Everything you need to know about the approaches to the study of marketing. Marketing is inherently multidimensional.
As such, it is practised and studied from many distinct points of view, with varying means and toward different ends. Perhaps inevitably, a variety of definitions of marketing have emerged and evolved.
“Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others”.
The approaches to the study of marketing are:-
1. Commodity Approach 2. Institutional Approach 3. Functional Approach 4. Managerial or Decision Making Approach 5. The Systems Approach
6. Sales Oriented Approach 7. Production Oriented Approach 8. Consumer Oriented Approach 9. Socially-Oriented Marketing Approach.
Approaches to the Study of Marketing: Commodity Approach, Institutional Approach, Functional Approach and a Few Others
Approaches to the Study of Marketing – 3 Main Approaches: Commodity Approach, Institutional Approach and Functional Approach
In the early stages of evolution of economic life, man’s wants were limited. Production was strictly in accordance with demands. The scope of marketing was naturally also very limited. There were direct and personal relations between the producers and the consumers. Production and marketing techniques were quite simple.
In fact, there were no marketing problems. But now-a-days they are increased with development of knowledge in different areas. But at present large scale production is carried on with the help of most sophisticated machines and the consumption of these goods is made by a very large number of consumers throughout the world.
As such the direct contact between the producers and consumers is almost impossible. There is a long chain of middlemen which make it possible for these goods to be carried to the consumers. Marketing process is getting more and more complex in present times.
Modern marketing process can be studied from three points of view:
1. Commodity Approach.
2. Institutional Approach.
3. Functional Approach.
1. Commodity:
Under this approach a particular product is selected and then a detailed study is made regarding the various sources of its supply, quality of the product, its characteristics, its uses, limits of the market for the product, the intervening middleman engaged in the work of distribution, the various means of transport which actually carry the goods to the consumers and after sales service.
For example if we want to study marketing of wheat or sugar then we shall have a study in detail of the sources of the supply of these commodities, their kinds, different uses, their buyer and actual consumer, suppliers, the various means of transport used to carry them for the actual place of production to the markets and then how these products actually reach the hands of the users by the efforts of the retailers.
The problems relating to the storage classification and gradation, packaging, brand and financing are also involved in marketing of the products.
Commodities may be classified under various groups such as agricultural, minerals and industrial products. Marketing problems have to be studied separately in respect of each product for they differ widely in their characteristics. Commodity approach has its own merits and demerits.
The merit of this approach is that it gives full insight into the inherent problems underlying the marketing of each particular product. But the greater disadvantages of this approach are that it takes a long time to study the marketing process.
2. Institutional:
Under this approach the functioning of various institutions engaged in the task of marketing is studied scientifically. There are the days of mass production and the consumption is made by the people spread over throughout the world. Actual marketing is done by specialised institutional.
Their help is vital in the marketing process. There are wholesaler’s retailers, advertising agencies, transport agencies, marketing research institutes, commercial banks, insurance companies, warehousing, etc. All these institutions help in one or the other way to take the goods to the hands of actual users.
The selection of these institutions depends on the nature of product. For example for industrial products direct selling is preferable through wholesalers and retailers. For consumer goods like soap, cloth, etc. the help of the wholesalers, retailers is essential for distribution work.
The main thing about the consumer goods is that they are purchased by the consumers generally is small quantities and not in bulk. Therefore their direct sale by the producers to the sellers is not economic. It entails higher costs and involves other difficulties.
The great merit of the institution an approach is that it provided complete knowledge of each institution engaged in particular part of marketing.
3. Functional:
Under this approach we study the marketing functions right from the production stage of the goods and services up to their reaching the hands of consumers. These marketing operations include purchase, classification, standardisation and gradation transport storage, advertisement, financing and risk bearing, etc.
