Marketing is a business activity that focuses on providing value and benefits to customers not only by selling products/ services. It also uses different means to communicate, distribute and determine relevant pricing strategies to customers and other stakeholders like employees, suppliers, partners, shareholders, distributors, etc., with products / services, ideas, values and benefits whenever and wherever they desire.
This customer-oriented process that involves interaction with multiple stakeholders to create awareness and boost business revenues is called marketing management.
Marketing is a very broad term that is difficult to conceptualize and define. The American Marketing Association defines marketing as the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.
Some of the functions of marketing are:
A. Functions of Exchange – 1. Buying 2. Assembling 3. Selling
B. Functions of Physical Supply – 1. Transportation 2. Storage and Warehousing 3. Choosing and Motivating Channel of Distribution
C. Facilitating Functions – 1. Financing 2. Risk Taking 3. Standardizing or Grading 4. Packaging 5. Branding 6. Labelling 7. Pricing.
It is very difficult to list down and classify the marketing functions. Moreover all the marketing functions may not be performed by all businesses. There are several classifications of marketing functions according to different experts in the field.
Functions of Marketing: Functions of Exchange, Functions of Physical Supply and Facilitating Functions
Functions of Marketing – Buying, Assembling, Standardizing, Grading, Branding, Packing, Packaging, Warehousing, Insurance and Financing of Trade
Function # 1. Buying:
The Buying activities of marketing are complementary to selling efforts. Buying includes the determination of one’s needs, the seeking out of sources of supply the negotiating of prices and other terms, and the transfer of title from the seller to the buyer. Buying is an important function, and occupies much of the time of both business concerns and ultimate consumers. The ultimate purpose of buying is to bring commodities together where they are wanted for immediate use in production or in personal consumption.
Assembling is not buying; it is merely putting together of goods to secure larger lots for shipment, for sale, or for manufacture. Assembling plays an important part in the marketing of agricultural goods which are normally grown in small quantities by large number of producers in territories spread over vast areas. Concentration of raw materials is necessary, because they are used in large quantities by manufacturers, and who require a regular supply of standardized materials. Assembling assures this.
To grade is to assort goods into lots which are approximately alike in variety, size and quality. To standardize is to give permanence to grades by means of inspection of commodities. When goods, as produced, are not standardised, and when the standard to which they conform is unknown, grading or classification is necessary. The object of these efforts is to prepare goods so that a common standardised nomenclature or grade can be utilised in bringing about an understanding between buyer and seller.
Grading may be based on size, colour, appearance, chemical contents, strength, shape, specific gravity, amount of foreign matter, amount of moisture, ripeness, sweetness or length of fibre, etc. A grade carries the idea of uniformity. Therefore, a standard or grade often means that the goods are of certain quality regardless of the producer.
Besides general gradations, individual producers establish their own standards, commonly known as Brands. Branding is the process of identifying the name of the producer with the product. This is usually done by affixing to the product or its container the trade name or brand represented by words or designs. Branding is very common with consumption goods and with equipment. A brand conveys an idea of permanence, subject to the possibility of change for improvement in quality.
As a rule, in selecting a brand name or design consideration should be given to the following points:
a. The name or word should be simple and easy to pronounce so that it can be remembered.
b. The name or design should possess its own distinctive feature to avoid its being confused with some other name or design.
c. It should not lend itself to easy imitation.
d. It should be suggestive of good quality.
e. It should not be frequently changed.
Packing refers to the wrapping and crating necessary for the transport or storage of goods. Many goods must be packed in order to be preserved or delivered to the buyers. Liquids must be placed in barrels, bottles or cans. Bulky fabrics are compressed into bales. Heavy goods are often crated for handling or protection during transportation.
Goods must be placed in boxes for delivery to dealers, while the retailers often wrap goods or place them in bags for delivery to ultimate consumers. Fragile goods must often be packed in special containers.
Packaging means placing the product in small packages – boxes, cartoons, bottles or cans – for sale to the ultimate consumers. It is axiomatic that the job of packaging is to sell; and the major purpose of any package is to influence or control the location of product storage within the marketing channel right to the ultimate consumer.
The Functions of the Product’s Package are:
a. Protecting the product.
b. Adapting to production line speeds.
c. Promoting the product.
d. Increasing product density, i.e., increasing the ratio of product volume to package volume.
e. Facilitating the use of the product.
f. Having re-use value for the consumer.
The successful package is not the one with an intriguing shape or design, but the one whose over-all design, shape, colour, and printed message delivered an impact that resulted in a personal relationship between the consumer and the package on the shelf. Today the package must come alive at the point of the purchase. The salesman has now stepped inside the package. The manufacturer can create and control the salesman in the package.
A poorly designed package tells the consumer that the maker of the product does not care. Like an impatient salesman at five minutes before closing time, he is saying “take it or leave it”. But a well-designed package is proof that the manufacturer really cares about both the customer and the product and is willing to make an extra effort to please. He is employing a friendly, interested salesman.
