What is marketing? Functions, Relevance and Facts



What is marketing? Functions, Relevance and Facts

We take into account the various concepts related to marketing. It attempts to define their relevance, characteristics and utility. . When an organization knows who buys (or uses) the goods and services it offers; why, where, when and how they buy; what if the goods (or services) satisfy them and what may be done to increase the satisfaction, it is possible for the organization to increase its effectiveness as well as reduce wastage of resources. Marketing helps to match the organization’s human, financial and physical resources with the wants of customers along with maximum economy and efficiency.

Customers do not always run to a producer and demand supplies, however useful and valuable the product may be. They will not make the effort to buy, if the effort is not commensurate with the perceived value. It must be available when needed, at places that are convenient and at prices that seem reasonable. They have to know what is available, where and at what price. Often they have to be persuaded that the purchase is beneficial to them. This is even so for products that apparently meet an important need. Health check-up programmes, financial arrangements to meet contingencies of death and old age are some examples.

Services are bought by customers and they produce satisfaction. The producing organization creates a capacity through human financial and physical resources for rendering the services. Most effective utilization of these resources is possible through the application of marketing concepts. You must remember that tourism is a service oriented industry.

What is marketing?

An organization procures resources from the environment at a cost. It arranges for the utilization of these resources to produce goods and/or services. These are offered to consumers in the environment, who avail of these outputs and experience satisfaction there from. The procurement and utilization of resources is done through processes and practices relating to finance, personnel, production, materials, ancillaries, vendors and so on. All these processes, practices and activities relating to the production of the output have no justification, if the consumer, who avails of the output, is not satisfied with it. The consumer will then not buy what is offered as output. To win keep a customer is the purpose of all organizations. The customer is therefore, central to an organization’s purposes. Marketing links the customer, who is the core, to processes, practices and activities.

Marketing and Decision Making Processes

Marketing looks at the decision making processes of both the producer and the customers. It tries to bring these two processes together in an exchange transaction. If there is no exchange, there is no marketing activity. If the exchange is by compulsion, then again, there is no marketing. Marketing is relevant only when there is freedom of decision on the part of both producers and customers. An organization has to create, produce and deliver goods and services that customers value and want at prices which are relatively attractive-particularly when compared with competition.

For example, an owner of a big hall can make money by renting it out for marriage purposes. The person hiring it also needs at the same time, a decorator, a caterer, and so on. If the hall owner can make arrangements for these also as part of a single package, he is enhancing the value of his offer and providing greater satisfaction.


Functions of Marketing 

1. Add value, by finding a better match between the product and needs.

2. Reduce wastage, which would otherwise occur if the product is not needed or production does not match demand.

3. Improve effectiveness of communication through b etter targeting of messages,

4. Cut costs, through more effective distribution arrangements, and

5. Improve better understanding between marketer and customer because of increased contracts.

The concepts of marketing were developed in relation to consumer goods. These concepts are however relevant to services as well. Whether goods or services.

Consumer does not buy a product for its technical features or for what it can do. He buys for the benefits that can be derived there from. He buys a cluster of values which are intangible. For example, a shirt is not bought only because of consideration of comfort, exclusiveness or to appear 'macho'. All these are vague thoughts, difficult to evaluate and of different importance to different people.

Marketing may not have much of a role in a controlled economy in cases where the consumer has no options or in conditions of scarcity.


Relevance of Marketing

Marketing concepts are relevant even in the absence of competition. A monopoly producer also has to generate revenue through sales. Sales will not increase through increased production if the:

1.       Existence of the product is not known

2.       Need for the product is not felt

3.       Price is not considered appropriate to value or

4.       Product is not available at convenient place or times.

A felt need attracts the customer to the product, enhances its value and provides satisfaction. This leads to an increase in sales.


Marketing Mix

Marketing concepts had been originally developed in the context of tangible consumer goods. The main elements of a marketing programme are conceptualized in terms of four (4) Ps-Product, Price, Promotion and Place. It is by marketing adjustments and changes in one or more of these four (4) Ps that the attractiveness to the customer could be strengthened. These four elements are known as the marketing mix. The marketer could mix these in different ways for maximum effectiveness, like a chef mixes the same ingredients in different ways to achieve high levels of satisfaction.

In the case of services, three additional Ps are included in the marketing mix. These are People, Process and Physical Factors. Services are performed by people and they constitute an integral part of the service product.