The credit for designing this approach goes to A.W. Shaw who enumerated the functions of middlemen as follows-
Sharing the risk, transporting the goods, financing the operation, selling (communication of ideas about the goods); and assembling; assorting and reshaping. Later on L.D.H. Weid introduced some notable changes in the concept by pointing out that the above functions are not always performed by middlemen but also partly by the producers and partly by the consumers.
A marketing function is a major specialised activity performed in marketing. Functional approach, therefore, splits down the field of marketing into a few functions which are to be performed by doing marketing work.
Through such a study of functions, changes in the structure of marketing caused by shifting, combining or eliminating activities from one agency to another could be made easily understandable as a means of classifying the various phenomena of marketing under a small number of categories. This approach is definitely an improvement over the former ones in two respects (i) Conservation of time and (ii) avoidance of much repetition.
But this approach is also not free from defects. Undue emphasis on functions of marketing does not permit one to know how these functions are applied to specific business operations. Secondly the marketing functions are so numerous that it is difficult to eliminate the unnecessary from the necessary functions. Finally this approach is also repetitive to some extent.
Approaches to the Study of Marketing – 6 Basic Approaches: Commodity, Functional, Institutional, Managerial, Systems and Modern
Six basic approaches are commonly used to describe the marketing systems:
1. Commodity approach,
2. Functional approach,
3. Institutional approach,
4. Managerial or Decision-making approach, and
5. Systems-approach.
6. Modern approaches
Approach # 1. Commodity:
Under the commodity approach, we study the flow of a certain commodity and its journey from the original producer right up to the final customer. In such a study, we can locate the centre of production, people engaged in buying and selling of the product, mode of transportation, problems of selling and advertising the product, problems of financing it, problem arising out of its storage and so on.
Through such an approach, we can find out the differences in marketing producers, services and problems. Thus, we can have a fuller picture of the field of marketing. Marketing of agricultural products such as cotton, wheat, jute represent the commodity approach.
Approach # 2. Functional:
Under the functional approach, we concentrate our attention on the specialised services or functions or activities performed by marketers. The study of marketing functions (like, buying, selling, storage, risk bearing, transport financing and providing information) represents the functional approach to the marketing system.
Approach # 3. Institutional:
Under the institutional approach, our main interest centres round the marketing institutions or agencies such as wholesalers, retailers, transport undertakings, banks, insurance companies etc., who participate in discharging their marketing responsibilities during the movement of distribution of goods. We try to find out how these various business institutions and agencies work together to form a total marketing system.
Approach # 4. Managerial or Decision Making:
This approach which is of recent origin combines certain features of the commodity, institutional and functional approaches. In this approach, the focus of marketing study is on the decision making process. The study encompasses discussion of the different underlying concepts, decision influencing factors, alternative strategies and techniques and methods of problem solving.
Approach # 5. The Systems:
A system is a set of interacting or interdependent groups co-ordinated to form a unified whole and organised to accomplish a set of objectives. In the model of systems approach we have- (i) Objective, (ii) Inputs, (iii) Processor, (iv) Outputs, and (v) Feedback. The objectives direct the process. Control monitors the process.
Information feedback gives information from internal and external sources and it is the basis for future change in the system. An open system has its own environment giving the inputs and accepting the outputs. Inputs are processed, producing outputs to meet the objective, the twin objectives of marketing system are customer satisfaction and profitability.
The systems approach provides the best model for marketing activity. It places emphasis on the inputs to the system and the outputs produced. It helps in the determination of marketing and corporate goals, and the development of marketing programmes and the total marketing mix.
Adoption of a systems approach provides a good basis for the logical and orderly analysis of marketing activities. It stresses marketing linkages inside and outside the firm. It emphasizes changing environment. It provides a framework for control. It depends on using the right information. Markets can be understood only through study of information.
Besides these five approaches which are said time and again, we can add some other approaches like:
(i) Legal approach,
(ii) Societal approach, and
(iii) Economic approach.