Warehousing or storage creates time utility. Many goods are not produced regularly at the point where they are wanted for consumption, and they must be stored from the time of production until they are wanted by the consumer, if they are to be used in satisfying human wants. Goods produced at a distance from the consumer must be transported to the consumers.
In order to ensure an even supply, a stock of such goods must be maintained near the consumers as protection against delays and uncertainties of transport and to permit transport in economical units. Many agricultural goods produced seasonally are supplied to consumers more or less evenly throughout the year.
Grains, cotton, tobacco and sugar furnish examples. They can be stored for a fairly long time without any deterioration. Cold storage further enables many perishables such as butter, eggs and fruits, to be stored for regular supplies.
Again, demand for some products is irregular. In such cases storage can be called into use so that production can be more regular. Most jewellery, fancy goods, utensils, toys are bought at special occasions, such as Diwali or Christmas. Such goods produced in “off months” must be stored until they are wanted by the consumers.
In order that goods can be marketed efficiently, it is important that adequate storing facilities should be available. Sufficient space, proper location, adequate equipment to give protection to goods against heat, cold, moisture, dryness, vermin, fire and thieves should be available. A warehouse should be so located and constructed that goods can be received and shipped at minimum expense.
It is generally desirable that a warehouse, where large quantities of goods are stored, should be located on railway siding or on the harbour according to need. It should have adequate space for the trucks to load and unload and should be situated near the arterial streets or highways. Facilities for handling goods are important.
In business, as in private life, there are risks of every kind. Fortunately, most business risks are comparatively remote, but that does not lessen the loss they involve when they do occur. All prudent men will always catalogue most carefully every possible risk which the business they own or control may be running and consider how best they can prevent each risk materialising, or minimise and provide against its effects.
The word “risk”, as used here, means uncertainty of loss where the loss is caused by accidental and unexpected circumstances beyond the control of the management. Such risks have to be guarded against, and one of the ways to cover them is to take insurance. Every prudent businessman resorts to insurance. Insurance is really an element of business; without it no vehicle of transport on sea or land or in the air is allowed to move, nothing is built, and no wheel turns.
Insurance may be described as the provision which a prudent man makes against fortuitous or inevitable loss or misfortune. It is a commercialised form of spreading risk. The risk of loss is spread over a number of persons, each of whom is prepared to bear a fraction of the loss should the eventuality against which the owner of the property wishes to protect himself actually take place.
The person who assumes this risk is called the insurer, and he does so in consideration of the payment of a sum of money called premium, so that those entering into contracts of insurance called the assured, who suffered damage, are compensated from a common fund to which they and others have contributed. Insurance is, therefore, sometimes described as a cooperative way of spreading risk.
Methods of financing internal trade in different countries are different. Bulk of the Indian trade is financed by the indigenous system, and a little by the modern or Western system of banking.
The financing agents or the constituents of the money market in India are:
a. The numerous and heterogeneous group of indigenous bankers and brokers, called by different names in different parts of the country, such as Shroffs, Banias, Mahajans. Sahukars, Marwaris and Chettis, whose operations are almost entirely confined to the interior of India;
b. The co-operative banks, which advance mainly to member-cultivators;
c. The Indian joint-stock banks run on European lines; which advance for a short-term on collateral securities, by discounting trade bills, and against commodity security;
d. The exchange banks, which mainly finance external trade;
e. The State Bank of India; and
f. The Reserve Bank of India.
In the import trade the source of finance for the merchant is the Commission Agent, who functions as an intermediary to the buyers and sellers of goods in an up-country market. He advances money to several merchants. The purpose of this agent in advancing money is to secure substantial business for his own loan. He advances loans to cultivators also so that the cultivators are under obligation to sell their commodities through this agent.
In this way commission agents act as financing agencies for getting business for themselves. It is no exaggeration to say that 80 to 90 per cent of the total business is done by the native Shroffs or Mahajans; and Hundi is the instrument in the hands of these indigenous bankers. Hundis are drawn for three purposes – (a) for raising loan (hand bill) ; (b) for financing trade (bill of exchange) ; and (c) for remittance of money from place to place (draft or cheque).
The joint-stock banks follow different methods of financing trade. The most common method of short-term lending is through discounting the concern’s promissory note or hundi. There are unsecured time loans with a definite date of maturity ranging from one month to six months. A small concern would borrow from local banks, for they can render frequent advice, and can be relied upon to take a personal interest in the concern’s welfare.
Another method is bankers’ acceptances, although they are used primarily in financing export and import trade and in financing domestic shipments where the buyers and sellers are unknown to each other, when because of distance or other reasons the seller finds it difficult to investigate the credit-standing of the buyer. Another method is commodity loans. Business concerns often obtain their short-term funds by borrowing from banks against commodity collateral.
By this means the business concern can obtain a relatively greater advance than its own financial standing and credit rating would entitle it to obtain on unsecured hundis. Borrowing on bills of lading against shipments is another means of securing funds for short periods of time. Specific merchandise in the concern’s profession at times may be used as security for loans. A floating charge may be created on the stock. The banks allow overdrafts and open cash credit accounts against suitable security.
