1. Introduction to the Topic:
According to Kotler and Armstrong (2003), “marketing is the process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others” (Kotler & Armstrong, 2003). In today dynamic environment the success of any organization depends on how the organization satisfies consumer needs and wants. The customer orientated organization first identify the customer needs and wants, and then coordinate and integrate its various activities including finance, human resources, research and development (R&D), engineering, inventory control, operation, sales and marketing to satisfy those needs and wants. This activity of satisfying customer needs and wants are carried out keeping in view certain goals and objectives. The organization may seek variety of goals including achievement of certain level of sales, profitability, Return On Investment (ROI), market share, leadership in a category, statuesque etc. The organization that employee the above three strategies is said to using the marketing concept.
The marketing concept also known as customer oriented concept is based on three pillars. As depicted Figure 1 Marketing concept first identifies customer needs and wants, then design and implement integrated and coordinated marketing strategies that are directed toward attainment of certain goal. These three pillars of Marketing Concept are discussed in detail in the following:
1.1. Customer Needs and Wants Identification:
Needs are the actual or felt deprivation. According to Abraham Maslow, human needs can be grouped into five categories known as physiological needs (needs for foods, water, shelter etc), safety needs (need for security, stability etc), belonging needs (social interaction, affection, friendship), esteem needs (respect, and recognition), and self-actualization needs (Jones, 2001). Marketer transforms these needs into wants. When a need is shaped of individual preferences and the social and cultural values of the person it become a want.
Marketer use marketing research to identify customer needs, and how these needs are transform in wants. The research thoroughly investigates the target market preferences for various goods and services. Marketer then designs his marketing mix to satisfy the needs and wants identified through marketing research. Organizations build relationships with its target market on value and service. Value for the customer is the utility he derive from the use of product and/or service. Customer purchase only those products whose utility is greater than the price paid. On the other hand service is part of a corporate culture and organization utilizes it for keeping its customers.
Marketing mix of an organization consists of the controllable factors that marketer offers to the target market also known as four P's of marketing. Marketing mix includes product, price, place and promotion. Marketer produce the product according to the taste and preferences of the target market, price the product attractively so that consumer gets value through the consumption of the product, promote the product in way that the interest of consumer are arouse, and place the product at the stores that are convenient to the customer.
1.2. Integrated and coordinated Marketing activities:
In order to achieve the stated objectives of customer needs and want satisfaction all the activities of the organization needs to be properly coordinated and integrated, and should be directed towards fulfilling the requirements of customers. Organization usually first identifies the organization-wide objectives for a specific period of time, and then the function heads (for example Vice President of Marketing/translate this organizational objectives into departmental objectives.
Organization is composed of different functional department (for example finance, marketing, sales, R&D, engineering etc) each having its own specific goals and objectives. For example the departmental goal of Sales department is to increase the sales; On the other hand the goal of Finance department is to increase the wealth of Shareholder, and the goal of Production department is to produce the desired quantity on the schedule dates. In order to be a truly marketing oriented organization all the activities of these diverse departments should be coordinated in such a way that it leads to customer need and wants satisfaction. In order to achieve this objective the marketing department should be given the key role and all other departments are required to follow the initiative of the marketing department. If this is not the case the organization may fail to achieve its objectives of satisfying the customer needs and wants.
The organization can use its planning process to integrate and coordinate the role and objectives of various departments. Planning is the process that coordinates all the diverse activities of different functional department in order to achieve the organization mission. The process of planning is not decision making; rather planning support the decision makers by coordinating information and activities. Planner thus makes it sure that the organization different department task are coherently integrated and coordinated, so the organization can achieve its objectives.
1.3. Goal Oriented Philosophy:
Organization uses the marketing concept in order to achieve certain goals and objectives. Setting objectives are important; as it serves to motivate organizational members and focuses the organization on precise aims over a period of time. Without Objectives a business organization will be wandering here and there. Objectives serve as guideline for accomplishment, directing and transforming efforts and actions of managerial members. Organization objectives should be SMART. SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic and Time.
Organization can have two types of objectives: financial objectives and non-financial objectives. Financial objectives of the organization are usually stated for a short time period (for example one year) and are stated in crude quantitative figures. Example of financial objectives includes percentage increase in sales, market share, a level of profit, ROI, Earning Before Marketing (EBM), Earnings After Marketing Spends (EAMS), profit per unit etc. On the other hand non-financial objectives are stated in qualitative terms and usually for a longer period of time as compared to financial objectives. Non-financial objectives may take the form of market leadership, first mover advantage, statusquo, admiration by the customer, social responsibility, etc.
2. How Marketing Concept was Developed:
In 1954 the leading management professor and consultant with multinational firms Peter Drucker, described that the success of the business rests on how successfully the marketing department play its role. According to Drucker, “if we want to know what a business is we must start with its purpose….there is only one valid definition of business purpose: to create customer” (Drucker, 1957). The words of Drucker are as valid as was in 1957. The basic purpose of all the organization is to satisfy the needs and wants of the target market it serves.
The first formal statement regarding marketing statement was made by General Electric (GE) president McKitterick in 1957 with a meeting with representative of American Marketing Association, that marketing concepts have three pillers: Customer orientation, integration of all the tasks that the organization perform, and achievement of organizational objectives (McKitterick, 1957).
