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goods like fruits, fish, vegetables etc. But strictly speaking such markets are disappearing because of the
efficient system of transportations and communications. However, many villages are still witness to such
markets even today.
3) National Market: For certain commodities, a country may be regarded as a market, through the fast
development of industrialisation. This is referred to as a national market. In India, the goods can reach
another, because of efficient communication system and transport facilities. In the present decade, almost
all the products have national markets as the markets have widened to a great extent.
4) World Market: World or international market arise when buyers and sellers of goods emerge at an
international level i.e., involvement of buyers and sellers beyond the boundaries of a nation.
Exchange is an act of obtaining a desired product or service from someone by offering something in
return. Marketing occurs when people decide to satisfy their needs and wants through exchange.
Marketing, thus, involves exchange of a product between a seller and a buyer based on monetary
considerations. The exchange concept of marketing holds that exchange is the central idea of marketing.
But marketing is much broader than exchange. Exchange covers the distribution aspect and the price
mechanism. Marketing has wider connotations including value generation, customer satisfaction, creative
selling, advertising and integrated action for serving the customer. The exchange concept does not cover
all the vital ingredients of marketing.
b.) Production Concept:
The production concept of marketing is one of the oldest marketing concepts or marketing philosophies
in guiding the marketing activities of an organization. The production concept is that marketing
philosophy which operates with the guiding force thatthe consumers will prefer those products which are
available at the right time, at right places, in adequate quantities, and at affordable prices.Hence, the
management should pursue policies to improve production and distribution system to reduce prices. The
production concept or philosophy is relevant in situations where mass quantity of a product is consumed
and the demand for the product exceeds the supply. The main criticism against this philosophy is that the
consumers are not given personal attention and the management is not responsive to consumers' views.
Marketing is a very important aspect in business since it contributes greatly to the success of the
organization. Production and distribution depend largely on marketing. Marketing is the father of
innovation and product development, promoter of entrepreneurial talent, developer of economy,
stimulator of consumption and higher standard of living and guardian of price system.
Apart from contributing to the development of the nation as a whole, marketing has greater importance
for its contribution to society and individual business firm.
Opportunities: external chances to make greater sales or profits in the environment. For example,
changing lifestyle of people- the firm can make use of their capability to cater to the changing lifestyle of
people which in turn could help company to gain profits.
Threats: external elements in the environment that could cause trouble for the business. For example, the
small retail shops owners found a great threat when big retailers began their operations in India.
A SWOT analysis should identify a corporations core competencies, along with the opportunities that the
organisation is not currently able to take advantage of due to lack of appropriate resources. This is
essential because subsequent steps in planning for achievement of the selected objective may be derived
from the SWOT analysis.
The SWOT analysis framework has gained widespread acceptance because it is both simple and powerful
for strategy development. However, like any planning tool, SWOT is only as good as the information it
contains. Thorough market research and accurate information systems are essential for the SWOT
analysis to identify key issues in the environment.
The analysis of strengths and weaknesses focuses on internal factors that give an organization advantages
and disadvantages in meeting the needs of its target market. Strengths refer to the core competencies that
give the firm an advantage in meeting the needs of its target markets. Any analysis of company strengths
should be market oriented/customer focused because strengths are meaningful when they assist the firm
in meeting customer needs. Weaknesses refer to any limitations a company faces in developing or
implementing a strategy. Weaknesses should also be examined from a customer perspective because
customers often perceive weaknesses that a company cannot see.
The SWOT Matrix helps visualize the analysis. Also, when executing this analysis it is important to
understand how these elements work together. When an organisation matches internal strengths to
external opportunities, it creates core competencies. In addition, an organization should act to convert
internal weaknesses into strengths and external threats into opportunities.
PEST analysis stands for "Political, Economic, Social, and Technological analysis". It describes a
framework of macro-environmental factors used in the environmental scanning component of strategic
management. It is a part of the external analysis when conducting a strategic analysis or doing market
research, and gives an overview of the different macro environmental factors that the company has to take
into consideration. It is a useful strategic tool for understanding market growth or decline, business
position, potential and direction for operations.
The growing importance of environmental or ecological factors in the first decade of the 21st century has
given rise to green business and encouraged widespread use of an updated version of the PEST
framework.
A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.
Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated with market
growth or decline, and as such the position, potential and direction for a business or organization.
PESTLE analysis is a useful tool for understanding the big picture of the environment, in which you are
operating, and the opportunities and threats that lie within it. By understanding the environment in which
you operate (external to your company or department), you can take advantage of the opportunities and
minimize the threats.
developing an effective marketing strategy. In the words of Philip Kotler "the best way for a company to
grasp the full range of competition is to take the view point of a buyer".
iii. Customers
Customers market consists of several constituents such as consumer markets, business markets, reseller
markets, Government markets and international markets.