Occasionally, in order to secure the necessary funds with which to postpone or forestall financial insolvency, companies sell their open book accounts. This is referred to as- “assigning”, “hypothecating” or “pledging” accounts receivable. Loans of this type can seldom be obtained from the ordinary commercial banks but must be .secured from finance companies at a higher charge than the customary rate of interest.
Functions of Marketing – Functions of Exchange, Functions of Physical Supply, Facilitating Functions and Other Functions
1. Functions of Exchange:
It is the process of the passing of goods into the customer’s hands. It can be split into buying, assembling and selling.
This is the first step in the process of marketing. A manufacturer has to buy raw materials for production of goods; a wholesaler has to buy goods to sell them to the retailer; a retailer has to buy goods to be sold to the consumer. Buying involves transfer of ownership of goods from seller to buyer.
Assembling implies to the creation and maintenance of the stock of goods, purchased from different sources. Usually, the dealer or middleman purchases the goods from more than one seller. The goods have to be collected and assembled at one place in such a case.
Selling and buying are related to each other. Marketing efforts evolve around the buying and selling functions. In business, the selling function is most important. The primary objective of marketing is to sell the products at a profit. By selling, the ownership is transferred to the buyer. Sales are concerned with the activities, which convert the desire into demand. Creation of demand, its maintenance, expansion, etc., are the soul of sales efforts.
2. Functions of Physical Supply:
The important group of marketing process is the physical supply. These are the functions that are related with creation of place and time utilities.
Physical transfer of goods from the manufacturer to consumer takes place by means of the following functions:
Marketing process requires an economical and effective transportation system. A good system of transportation increases the value of goods by the creation of place utility. An opening of new markets has been possible by the quick development of transportation and communication. It has resulted in the expansion of markets, regular supply at lower price and improved services to the consumers.
(ii) Storage and Warehousing:
Usually, there is a time lag between production and consumption of goods. Sometimes, seasonal production of goods having continuous consumption or seasonal consumption of goods produced regularly, requires storage. It involves holding and preserving goods between such time periods.
It facilitates a steady flow of commodities in the market. Warehouses can be maintained at central places from where the distribution can be made according to the needs of the consumers. Storage tends to adjust the supply to demand of the product and also holds the price line. Therefore, storage can be regarded as a function of equalisation. It creates time and place utilities.
(iii) Choosing and Motivating Channel of Distribution:
A group of individuals and organisations directing the flow of products from producers to customers is termed as a channel of distribution. Channels of distribution should make products available at the right time, in the right place, and in the right quantity. Channel decisions are critical because they determine a product’s presence and buyers’ accessibility to the product.
3. Facilitating Functions:
Marketing process turns easy by these functions and includes financing, pricing, risk-bearing, standardisation and market information, etc.
It is perilous to carry on marketing activities smoothly without the availability of adequate and cheap finance. Commercial Banks, Co-operative Credit Societies, and Government Agencies arrange for short-term, medium-term, and long-term finance to facilitate marketing. Trade credit is also one of the important sources of finance.
Pricing is also an important function as it is closely related to selling. Price policy of the concern directly affects the profit element and thus, its successful functioning. To determine the price policy, several factors are to be borne in mind such as cost of the product, competitors’ prices, marketing policies, government policy or customary or convenient prices, etc.
The marketing activity will be closely involved in agreeing and setting market prices, terms of supply and payment conditions. Tasks involved in managing pricing include, Analysing competitors’ prices; Formulating pricing policies; Determining method or methods used to set prices; Setting prices; Determining discounts for various types of buyers and Establishing conditions and terms of sales.
In the marketing process, numerous risks arises like—damages to goods, physical loss, changes in economic values of goods, mismanagement, credit losses, etc. These are more or less inherent in the marketing process. There are losses— on accounts of fire, flood, deterioration, bad debts, etc. On all these occasions, an intelligent businessman minimises risks. As a result, the risks are to be shouldered, shifted or reduced. Some of the risks are insurable, while others are not.
Standard is a specification of goods. It is a ‘norm’, ‘grade’ or ‘category’. Standards are fixed on physical characteristics of products. Standardisation is related with the division of commodities into distinct groups. Standard is used in providing certain basic qualities to the goods for their use. The standardised products possess uniform characteristics e.g., shape, weight, size, etc.
(v) Marketing Information:
Marketing conditions are dynamic and affect the industry to any extent. Market information includes all facts, estimates, opinions and other information used in making decisions, which affect the marketing of products or services. The desired success of marketing depends on correct and timely decision.
These decisions are based on market information or market intelligence. Modern marketing must have information of size, location, characteristics of markets, etc. The customer’s wants, habits, purchasing power, etc., are to be considered; the strength or weakness of competitors, trend in market, supply and demand, etc., are also to be taken into consideration.
(vi) Managing Product:
The marketing function is held for forecasting and managing the rate of supply and distribution of the firm’s existing products. Of equal importance will be its ability to ascertain what new products should be developed by the firm.