Legal approach focuses its attention on the legal transfer of ownership of goods to the buyer. It highlights the various legislations that are in force to support marketing system. Acts like Sale of Goods Act, Carrier Act, Construct Act etc., at national level and Act like Regulated Market Act at state level provide legal aspects of marketing.
Societal approach states that society identifies its own consumption needs and satisfy it accordingly. Modern aspect of marketing — consumer to consumer — is the theme of societal approach. Consumers in the society project their desires; producers produce the products accordingly and sell them to consumers. This is a recent thinking on marketing concept. Societal concept projects the idea that “society meets its own consumption needs.”
Economic approach considers market forces like demand, supply, price etc. The market behaviour, the types of markets etc. are considered in this approach.
Approach # 6. Modern:
The basic aim of marketing management is to reach as many customers as possible and serve them better with an intention of creating good market share. In today’s business, customer is king. Therefore, companies formulate their strategies based on marketing concept which they feel more profitable to them.
Following are the marketing concepts on which company can formulate its marketing strategy:
i. Production Orientation
ii. Product Orientation
iii. Sales Orientation
iv. Marketing Orientation and
v. Social Marketing Orientation
i. Production Orientation:
This concept is the oldest of the concepts in business. The focus of production orientation is to reduce costs through mass production. A business orientated around production believes that the “economies of scale” generated by mass production will reduce costs and maximise profits. Production orientation assumes that consumers will prefer products that are widely available and inexpensive.
Organisations focusing on this concept concentrate on achieving high production efficiency, low costs, and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than in its features.
ii. Product Orientation:
This orientation holds that consumers will favour those products that offer the most quality, performance, or innovative features. Companies focusing on this concept concentrate on making superior products and improving them over time.
They assume that buyers admire well-made products and can appraise quality and performance. The problem with this approach is that superiority alone does not sell products; superior products will not sell unless they satisfy consumer wants and needs.
iii. Sales Orientation:
The companies following this orientation aim at selling what they make rather than make what the market wants. Companies following this orientation make the product, and then sell it to the target market. The organization must, therefore, undertake an aggressive selling and promotion effort. Companies following this orientation believe that it has an effective selling and promotional tools to stimulate more buying.
iv. Market Orientation:
A market orientated company puts the customer at the “heart” of the business. According to this concept customer is truly a king. A market orientated organisation attempts to understand customer needs and wants. This is done with the help of market research. Marketing strategy is formulated based on their market research.
Once sales begin, further research will be conducted to find out what consumers think about the product and whether product improvements are required. As markets continuously change, market research and product development is an ongoing process for a market orientation company. Marketing concept tries to achieve competitive advantage by providing products which would suit customer needs.
v. Social Marketing Concept:
It is the use of marketing principles and techniques to influence a target audience to voluntarily accept, reject, modify, or abandon a behaviour for the benefit of individuals, groups, or society as a whole. Social marketing is the use of commercial marketing principles and techniques to improve the welfare of people and the physical, social and economic environment in which they live. It is a carefully planned, long-term approach to changing human behaviour.
Social marketing has similar characteristics to marketing orientation but with the added quality that there will be a curtailment of any harmful activities to society, in product, production, or selling methods. Social marketing can be applied to promote good products or to make a society avoid bad products and thus to promote society’s well-being as a whole.
For example, this may include asking people not to smoke in public areas, asking them to use seat belts, or prompting them to make them follow speed limits. Social marketing is sometimes seen only as using standard commercial marketing practices to achieve noncommercial goals.
Approaches to the Study of Marketing – Traditional and Modern Approaches
Marketing philosophy has undergone a gradual but thorough change since the industrial revolution. This change in the philosophy of marketing can be compartmentalised into four stages or four different concepts of marketing.