Customer markets consist of individuals and households who buy goods and services for personal
consumption. Business markets buy goods and services for further processing or use in their
manufacturing process. Reseller market consists of wholesaler and retailers. They buy goods and services
to resell at a profit. Government market consists of government agencies which buy goods and services to
produce public services. Lastly international market consists of buyers in other countries. Thus each of
the constituents of the customers market has unique characteristics.
iv. Shareholders
As shareholders contribute capital, they are eligible for a share in the profit of the organisation.
Shareholders earning is dependent on the marketing efforts and profitability. As organisation requires
greater inward investment for growth, they face increasing pressure to move from private ownership to
public. However, this movement unleashes the forces of shareholder pressure on the strategy of
organisations. Satisfying shareholder needs may result in change in tactics employed by the organisation.
Many IT companies whose share prices sky rocketed during 1999 - 2000 saw a steep decline in share
prices as they faced pressures from shareholders to make it profitable.
v. Creditors
Creditors are those from whom marketers purchase goods on credit. The relationship between the
company and creditors should be good as it affects their activities in future.
Most business purchase goods and services much like a consumer. However, they do so to a large extent
on credit as they are able to get discounts or other incentives to buy in bulk. When businesses buy goods
and services on credit, the business that holds the note or paper is referred to as a creditor. A firms power
and prestige in domestic markets may be significantly enhanced with the right credit resources. Enhanced
prestige can translate into a better negotiating position with other creditors, suppliers, distributors and
other important groups.
With the exponential growth in the service industry, it was found that the traditional marketing mix was
insufficient to meet the growing demands of the industry. This was especially due to the fact that the
service industry involved several intangible and variable components, which could not be covered under
the traditional components of the marketing mix. Hence, in order to meet the needs of the service
industry, three additional components or additional Ps were introduced in the mix People, Process and
Physical Evidence. The marketing departments in the Service sector need to include these additional
components, along with the regular components, in the marketing mix.
4.4.1 People
A service industry is a people intensive industry, as the human resource is the key asset who performs the
service. Good service has to be rendered rightly to the customer first time and every time. Unlike a
product based industry, bad service cannot be replaced or returned. Also, customers feel important when
they are treated rightly by the service personnel. Hence, it is necessary for service industries to invest
heavily in people.
The quality of service provided is dependent on the skill sets, behaviour and attitude of the service
personnel. It is important for managers who market services to consider the following points with respect
to their people
1. Selection The organisation should have clearly laid down procedures for the selection of service
personnel. The key factor in selection would be the right attitude of the candidate rather than the
knowledge, as the latter can be provided by proper training.
2. Motivation In the service industry, it is important that the employees are self motivated and are
willing to give their 100% for the organisation. The satisfaction of the customer depends totally upon the
employee motivation as motivated employees treat the organization as their own. They act like
entrepreneurs so as to ensure that the customers needs are addressed immediately. This results in
customer delight.
3. Training Behavioural training is crucial in the service industry, as behaviour determines the
commitment of the employee towards the customer. The level of training is also dependent on whether the
employees role is in high contact or low contact with the customer. It is important to provide the right
training to the employees as this will result in enhancing the customer experience.
4. Team Development For delivering effective service, teamwork is critical as no service is an
individual task. Both the front-end and back-end employees contribute together for the service delivery to
the customer. Hence, it is important to develop teams which share these common aims.
All of the above items need to be considered by the service marketing manager so that they can be
incorporated into the development of the people component of the marketing mix.
4.4.2 Process
Process refers to the system used by the organisation so as to deliver service to the customer. It is a
systematic arrangement which results in the delivery of service. The service delivery process needs to be
mapped minutely so as to ensure that the desired service reaches the customer in the given time frame. It
is also important that the services marketing manager tweaks the processes at regular intervals, so as to
ensure that the gaps are assessed and addressed. Such tweaking helps in maintaining the quality of the
service.
For example, when you order pizza from Pizza Corner, there is a service guarantee of delivery within 40
minutes to your home or the order is free of charge. For providing such a service, Pizza Corner has to
ensure that there is a well-defined process in place from the time of receiving the order, to the preparation
of the pizza and delivery of the same to the customers residence. A lapse in any leg of the process would
result in the company incurring a loss on that order.
Thus, process is an important component of the marketing mix for the service industry.