(i) Identifying Market Opportunities:
Success of marketing depends upon correct and timely identification of customers’ needs and wants, so that such needs can be converted into marketable opportunities, keeping in mind the technological developments, new products development and research taking place within as well as outside the organisation.
(ii) Promoting Products and Services:
For communicating to target market customers the existence of its products and the benefits to be obtained from purchasing them the marketing function will be responsible. The advertising and promotional process is aimed at the target customer group-
(a) To communicate with the customer.
(b) To encourage the customer to consider the product or service and understand its benefits.
(c) To persuade/informs the customer.
(d) To reassure the customer that he or she has made the correct purchase decision.
(e) To encourage the customer to make further purchases of the firm’s products or services.
(iii) Planning the Marketing Activity:
Marketing planning is inclusive of deciding on marketing strategies that will help the company attain its overall objectives. The primary objective for most companies is to make profit, so the marketing plan outlines how company resources can be maximised in meeting customer needs so that this can happen.
Functions of Marketing – 3 Main Functions: Functions of Exchange, Functions of Supply and Facilitating Functions
Marketing consists of three processes. First, concentration which implies gathering products and materials from different places at a central point. Second, dispersion which involves dispersion of goods from the central point to ultimate users at different places. The third, creating balance between demand and supply of goods and services.
The various functions involved in these processes are described below:
1. Functions of Exchange:
These are basic functions of marketing, without which marketing is not possible.
i. Buying and assembling, and
i. Buying and Assembling:
Purchasing goods is no doubt the starting point in the whole marketing process. It is so special because of the fact that marketing is always consumer-oriented. Goods are purchased, manufactured or collected from numerous centres according to the needs of the consumers.
The selling function is the heart of the marketing function as it enables a business enterprise to realise its marketing objective by affecting a transfer of the physical possession and ownership of goods from the seller to the buyer. Selling results after locating buyers and inducing them to buy in a democratic manner—through pursuing promotional activities like advertising, personal selling or other sales promotion methods.
2. Functions of Supply:
i. Transportation and
It is this function of marketing which creates “place” utility in the goods. Proper transport arrangement of the goods is an essential part of the whole marketing process. Good transportation of the goods goes a long way in improving and widening the markets.
It is yet another important function of marketing process. By this the goods are retained from one time to another time when they are needed more. This helps in creation of the “time” utility. Storage assumes still more importance in view of the fact that the production in the modern times is always carried on much in anticipation of demand.
Therefore, the goods are sold only in particular seasons and produced throughout the year, while some other goods are produced only during a season but are sold throughout the year. In either case, storage serves an important purpose.
3. Facilitating Functions:
Facilitating marketing functions are those which facilitate the process of marketing.
These functions include the following:
Though not the main but only an ancillary function, financing is certainly an important function of marketing. Marketing firms require more funds for their working capital requirements than for fixed capital ones. It is so because marketing concerns generally have to maintain huge stocks. Finances for these marketing firms are generally arranged by using different sources such as own capital, bank credit and trade credit.
ii. Risk Taking:
The market process is beset with several types of risks at each stage. Some marketing risks are such as could be easily insured against by entering into a contract of insurance with an insurance company.
However, the real risks of marketing are those which are non-insurable and have to be assumed by the marketer himself—as incidental to the conduct of marketing operations.
Some such risks are:
(a) Risks arising from changing Government policies.
(b) Risks arising out of the actions and reactions of competitors.
(c) Risks arising from depression in economic atmosphere of the country.
(d) Risks due to changing fashions.
iii. Standardizing or Grading:
Some standards are set for a product as far its size, shape, colour, material etc. are concerned. Standardisation helps in the efficient performance of the other marketing functions. According to Clark, “Standardisation includes the establishment of standards, the sorting and grading of the goods conforming to these standards, repacking, breaking up the large quantities into small units of the desirable size….”.
Therefore, grading is an important process in the whole series of the functions of marketing. Grading is specially necessary in case of products coming from the fields, forests, mines or water.
It implies enclosing or encasing a product into suitable packets or containers for easy and convenient handling of the product by both the seller and specially the buyer. In short, packaging provides a sort of protective cover for the product. Packaging is a method of sales promotion.
It refers to assigning a distinctive name, brand or symbol to a product in order to differentiate it from competing products. It gives a separate identity to a product.
Branding of goods offers the following advantages:
(a) Branding makes buying easy.
(b) Branded goods psychologically ensure quality.
(c) Branding of goods facilitates advertising.
(d) It enhances the goodwill of the manufacturers.
(e) Need of middlemen is considerably reduced.
Labelling means putting identification marks on the package of the product.
Labelling is significant for the following reasons:
(a) Labelling is an important feature of the product.
(b) It is a strong sales-promotion tool.
The term ‘price’ denotes the money value of a product. It is the amount of money for which a product can be exchanged. Pricing determines sales and profits and therefore price should be fixed after taken into consideration all relevant factors such as cost, selling expenses, profit margin etc.