The first two are the traditional concepts and the last two are the new approaches of marketing:
1. Production Oriented Marketing,
2. Sales Oriented Marketing,
3. Consumer Oriented Marketing,
4. Socially Oriented Marketing, i.e., socially responsible marketing approach.
1. Production Oriented:
Till 1930, there was a feeling amongst the manufacturers that if a company manufactured a good product it would sell with little or no promotion effort. This concept of marketing i.e. if a product is really good and the price is reasonable, no special efforts are required to market the product is known as The Production Oriented Concept of Marketing.
It is based on the following assumptions:
(a) A firm should manufacture only certain basic products.
(b) The most crucial task of management is to keep the cost of production relatively low.
(c) Anything that can be produced sells.
This concept of marketing can successfully exist only in a sellers’ market, i.e., a market in which supply is limited and demand exceeds supply. Hence after 1930, when the market changed from a sellers’ market to a buyers’ market this concept was overthrown to be replaced by a new philosophy known as the “Sales Oriented Concept of Marketing.”
2. Sales Oriented:
After 1930, certain social and economic changes took place which resulted in a shift from agriculture to industry. Transport and communication systems developed and mass production became the order of the day. This resulted in an increase in competition.
As more and more competitors entered the area of manufacture, the market slowly turned into a buyer’s market, i.e., the supply exceeded demand. It was no longer possible to sell everything that was manufactured. The problems of the manufacturer now focused on how to increase sales.
This was mainly because for the same number of customers, now there were many sellers. The purchaser had a choice of products and hence the seller now had not only to manufacture a good product but also convince the purchaser that his product was better than the competitor’s product.
For this he had to have an effective sales organisation, choose the right channel of distribution, concentrate on advertising, sales promotion and other demand increasing activities. This phase continued till 1950. In fact, it still holds good to a certain extent even today; it is prevalent in the selling of consumer non-durables and consumer durables, especially products which have a status symbol.
3. Consumer Oriented:
This concept came into existence around the 1950’s, when the manufacturers realised that no amount of aggressive selling would force people to buy a product they did not need. This era forced the manufacturers to rethink and realise that the basis of all their marketing efforts should revolve around the need of the customer. It was around this period of time that marketing research became an important function of marketing. This concept concentrates on the consumer rather than the product.
It is based on the following assumptions:
(a) The firm should produce only that product which is desired by the customer.
(b) Management should integrate all its activities in order to develop programmes to satisfy consumer wants.
(c) Management should be guided by long term profits rather than quick sales.
This philosophy of marketing brought about two major changes. Firstly, it placed the consumer at the crux of all marketing activities, and secondly, it replaced the age old ‘caveat emptor’, attitude with ‘caveat venditor’. This philosophy will continue so long as the customer continues to be the king of the market.
4. Socially-Oriented Marketing:
The philosophy of marketing was further refined during the 60’s and 70’s and a new concept of Social Marketing was coined and accepted by manufacturers all over the world. This concept focuses not only on customer satisfaction but also on customer welfare and social welfare as well. By customer and social welfare is meant a pollution free environment and good quality of human life.
Thus, an automobile manufacturer must manufacture not only a good vehicle but one which will reduce pollution or a tobacco manufacturer must manufacture not only good quality tobacco but one which will do the least harm to the environment and health of the consumers.
In fact, this concept of marketing goes a step further and says that it is the duty of the manufacturer to awaken those needs in the people, the satisfaction of which will lead to social good. Here the marketers concentrate on satisfying the needs of the society as a whole rather than on individual need satisfaction.
Social marketing is often concerned with a major change in ‘attitudes’ which is an uphill task. In India social marketing is undertaken by a variety of organisations and groups such as units of the UNO like WHO, UNICEF, international organisations like the Red Cross, and the Rotary Club, socially conscious companies, charitable societies and associations of individuals.
Approaches to the Study of Marketing – 3 Important Approaches: Commodity, Institutional and Functional
In the early stages of evolution of economic life, man’s wants were limited. Production was strictly in accordance with demands. The scope of marketing was naturally also very limited. There was direct and personal relations between the producers and the consumers. Production and marketing techniques were quite simple.