Physical Evidence
In most service industries, customer is physically present at the time of providing service. Due to this
physical presence, it becomes important to create the right surroundings or ambience for providing
service. Physical evidence refers to the external factors or surroundings which aid the customer in making
a judgement about the company. Such factors can be physically sensed as they can be seen, felt, heard or
touched. The customer makes a decision whether he or she wants to have business transactions with a
particular service provider, depending on the external physical environment.
The physical evidence is the tangible part of the service, as it can be perceived by the customer. It
becomes important for the service marketing manager to ensure that the physical evidence before the
customer is pleasing and does not offend the customers sensibilities. This will help in increasing the
business opportunities with the customer.
For example, the ambience, appearance, decor and cleanliness of a restaurant will encourage repeat visits
from clientele. These can be leveraged to bring in more business.
The services marketing manager has to consider the physical evidence of the surroundings and allocate
resources for improving or maintain the same, so as to generate business.
6 What are the internal & external factors affecting pricing decisions?
Answer:
The pricing decisions are influenced by many factors. The price policies should be consistent with
pricing objectives. The influencing factors for a price decision can be divided into two groups: (A)
Internal Factors and (B) External Factors.
(A) Internal Factors
1) Organizational Factors
Pricing decisions occur on two levels in the organisation. Over-all price strategy is dealt by the top
executives. They determine the basic range the product falls into in terms of market segments. The actual
mechanics of pricing are dealt with at lower levels in the firm and focus on individual product strategies.
Usually, some combination of production and marketing specialists are involved in choosing the price.
2) Marketing Mix
Marketing experts view price as only one of the many important elements of the marketing mix. A shift in
anyone of the elements has an immediate effect on the other three-Production, Promotion and
Distribution. In some industries, a firm may use price reduction as a marketing technique. Other firms
may raise prices as a deliberate strategy to build a high-prestige product line. In either case, the effort will
not succeed unless the price change is combined with a total marketing strategy that supports it. A firm
that raises its prices may add a more impressive- looking package and may begin a new advertising
campaign.
3) Product Differentiation
The price of the product also depends upon the characteristics of the product. In order to attract the
customers, different characteristics are added to the product, such as quality, size, colour, attractive
package, alternative use etc. Generally, customers are willing to pay more for the product which makes a
fashion statement or is trendy with good packaging.
4) Cost of the Product
Cost and price of a product are closely related. The most important factor is the cost of production. While
deciding to market a product, a firm may try to decide what prices are realistic, considering current
demand and competition in the market.
5) Objectives of the Firm
Firms may pursue a variety of value-oriented objectives, such as maximising sales revenue, maximising
market share, maximising customer volume, minimizing customer volume, maintaining an image,
maintaining stable price etc. Pricing policy should be established only after proper consideration of the
objectives of the firm.
(B) External Factors
1) Demand
The market demand for a product or service obviously has a big impact on pricing. Since demand is
affected by factors like, number and size of competitors, the prospective buyers, their capacity and
willingness to pay, their preference etc, and these factors are taken into account while fixing the price.
2) Competition
Competitive conditions affect the pricing decisions. Competition is a crucial factor in price determination.
A firm can fix the price equal to or lower than that of the competitors, provided the quality of product, in
no case, is lower than that of the competitors.
3) Suppliers
Suppliers of raw materials and other goods can have a significant effect on the price of a product. If the
price of cotton goes up, the increase is passed on by suppliers to manufacturers.
Manufacturers, in turn, pass it on to consumers. Sometimes, however, when a manufacturer appears to be
making large profits on a particular product, suppliers will attempt to cash in on the profits by charging
more for their supplies. In other words, the price of a finished product is intimately linked up with the
price of the raw materials. Scarcity or abundance of the raw materials also determines pricing.
4) Economic Conditions
The inflationary or deflationary tendency affects pricing. In the recession period, the prices are reduced to
a sizeable extent to maintain the level of turnover. On the other hand, the prices are increased in the boom
period to cover the increasing cost of production and distribution. To meet the changes in demand, price
etc., several pricing decisions are available (a) prices can be boosted to protect profits against rising
cost, (b) price protection systems can be developed to link the price on delivery to current costs, (c)
emphasis can be shifted from sales volume to profit margin and cost reduction etc.
5) Buyers
The various consumers and businesses that buy a company's products or services may have an influence
in the pricing decision. Their nature and behaviour for the purchase of a particular product, brand or
service etc. affect pricing when their number is large.
6) Government
Price discretion is also affected by the price-control by the government through enactment of
Legislation, when it is thought proper to arrest the inflationary trend in prices of certain products.
The prices cannot be fixed higher, as government keeps a close watch on pricing in the private sector. The
marketers obviously can exercise substantial control over the internal factors, while they have little, if
any, control over the external ones.