Functions of Marketing – Warehousing, Buying, Selling, Transporting, Financing and Market Research
In modern day business, goods are produced in anticipation of future demand. Thus, goods need to be stored from the time they are produced till the time they are actually required for consumption. Warehousing function stores the goods till they are demanded in the market, thus creating time utility in respect of such goods. As a result, goods stored in warehouses ensure a steady flow of goods in the market.
Buying is the process of getting a commodity at a specific price from the seller.
Buying may be for the purpose of:
a. Re-selling as in the case of a trader.
b. Satisfaction of human wants as in the case of a consumer.
c. For the purpose of further manufacturing as in case of raw-material purchase by the industry.
For bulk purchases, a list of requirements needs to be prepared and sent to the supplier. If buying is done judiciously, it results in lowering the cost of production/expenditure.
Selling function, in marketing, strives to create new markets for the goods in anticipation of demand. Selling thus helps in creating potential demand for the product. Most importantly, it ensures transfer of ownership/title to goods from the seller to the buyer. Such transfer of ownership through the medium of selling leads to generating fresh revenues for the business.
Transportation function ensures the timely movement of goods from the place of production to the place of consumption. It thus, helps in creating place utility for the goods. It also encourages large scale production of goods since transportation aids the raw-material movement to the factory and the finished goods movement to distant markets.
Finance is required to fund marketing as well as other business activities. It should be available in adequate quantity at affordable rates of interest. Such easy availability of finance ensures long term growth of the business.
vi. Market Research:
Market research is required to obtain useful information regarding the market.
Functions of Marketing – Top 12 Functions
In order to complete the process of exchange of goods and services from producers to consumers, marketing performs the following functions or activities:
Function # 1. Gathering and Analyzing Market Information:
The main focus of marketing is to satisfy the needs and wants of its existing and potential customers. To be able to achieve this, a marketer has to gather and analyse information related to the needs of consumers. The market analysis helps business to-
(a) Avail the opportunities and beware of the threats from the external business environment.
(b) Decide on opportunities to be pursued considering strengths and weaknesses of the organisation.
Function # 2. Marketing Planning:
A marketer has to develop appropriate marketing plans so that the business achieves its marketing objectives. The marketing plan involves laying out specific strategies to increase market share, promotion programmes and increase production capacity to meet increased demand.
Function # 3. Product Designing and Development:
The product designing and development is another important marketing activity. A good design improves the quality of the product and makes it attractive and competitive in the target market. The shape, size and packaging are the added advantages a customer looks for in a product he/she is planning to purchase.
Function # 4. Standardisation and Grading:
Standardisation refers to producing products with predetermined specifications and grading classifies the products into different groups on the basis of important characteristics like size, quality etc. Standardisation provides uniformity and consistency to the product reducing the need to inspect, test and evaluate the products. Thus a firm is able to build confidence amongst customers about product quality. Grading on the other hand is required for products which are not produced with predetermined specifications. It ensures that goods sold belong to particular quality and thus helps to realize prices according to the product quality.
Function # 5. Packaging and Labelling:
Packaging refers to designing the package for the products and labelling refers to designing the label to be put on the package. Packaging and labelling plays an important role in marketing the product. While labelling provides all important information about the product, the packaging on the other hand helps to build product image. Informative and attractive packaging and labelling act as promotional tools for a business organisation.
Function # 6. Branding:
One of the most important decisions for a company is to decide whether they wish to sell the product in its generic name or sell with a brand name. For example, a T-shirt can be just sold as a T-shirt or may be sold under a brand name like NIKE, Colourplus etc. Brand name provides business an identity and distinguishes its products from that of its competitors. Branding builds company’s image, customer’s loyalty and promotes sales in the long run.
Function # 7. Customer Support Services:
Customer Support Services are related to handling customers after goods are sold to them. These services aim to maintain good relationship with existing customers and attract potential customers. Efficient support services help business to get repeat sales and develop brand loyalty for a product.
Important support services include handling complaints and adjustments, procuring credit services, maintenance services, technical services and customer information.
Function # 8. Pricing of Products:
Price of a product affects the success or failure of a product in the market. Demand of product is inversely related to its price. Usually, lower the price higher would be the demand of the product. The marketers analyse all the factors like target customers, their level of income, competitor’s prices etc. while setting prices or determining the price strategies.
Function # 9. Promotion:
Promotional techniques are used to create product awareness amongst the potential target customers and persuade them to purchase the product. A marketer takes crucial decisions like deciding the mix of promotional techniques like advertising, personal selling, publicity and sales promotion and the budget for each of the techniques used to promote the product.
Function # 10. Physical Distribution:
Distribution of goods and services is an important marketing activity. The marketer has to decide on the market intermediaries or channels of distribution to be used for physical movement of goods from the manufacturer’s place to consumers. A marketer has to decide if goods would be sold through wholesalers or retailers or direct to consumers. The physical distribution decision depends on the nature of the product and location of consumers. It facilitates transferring of ownership of goods, thus creates ‘possession utility’.