The process of performing the service corresponds to the process of production of goods. But in the service business, the process is in operation at the time of consumption by the customer. He is part of the process of production the way the process is managed affects the satisfaction experienced by each consumer. Process, like people, is an integral part of a service product.

Services are bought and rendered mostly in the premises of the service producer and rarely in the customer's premises. In case of tourism a customer has to go to a destination. The physical surroundings add to the tourists' satisfaction. Hence, decor, sounds, colour, artefacts, layout etc. At the premises where the services are rendered need a careful attention.

Each of the elements in the marketing mix is important and has an influence on the customer. None of them can be ignored. However, the marketer has a choice of concentrating on one or more of the elements to create the necessary impact on the market.

We will deal with promotion later. This Unit deals with the product. The other Ps applies differently to the variety of products that together constitute the tourism product.


Segmentation and Target Market

The term 'market' refers to the collective of existing and prospective customers for the product.

A hotel may be used by people who need to stay outside their usual residence. A person may have no such need but if such a need arises later, he is a prospective customer. Part of the marketing effort is aimed at such prospective customers in the hope that whenever the need arises in future, they will choose to buy the marketer's hotel services. There are however limitations. For example, all persons who need to stay outside are not prospective customer for the 5-star hotel users. Such parts are called segments of the market.

The customers of a hotel are those who come to stay as well as users of other facilities. They are different groups and each group constitutes different segments in the sense that segmentations are possible on the basis of lunch time users and late night users of the restaurants because they need different kinds of service. In the swimming pool, some hotels permit training classes. The segments using the pools for training are different from regular guests in terms of age, behaviour, attention required, hours spent in the pool or nearby, cleanliness demanded and so on.

A segment is discrete, identifiable, viable and appropriate. It is distinguished by characteristics of purpose, needs, motivation, benefits and behaviour.


Segmentation is usually done on the basis of one or more of the following characteristics:

1.    Geographic-like region, district, density of population, climate, urban-rural.

2. Demographic like family size religion sex income occupation language education.

3.   Psychographic like value systems, life styles, personality types.

4.   Buying behaviour like volumes, frequency, delivery requirements, negotiated contracts (for long term arrangements).


The tourist market may be segmented on the basis of:

a.       Place or origin of tourists

b.       Destination

c.       Purposes of tour like holiday, pilgrimage, sightseeing, shopping, etc.

d.       Economic status and spending tendencies.

e.       Demographic characteristics like age, sex occupation and attitudes.

f.        Preferences for staying like camping, luxury hotels, caravans, etc

g.       Preferences of travel like air, sea, road or rail.

Each segment of the market differs in terms of needs and expectation. No one .7"' organization can cater for the needs of all the segments. Each organization has to decide on the particular segment or segments it would cater to. The segment so identified is called the target segment. The identification has to be made on the basis of what the organization identifies as its objectives and its capabilities.

Having identified the target market all activities will have to be planned and executed keeping this target market in mind. The service being offered, the messages in communication, the media used for communication, the pricing policies, the arrangements to access the service, all have to be consistent with preferences and behaviour patterns of the target market. For example, if the hotel is targeting on the domestic tourists in the circuit of religious places, there would be little point in advertising in business magazines or providing foreign cuisine in the restaurant. Simple vegetarian food would perhaps be more satisfying to its patrons.


The Service Product

A product is something that a producer makes and offers to consumers to provide satisfaction of the needs. Service products are different from goods in five major characteristics i.e.:

1.     Intangibility,

2.     Inseparability,

3.     Heterogeneity,

4.     Perishability,

5.     Ownership.

1. Intangibility

While goods are tangible in the sense that they have physical dimensions and attributes and can be seen, felt, or tasted, services are intangibles. Take for example, and educational institution. One can see or verify the building in which it is located, the facilities within etc. But none of these determine the nature and quality of the education imparted by that institution. The product (or education) provided is to be evaluated in terms of the development of the knowledge, intellect and character of the alumni. This development may be perceived, but cannot be measured. Hence, this critical factor that constitutes education and the output from the institution is intangible.

