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MGT601 - SME Management - Lecture Handout 32

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Concept of Marketing

Marketing is the process of integrating and coordinating the following.

  • Identifying and measuring the needs of customers for the type of products or services that the firm is equipped to provide.
  • Translating the perceived needs into products or services development.
  • Developing and activating a plan for availability of product or service available.
  • Informing perspective customers about availability of the product/service and stimulating their demand at a price that generates satisfactory profits for the firm.

Marketing Function

The functions that must be performed in the marketing process are as follows:

  1. Buying And Selling
    Exchange process involves buying in anticipation of customer demand and searching for materials that will satisfy those needs. Selling function includes determination of potential customers and using a combination of sales techniques to stimulate demand for those goods or services.
  2. Transportation And Storage
    It involves the movement and handling of goods. Not all goods are sold at the same time they are manufactured. Storage is done so that goods are available at the time and place they are needed.
  3. Risk-Taking, Standardization And Grading
    Stored goods are subject to several types of risks. They may undergo spoilage, obsolescence, destruction. Consumer preferences may change leaving the business owner with a large quantity of unsold goods. Some of the risks can be shifted through insurance coverage. But the most effective means of dealing with risks is the adoption of good management practices. Standardization and grading enable consumers to make a comparison of the products. Standardization establishes uniformity of specifications in the matter of color, weight, composition etc. grading is done in the case of products that cannot be produced uniformly e.g. fruit, egg.

Marketing Process - Steps

  1. Identification of Potential Changes in Firm’s Market
    Identification of potential changes taking place in firm’s market that could materially affect the firm’s business.
  2. Identification of Customer Needs
    The first step in marketing should be to identify the needs of customers the firm intends to sere. Many firms simply focus an introducing technical perfection in the product with out assessing customer reactions. The small firm is advised to proceed only on the basis of definite information collected with the help of a following exercise.
    • Sources of information about markets and customer:
      There are two broad sources of market intelligence viz,
      • Primary sources which the company develops for us own specific requirements
      • Secondary sources i.e. the published reports of trade association, government agencies, and other. These are not geared to the requirement of an individual firm.
        Primary Sources
        From a marketing perspective, the three primary sources of information are:-
        • Internal Records of the Firm: These consist of invoices, inventory audit, reports of salesmen etc.
        • Mail Surveys: Telephone interviews and personal interviews of actual or prospective customers.
        • Direct Observations: information derived from direct observation of customers and competitors.
          Secondary Sources
          A number of publications provide overwhelming useful marketing information industry. Specific data are published by trade and professional associations.
    • Pinpointing the real customers
      The potential customers must not only be recognized but placed into proper categories as follows:
      • Users. (who consume the product/service);
      • Buyers. (who actually purchase);
      • Deciders. (who decided what should be purchased);
      • Influencer. (who has some influence on the purchase process);
      • Informer. (who controls the flow of information to the decision groups);
        A typical customer may play several of these roles. Costlier the item to be purchased, more actors playing different roles will get into the process. To illustrate, suppose the family decides to buy a TV set. All the family members would be the users. But the actual buyer could be the husband. Deciders could have been the husband and wife both. The children could be the influencers on the decision-makers. Any member could act ad informer by providing or withholding information from decision making group. Generally the role of buyer and decider could have been performed by the same individual. But in case of organizational purchases. For successful marketing, the entrepreneur will endeavor to identify the roles played by different members in the decision process.
  3. Market Segmentation
    It is the grouping of customers into segments so that each segment has similar needs, characteristics and requirements. It helps a firm to relate its products to those requirements of the target group. A small firm may focus on a segment that may not be found attractive by a large firm. Segmentation could be on demographics (i.e. age, sex, religion), geographic, psychographic or social basis. Good segmentation must meet the following criteria:
    • Needs of customs must be both identifiable and measurable.
    • Firm must have the capacity to develop products that will satisfy the customer’s choice in the particular segment.
    • The segment must be economically worthwhile.

Procedure for market segmentation is described below:

  1. Ascertain firm’s Capabilities.
    It must know what wet of needs it can satisfy. For instance, the small firm may be willing to sell its products to foreign buyers. But it must ascertain whether it has the necessary financial, promotional or distributive capabilities.
  2. Ascertain the Competition.
    Identify the characteristics and extent of competition in the various segments. All other conditions being equal, it should focus on the segment which has the least competition or the segment which are too small for large firms.
  3. Focus on the Segment Chosen.
    For a small firm, the segment chosen on the criteria of customer characteristics such as geographical region, demography has been found to be more suitable.

  4. Related Content: MGT601 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of SME Management