Function # 11. Transportation:
Consumers are widely spread and geographically separated from the place where goods are manufactured. Transportation facilitates movement of goods from the manufacturer to the consumer and thus creates ‘place utility’. A marketer decides on the mode of transportation after considering factors like nature of the product, location of target market and cost of transportation.
Function # 12. Storage or Warehousing:
The need of warehousing and storage depends on the time gap between production or procurement of goods and their sale. For smooth flow and regular supply of goods businesses need to maintain appropriate stock levels and thus will require warehousing or storage facilities. The warehousing function is performed by manufacturers, wholesalers and retailers. The decision regarding storage facilities depends on the nature of business and level of stock to be maintained. Business having irregular supply or irregular demand will require more warehousing facility as compared to business having normal supply and demand. Storage creates ‘time utility’.
Functions of Marketing – Functions of Exchange and Functions of Physical Supply
The functions of marketing are broadly classified as follows:
A. Functions of Exchange:
This set of functions belongs to actual transfer of ownership in the goods from sellers to buyers. There are two such functions where buying and selling or selling and buying are interacting each other.
In this article, the function ‘buying’ means purchase of goods for the purpose of resale and making profit out of it. Such buying may be done by all who are in the channel of distribution. Channel means the process through which goods move manufacturers to the final consumers. Here the goods bought are for the immediate resale, but not for self-consumption or use in business asset. Such goods are, sometimes referred to as stock of goods.
Buying is an important initial function. This is followed by the other equally significant function i.e., selling. The success of selling is considerably depending on the successful performance of buying function. Therefore, a proverb “goods well bought are half sold”-is always referred.
This indicates that care, caution, diligence, wisdom be applied while buying of goods. Greater the cares taken in buying lesser are the efforts needed to sell them. Quality, reasonable price, appropriate, most wanted goods shall attract the customers and very little efforts are required to sell them. Therefore, buying is considered as the most important function.
Before buying decision is made, ‘the market position, needs of customers, availability of goods in the market, competitors’ strategy, expected price range, quantity, future changes, earlier trends are to be studied. This information is provided by specialised agencies and the businessman has to apply much of his own judgement and experience.
It is the ‘blood pumping’ function of a concern. The continuity in business is provided by selling function. Selling is the crux and soul of marketing function as it decides the very survival and existence of a firm. The goods manufactured or bought from producers should be sold as quickly as possible to generate funds for all activities to be functioning.
The importance of selling is far more increasing in the present time of open economy. This has no longer remained as an easy function. The markets have become complex, complicated, and competitive. No firm can be assured of sales unless persistent efforts of selling are made. Sales promotion and advertising have almost become the essential part of a business organisation.
Selling has to be performed simultaneously along with manufacturing or buying of goods. Mass production and mass selling stand on equal footing.
B. Functions of Physical Supply:
Modern manufacturing is known for its large scale production. There is a time gap between the production and consumption. Hence, goods should be preserved and stored. This storing activity facilitates smooth movement and balancing the demand and supply of goods. They create time utility.
Both the places of production and consumption are different. The goods are produced in one place and consumed in other place such; gap between these two ends is filled by a marketing function called Transportation. To transport mean to physically carry the goods. Unless, the goods are carried to consumption centers’ the production has no meaning and marketing is incomplete. This physical supply function adds time and place utility to the products.
Transportation is identified as the wheel of progress, civilization, nervous system of body, indispensable economic activity that connects the production and consumption centres.
Functions of Marketing – Classified!
Marketing itself is a series of activities which are concerned not only with bringing goods and services from the producers to the consumers but also conveying information from the consumers to the producers. Such information or feedback is very necessary for a producer to produce goods and services to suit the requirements of the consumers.
Marketing is actually involved in all the activities of a business such as production, purchasing, human relations management etc. In the present situation where every seller has to adopt the marketing approach, every activity of his must be focused on the satisfaction of the consumer needs. A few activities however are directly identified.
It is very difficult to list down and classify the marketing functions. Moreover all the marketing functions may not be performed by all businesses. There are several classifications of marketing functions according to different experts in the field.
According to Cundiff and Still, the following is the classification of marketing functions:
1. Merchandising Functions:
i. Product planning and development.
ii. Standardizing and grading.
iii. Buying and assembling.
2. Physical Distribution Functions:
3. Auxiliary Functions:
i. Marketing financing.
ii. Risk bearing.
iii. Market information.
According to J. F. Pyle, the following is the classification of marketing functions:
1. Functions of Concentration:
i. Buying and assembling.
vi. Risk bearing.
2. Functions of Dispersal:
vi. Risk bearing.
According to Converse Hugey and Mitchell, the following is the classification of marketing functions:
1. Functions of Creation of Time and Place Utility through Physical Movement:
2. Functions of Creation of Possession Utility through Ownership Transfers:
i. Need determination.
ii. Finding buyers and sellers.
iv. Demand creation.
vi. Transfer of title.
3. Functions of Marketing Management:
i. Policy formulation.
vii. Risk bearing
The functions of marketing explained are according to the classification given by Clark and Clark.