In fact, there were no marketing problems. But now-a-days increase with development of knowledge in different areas. But at present large scale production is carried on with the help of most sophisticated machines and the consumption of these goods is made by a very large number of consumers throughout the world.
As such the direct contact between the producers and consumers is almost impossible. There is a long chain of middlemen which make it possible for these goods to be carried to the consumers. Marketing process is getting more and more complex in present times.
Modern marketing process can be studied from three points of view:
1. Commodity Approach.
2. Institutional Approach.
3. Functional Approach.
Approach # 1. Commodity:
Under this approach a particular product is selected and then a detailed study is made regarding the various sources of its supply, quality of the product, its characteristics, its uses, limits of the market for the product, the intervening middleman engaged in the work of distribution, the various means of transport which actually carry the goods to the consumers and after sales service.
For example if we want to study marketing of wheat or sugar then we shall have a study in detail of the sources of the supply of these commodities, their kinds, different uses, their buyer and actual consumer, suppliers, the various means of transport used to carry them for the actual place of production to the markets and then how these products actually reach the hands of the users by the efforts of the retailers. The problems relating to the storage classification and gradation, packaging, brand and financing are also involved in marketing of the products.
Commodities may be classified under various groups such as – agricultural, minerals and industrial products. Marketing problems have to be studied separately in respect of each product for they differ widely in their characteristics. Commodity approach has its own merits and demerits.
The merit of this approach is that it gives full insight into the inherent problems underlying the marketing of each particular product. But the greater disadvantages of this approach is that it takes a long time to study the marketing process.
Approach # 2. Institutional:
Under this approach the functioning of various institutions engaged in the task of marketing is studied scientifically. There are the days of mass production and the consumption is made by the people spread over throughout the world. Actual marketing is done by specialised institutional.
Their help is vital in the marketing process. There are wholesalers, retailers, advertising agencies, transport agencies, marketing research institutes, commercial banks, insurance companies, warehousing, etc. All these institutions help in one or the other way to take the goods to the hands of actual users.
The selection of these institutions depend on the nature of product. For example for industrial products direct selling is preferable through wholesalers and retailers. For consumer goods like soap, cloth, etc., the help of the wholesalers, retailers is essential for distribution work.
The main thing about the consumer goods is that they are purchased by the consumers generally is small quantities and not in bulk. Therefore their direct sale by the producers to the sellers is not economic. It entails higher costs and involves other difficulties.
The great merit of the institution an approach is that it provided complete knowledge of each institution engaged in particular part of marketing.
Approach # 3. Functional:
Under this approach we study the marketing functions right from the production stage of the goods and services up to their reaching the hands of consumers. These marketing operations include purchase, classification, standardisation and gradation transport storage, advertisement, financing and risk bearing, etc.
The credit for designing this approach goes to A.W. Shaw who enumerated the functions of middlemen as follows:
Sharing the risk, transporting the goods, financing the operation, selling (communication of ideas about the goods); and assembling; assorting and reshaping. Later on L.D.H. Weld introduced some notable changes in the concept by pointing out that the above functions are not always performed by middlemen but also partly by the producers and partly by the consumers.
A marketing function is a major specialised activity performed in marketing. Functional approach, therefore, splits down the field of marketing into a few functions which are to be performed by doing marketing work. Through such a study of functions, changes in the structure of marketing caused by shifting, combining or eliminating activities from one agency to another could be made easily understandable.
As a means of classifying the various phenomena of marketing under a small number of categories. This approach is definitely an improvement over the former ones in two respects. Conservation of time and avoidance of much repetition.
But this approach is also not free from defects. Undue emphasis on functions of marketing does not permit one to know how the functions are applied to specific business operations. Secondly the marketing functions are so numerous that it is difficult to eliminate the unnecessary from the necessary functions. Finally this approach is also repetitive to some extent.