In 1985, the members of the board of American Marketing Association (AMA) have unanimously devised and approved a new definition of marketing. Accordingly they define marketing as “The process of planning and executing the conception, pricing, promotion and distribution of ideas goods and services to create exchange and satisfy individual and organizational objectives" (AMA Board Approved a New Definition of Marketing, 1985).
3. Evolution of the Marketing Concept:
Marketing concept has not been developed in blue. The marketing concept that we have just explored has evolved over a period of hundred plus years. Broadly the evolution of the concept as we know has gone though five stages that are still continue on evolving. The various stages of the marketing concept have been depicted in Figure 2 and discussed in detail in the following:
3.1. Production Era:
Organizations around the world that have experienced the Industrial Revolution that has started in UK and spread to the rest of world were using the production concept till 1920. According to Kenner et al “the production concept hold that a firm should produce and distribute those products it can produce most efficiently” (Kinner, Benhardt, & Krentler, 2002). The organization that uses the production concept strives to achieve economies of scale and distribution efficiency. Economies of scale can be achieves by an organization through the process of producing the optimum quantity of the plant. In Economics terms a firm will continue to increase the production of goods and services till the Marginal Product Revenue equal to Marginal Product Cost (MPR=MPC). A firm will achieve the highest profit at this point. On the other hand the second objective of the firm is to increase the distribution efficiency of the business, by ensuring the availability of the product or services at every corner of the target market.
In production orientation, marketer plays very insignificant role as the product or services offered by the organization sell themselves as the target customer have no choice except to purchase the product offered by the organization. Organization that practiced the concept of production era views the market as homogenous and a basic product used to satisfy the needs and wants of the customers. When the competition in the market place intensified, companies that were using the production orientation have a very hard time for finding the target market, then a new concept was evolved that is known as product concept.
3.2. The Product Era:
The product era takes the production concept one step further. Over here the basic of them of the marketing is that consumer will prefer products that offered most of the quality, options, and varieties. At this stage producer used to differentiate their offerings from that of competitors by assigning a brand name to his product. Companies now used to offer different types of qualities in a product (e.g. premium quality, high quality, economical) and use different pricing and promotion techniques for these different types of products.
Ralph Waldo Emerson described the product concept when he said, "If a man … makes a better mousetrap … the world will beat a path to his door." (Kinner, Benhardt, & Krentler, 2002). In reality this need not to happen as consumer usually purchase those products and service that provides them greater perceived value. This perceived value needs not to be the same as the actual value (Quality, performance etc.).
The Sales Era:
After World War II, countries around the world experienced unbelievable innovation in manufacturing technologies that resulted in mass production of goods. The companies that were producing at mass level see an enormous increase in production while the cost of manufacturing the product per unit were keep on decreasing as the companies continue with more production. In order to exploit this trend of savings in cost (due to utilization of excess plant capacity), companies starts using the selling concept.
The sales era or the selling concept is used when an organization had over-production plant facility, and the organization employee its sales staff to sell those products in order to reduce their inventories and achieve the economies of scales. Those who follow the selling concept are of the opinion that “consumers will not buy their products unless they undertake a large-scale selling and promotion effort” (Kotler & Armstrong, 2003). The aim of the selling concept is to sell what the firm has produce. The concept is mostly used by producer of unsought products (those product that consumer have never heared about, or have never think of buying).
Unfortunately most of the people from around the corner think that this selling concept is what we called the marketing concept, while in reality it has nothing to do with the marketing concept. The reality is that selling concept focus on a very short term relation with the customer that are limited to one time sales, while the marketing concept tries to build long-term relationship with its target market.
3.4. Customer-orientation Era:
This was a remarkable improvement in the previous concept. The focus of marketing efforts in this era was to direct the organizational efforts towards the satisfaction of customer needs and wants. Organizations now understand that it is a lot cheaper to keep existing customers than to draw new ones. This organization-wide phenomenon has led to the relationship marketing, which involves functioning directly with customers to construct long-lasting relationships.
Organizations build relationships with its target market on value and service. Value for the customer is the utility he derive from the use of product and/or service. Customer purchase only those products whose utility is greater than the price paid. On the other hand service is part of a corporate culture and organization utilizes it for keeping its customers.
3.5. New Era:
The new era or marketing takes the customer-orientation era one step forward. An organization might be able to satisfy the needs and wants of its target market and producing a handsome profit, but the game is not over here. Organization have multiple stakeholders, and it is required that the organization should satisfy the diverse needs of all the groups. The various stakeholders of the organization include shareholders, management, employees, customer, suppeliers, distributors, society, government, taxing authority, regulatory agencies etc. The organization should therefore satisfy the objectives of these entire stakeholders (not just shareholders and customers). As Kinear et all has pointed out that “while it is clearly important to respond to the wants and needs of consumers if an organization hopes to be successful, sometimes the wants and needs of specific group conflict with the broader best interest of society” (Kinner, Benhardt, & Krentler, 2002).
This new approach can be called a balance approach to the marketing as it strives to satisfies customer needs and want, achieve long-term objectives including profitability and balance with the needs for other stakeholders like society, government etc. The organization using this concept works as responsible citizen of the community and contributes to the well-being of the society.