According to Clark and Clark, the following is the classification of marketing functions:
1. Functions of Exchange:
2. Functions of Physical Supply:
ii. Storage and warehousing
3. Facilitating Functions:
i. Standardisation and grading
iii. Risk bearing
iv. Market information
These functions create exchanges of goods and services for money. It is through these exchanges that legal ownership/title in the goods and immediately or at a later stage the physical possession of the goods are also transferred from the seller to the buyer.
Every business has to initially buy in order to later sell. Therefore selling begins with buying. Manufacturers buy raw materials and later convert them into finished goods. Traders such as wholesalers and retailers buy finished goods and later sell them. Buying is a very important function because the entire selling depends on buying. An old adage goes as follows – “Goods well bought are already half sold”.
Buying involves the following sub-functions:
(a) Planning of purchases
(b) Selection of proper sources of supply
(c) Selection of goods to be purchased
(d) Assembling of goods
(e) Contacting the sellers
(f) Negotiation with the sellers
The function of assembling involves purchasing the required goods in small quantities from numerous sources of supply and thereby creating a large quantity of stock of goods. Therefore assembling involves bringing together, concentration or collecting goods from numerous sources of supply. Assembling in the context of industry has a different meaning-in industry it means bringing together several components and physically assembling them to construct or erect a large product such as a large machine, a motor car etc.
Assembling assumes great importance in case of goods produced by small scale producers scattered over a very wide area such as agricultural goods, forest produce, goods produced, artisans/small scale industries etc.
The following are the advantages of assembling:
(a) Savings in the cost of handling
(b) Standardization and grading of goods can be done economically
(c) Goods of seasonal nature can be made available throughout the year
(d) Large quantities of goods can be supplied
Selling is transferring of goods by the sellers to the buyers for a price. This also involves transfer of the legal title/ownership of the goods. Selling requires a persuasive effort on the part of the seller to convince the buyers to buy the goods. Goods are sold to yield profit to the sellers and deliver satisfaction to the buyers. Selling is the most characteristic feature of the modern marketing system.
Selling is the only function that brings in revenue to the seller whereas all the other functions are actually expenses. Selling sustains the large scale production of goods during the present days. Selling also establishes relationship with the buyers/market.
The following are the sub-functions of selling:
(a) Product planning and development – This is planning the right product to suit the consumers’ tastes and also manufacturing such a product.
(b) Contractual – This is establishing trade relations with the buyers.
(c) Demand creation – This involves creation of demand for the goods in the minds of prospective buyers through advertising, sales promotion etc.
(d) Negotiation – This is negotiating the various terms of the sale such as the price, the payment, method of transportation etc.
(e) Contractual – This is legalizing the agreement containing all the terms and conditions of the sale.
The goods must be physically transferred from the seller to the buyer-manufacturer to the wholesaler, wholesaler to the retailer and retailer to the final consumer. Such transfers involve physical handling of the goods. This requires transportation and storage and warehousing of the goods.
Transportation under Marketing means the activity of transporting goods from the places of their manufacture to the places of their consumption. Most of the goods which are manufactured are not consumed at the places of their manufacture. Therefore these goods must be shifted (distributed) to all those places where they are consumed.
The consumption centres (markets) are geographically separated from the places of their manufacture. In the present situation goods are transported throughout the World for consumption. Transportation adds value to the goods by creating utility of place.
Selling only transfers the legal title/ownership in the goods from the seller to the buyer but to complete the transaction the possession of the goods also must be transferred. This task is done by transportation which physically transports goods from the manufacturers to the consumers.
Transportation enables mass production and mass distribution which are absolutely necessary in an ever widening market. This enables the manufacturers to reap the benefits of large scale production. Transportation has also made possible, the division and specialization of labour on a global scale.
Transportation has become a highly evolved sector by itself in the present situation. There are various means and modes of transportation to suit the needs of different types of goods which have to be transported.
ii. Storage and Warehousing:
Goods have to be stored/warehoused from the time of their manufacture to the time of their consumption. This is because goods are always manufactured in anticipation of demand. No goods can be consumed completely, immediately after their manufacture. Therefore storage and warehousing refer to making arrangements for the goods to be stored safely till they are consumed. Storage is the function whereas warehouse is a place where goods are stored.
Retailers have to offer goods to the consumers in the required quantity whenever the consumers demand the goods. Consumers are accustomed to convenience of purchasing. Therefore the retailers always have to store the goods in order to provide goods instantly to the consumers.
Some goods are seasonal in nature. Some goods are manufactured throughout the year but consume only during a part of the year. Some goods are manufactured only during a part of the year but are consumed throughout the year. Such goods have to be stored properly to even out the seasonal irregularities, some goods have to be stored for some time after their manufacture for the improvement in quality, such as rice.
Rice which is stored for some time after its harvest improves the quality. This is called seasoning. Some goods will fetch a better price if they are stored for some time after their production. This is called speculation. Storage and warehousing are necessary for these requirements.