One cannot see, feel, smell, touch or measure a service performed. It can only be experienced from the effects produced. When a doctor examines a patient and makes a decision about diagnosis and treatment, what he does is to tap the chest, hear the sounds, and read the instruments (or reports). That is not what he is paid for. He is paid for his knowledge, his experience, his training, the meaning that he makes of what he feels, hears and reads and the remedy he prescribes. This application of knowledge and making. / of meaning is intangible. If the patient is cured, the effect of the service is experienced as good. Otherwise, it is experienced as bad. It does not matter what the doctor's qualifications may be.

The characteristic of intangibility lies on a continuum with pure goods at one end and pure services at the other, with most products lying away from the two extremes. Similarly, services can be distinguished between "pure intangible" (education, information, consultancy) services which add value to a tangible product (laundry, decor) and services that make available tangible product (retailing, financing).

2. Inseparability

A physical item is produced in a factory, bought in a shop and consumed in the customer's premises at his convenience. But when one buys a service like a courier or a doctor, the production and consumption of the service takes place at the same time. The service product being an intangible, as experienced by the customer, exists only during the experience and that is when it is produced as well as consumed or used. The service in a restaurant is the courtesy of the waiter. Courtesy is, as the customer perceives it, at the time of behaviour, not before or after. It is produced by the waiter and consumed by the customer simultaneously. Hence, the production and consumption cannot be separated.

Education takes place in the interaction of the teacher and the student. Both teaching (production) and learning (consumption) happen together. If there is no learning, there is no teaching. Hence, the product exists only when the consumption takes place.

In a class of many students, a teaching session of one hour may cause different levels of learning among the students. What the teacher did in that one hour is the same but each student received it differently. The product of teaching was different to each student, depending on the nature of his consumption (learning). Hence, the product was received with varying consumption levels.

3. Heterogeneity

Because of the factor of inseparability it is not possible to produce a service in advance according to specified standards. Both production and consumption being by humans, the product of service as experienced, may not be of consistent quality. What is "excellent" to one, may not be so to another.

In a conducted tour or in a restaurant, the service quality is also influenced by the behaviour of the companions. Yet, the dissatisfaction experienced is not always attributed to the companions, but to services providers.

An optician sells glass to correct vision. But what is bought by the customer is not merely better vision, but also fashion and appearance. An optician who is technically good at determining the proper refractive index of corrective glasses has to enhance his service with a big range of frames and tints of glasses which the consumer can try out on his face. The service must also include speed of delivery, depending on the urgency of the consumer. The customer may need help in making choices of frame and glass. A choice cannot be made from a catalogue. The choice depends on the "fit" of the frame to the face of the customer as seen by the customer himself.

4. Perishability

The demand for crackers is very high during the New Year season. A manufacturer of crackers makes them well in advance of the season, stocks them at various places, and sells the whole stock during the season. If the goods are not consumed while being produced, they can remain in stock till the consumers are available. The crackers do not perish during storage. They retain their full valued vegetables, though perishable over time can also be stocked for subsequent consumption through processes like refrigeration and canning. But the supply of services cannot be stored. If an advertisement is not seen or read, it dies. It has gone waste. If the available seats in a cinema are not used during a show, they cannot be added on to the next show. If the supply is not used, it perishes. So also the seats in an aircraft or rail car, the rooms in a hotel, the space in a ship, the services of a tourist guide, the time of a consultant etc. All perish if not utilized when available. The loss of revenue cannot be made up. What is not sold cannot be carried forward as stocks to be sold the next day or at any other time.

The ability to carry stocks gives the manufacturer of goods some level of stability in his operations despite fluctuations in demand. If the supply is short at any time, he can arrange deferred deliveries. The consumer also can buy and store till he is ready to consume. The stability in operation helps to improve recovery of costs. Such stability is not possible for the producer or services because of the characteristic of perishability. For example, if an airline has only 20 per cent occupancy, the costs of operation do not come down to 20 per cent.

5. Ownership

No ownership passes from seller to buyer in a service. The buyer only acquires the right to certain benefits of what the seller offers. One may have the right to use a hotel room or a railway berth for a period of time, but the ownership of the room or remains with the hotel or the railways. Similarly, a doctor offers services. 'There is no tangible good that he produces or offers. He uses knowledge which is intangible and prescribes treatment which may be satisfying. The treatment may or may not involve medicines. The ownership of the knowledge of the doctor does not pass on to the patient, but the patient (customer) is entitled to the benefits of that knowledge. However, in the case of goods the ownership passes on to the buyer.

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