customer needs, and integrates all the marketing activities which affect the customers. In turn, it yields profits by creating lasting relationship with the right customers based on customer value satisfaction. The marketing concept recognizes that the organizational knowledge and skill in designing products is not always being meeting the needs of customers. Thus in this concept, the organizational is orientation shifted from the product to the market. In the marketing concept, the attention has shifted from the problems of production to the problems of marketing, from the product the organization can make to the product the customers wants the organization to make. This means that the focus has shifted from the organization to the market place. It is also now been recognized that even a good sales department cannot sell every product which does not meet the needs of the customer. When customers have many choices, they always choose the one which best meets their needs. This is expressed by those organizational managements who make a clear distinction between the selling and the marketing orientation. According to these managements selling focuses on the needs of the seller whereas the marketing focuses on the needs of the customer. Selling is preoccupied with the need of the seller to convert the product into cash. On the other hand, the marketing is based on the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming the product. This concept is what is expected from the organizations of the present day. Following this concept the organizations have market orientation and hence they can reap the organizational success. Despite the fact that new concept has been developed since the emergence of the marketing concept, the concept still reigns superior in creating and retaining profitable customers, which is a primary objective of any organization. Societal marketing concept – The societal marketing concept emerged in the 1970s and has since overlapped with the marketing concept. The concept assumes that there is a conflict between consumer short-term wants and the long-run interest of the society, and that the organizations are to focus on a practice which ensures long run consumer and societal welfare. The societal marketing orientation is considered as the best business concept to be adopted by the organizations. It is suggested that this new concept represents an attempt to harmonize the goals of the organization to the occasionally conflicting goals of the society. As per the societal marketing concept, the task of the organization is to determine the needs, wants, and interest of the target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way which preserves or enhances the well being of the consumer and the society. It is understandable why this concept did not emerge until around the 1970s. The importance of this concept became eminent when the effect of organizational activities on the environment and society became too pronounced. It was then become necessary for the organizations to think on how to satisfy the market with the aim of profit, and still minimize its effects on the environment and the society. The principle thinking behind this concept is that the satisfied society is more likely to buy and to recommend the organizational product, while an unsatisfied society refuses to purchase of the organizational product even if it could satisfy the needs of the customer. This means that the societal marketing concept emphasizes that need which the customers consider in product purchase decisions has a component of their immediate environment. The appropriateness of societal marketing concept is deduced from the fact that it supports a socially responsible behaviour of the organization. It thus, challenges the earlier assertion that the social responsibility of the organization is to make profit. Organizations are required to adopt this marketing concept in order to be able to deal with the cultural and regulatory aspect of the organizational environment. This means that the adoption of the societal marketing concept generates some factors of market orientation which promote organizational performance. The societal marketing concept is considered a separate organizational objective; however the concept can be better looked at as complementary. It is to be complementary organizational thinking to the adoption of other organizational objectives, particularly, the marketing concept. Thus, whether organizational operations are production, product, selling or marketing oriented, the interest of the society is still to be given its rightful place since the society is a key stakeholder in every organization. Tab 1 Comparison of selling concept and marketing concept Sl. No. Selling concept Marketing concept 1 Selling concept is based upon the volume of production without thinking of the customer. Marketing concept is based on producing products needed by the customers the satisfaction of the customers. 2 Organization first makes the product and then figures how to sell it Organization determines the customer requirements first and then produces the product which meets the customer requirements. 3 Selling begins with the organization which is pre-occupied all the time with meeting the requirements of selling. Marketing begins with the customer and focuses constantly on the needs of the customer. 4 Selling begins with the existing activities and products of the organization. Under marketing, all activities and products take their direction from the customers and their needs. 5 Selling emphasizes on the saleable products of the organization. It seeks to convert products into cash and getting rid of the stocks. It is concerned with the methods and techniques of getting the customers to part with their cash in exchange for the products. Marketing emphasizes identification of the opportunity available in the market. It seeks to convert customer needs into the organizational products. It emphasizes on fulfilling these needs. 6 Selling over emphasizes the exchange aspect without caring for the value satisfactions inherent in the exchange. Marketing is primarily concerned with the value satisfaction which travels to the customer through the exchange. 7 Selling views organization as a product producing entity. Marketing views organization as an entity as a part of the process for satisfying the customer. 8 The selling organization determines which product is to be offered. Customer determines the product which is to be offered by the organization. The organization makes a total offering which matches and satisfies the identified needs of the customers. 9 The product precedes the selling efforts which are the consequence of the product available on hand. The consequence of the marketing efforts is the identification of the product which is needed by the customer. The organization produces the identified product in its own interest. 10 In selling concept, packaging is essentially seen as a mere protection or a mere container for the product. In marketing concept, it is seen from the point of view of the customer. it is designed to provide the maximum possible convenience and satisfaction to the customer. 11 In selling concept, emphasis is on the product. In marketing concept, emphasis is on the requirements of the customers. 12 Selling concept is based upon the transfer of title and possession. Marketing concept is based on the satisfaction of the customers. 13 In selling concept, production cost determines the price. In marketing concept, customer determines the price and price determines the product costs. 14 In selling concept, organizational management is oriented towards sale volume. In marketing concept, organizational management is oriented towards profit. 15 In the selling concept, planning is short term oriented in terms of daily sale of the product. In marketing concept, planning is long run oriented in terms of new products and future market demands etc. 16 The selling concept has inside-out perspective. The marketing concept has outside-in perspective. 17 Transportation, storage, and other distribution functions are perceived as mere extensions of the production function. Transportation, storage, and other distribution functions are seen as vital services to be willingly provided to the customer in a manner which delivers the products without any damage. 18 The emphasis is to sell somehow. There is no coordination among the different functions involved in the total process leading to the product selling. The emphasis is on an integrated approach. The integrated approach includes product, production, promotion, pricing, and distribution. 19 Different departments of the organization operate in separate water tight compartments. All the departments of the organization operate in close coordination with the sole purpose of providing satisfaction to the customer. 20 In the organizations practicing selling concept, production is the central function and sales is a subordinate or secondary function. In the organization practicing marketing concept, marketing is the key function and the entire organization is organized for supporting the marketing function. 21 Selling concept views the customer as a link in the organizational process of product selling. Marketing concept views the customer as the very purpose of the existence of the organization. It sees the organization from the view point of the customer with customer consciousness spreading in the entire organization all the time.