Storage and warehousing must be done in such a way that there is absolutely no loss to the goods or deterioration to their quality. There are various types of warehouses for this purpose.
Storage and warehousing are necessary for the following reasons also:
(a) To ensure a regular supply of goods in spite of transportation delays.
(b) Highly perishable goods such as fruits, vegetables, milk and milk products must be stored in cold storages.
(c) In order to ensure uninterrupted production, the raw materials must be stored.
3. Facilitating Functions:
The goods to be sold from the seller to the buyer and to be physically transported from the seller’s place to the buyer’s place require several services for their smooth operation.
The following are the important of such services/functions:
i. Standardization and Grading:
This means establishment of certain standards based on a few inherent attitudes of the goods such as nutritional content, size, shape, colour, composition, quality, taste, performance etc. The products are compared and conformed to the standards.
“A standard is a measure that is generally accepted as having a fixed value. The measure is in units of intrinsic qualities or characteristics of a product or service”. – Duddy and Revzan
Standardization is a framework of agreements to which all relevant parties in an industry or organization must adhere to ensure that all processes associated with the creation of a good or performance of a service are performed within set guidelines. This is done to ensure the end product has consistent quality, and that any conclusions made are comparable with all other equivalent items in the same class. – Anonymous
A standard conveys the idea of a certain level of physical attributes of goods.
Standardization also means product rationalization. This means trying to reduce the number of varieties or variants of the products, so that instead of carrying a large number or varieties, a fewer varieties will be offered to the customers. Standardization is actually done by merging certain varieties wherein the differences among them are either very minimal or do not matter. Standardization is the design rationalization of a range of homogenous and partially interchangeable products designed to meet various needs.
Product standardization is an efficient method of cost reduction and quality enhancement. By minimizing the differences among products, production is increased, distribution is streamlined, raw material cost is reduced and branding becomes easier.
Grading means the physical sorting and classifying of the goods according to the predetermined standards. The goods are classified into several grades. All the goods in a certain grade will have similar characteristics. Grading is done after standardization. Grading begins when standardization ends.
Standardization and grading are very essential in case of agricultural goods, forests produce, minerals etc., as the physical quality of such goods cannot be controlled. Goods manufactured by industries do not need standardization and grading because the production process takes care of standardization and grading.
After the grading, goods are appropriately labeled.
Marketing activities just like any other activities need money. Market financing means providing finance to individuals and organizations involved in marketing functions to enable them to carry on marketing functions. There is a time gap between the purchase of the raw materials and sale of finished goods by the manufacturers, similarly between the time of purchase of goods by the wholesalers and the retailers and the sale of the same. These persons need money in between.
“Market financing is the service of providing credit and money needed to meet the costs of getting merchandise into the hands of the final consumer”. – J. F. Pyle
“Finance is the lubricant that facilitates the operation of marketing machine”. – Clark and Clark
The amount of money needed for marketing activities depends on the following – nature and volume of the business, the seasonal nature of the business, the amount of stock needed, the time taken between production or purchase and sales of the goods, the terms of sale etc.
Marketing activities generally require more of working capital than fixed capital. A marketer needs finance in two capacities-for his own requirements and also to provide finance in the form of credit sales to the buyers.
There are two major sources of finance to the marketers:
(a) Trade credit – This means buying the goods on credit and paying the amount later.
(b) Banks and financial institutions – Marketers can borrow amounts from various banks and lending financial institutions.
Credit facilities have to be extended to individual consumers in case of sale of expensive goods such as houses and apartments, automobiles, televisions, home gadgets etc.
Such credit facilities are given to them in two forms:
(a) Open credit – Loans are directly given to the individual consumers to buy expensive goods.
(b) Installment and hire purchase schemes – Goods are sold to individual consumers on deferred payment scheme called EMIs (equated monthly installments).
iii. Risk Bearing:
Risk means an element of uncertainty or possibility of laws on account of danger from unforeseen and uncontrollable circumstances in future. Marketing activities involve several risks such as destruction of goods by fire, flood, cyclone etc., theft of goods, changes in the fashion, price fluctuation, unforeseen competition, bad debts etc.
Converse, Hugey and Mitchell have classified marketing risks as follows:
(a) Risks from economic and social changes such as price fluctuations, changes in fashion etc.
(b) Moral risks such as theft, misappropriations of cash by employees, outsiders etc.
(c) Physical destruction of goods by factors such as fire, flood, earth quake etc.
(d) Liability for accidents to customers, employees etc.
The following are the methods of minimizing risks:
(a) Prevention of risks – Several risks can be prevented by the thoughtful action of the management such as installation of fire safety measures to avoid loss by fire, installation of security measures to avoid loss by theft, following a careful credit policy to avoid bad debts etc.
(b) Shifting or dividing the risk – This is done by getting several types of insurance coverage to the goods.
iv. Market Information:
Marketing has to ultimately serve the customers in order to achieve its objective of sales and profit. To achieve this objective a marketer must not only be well informed about the various facts of marketing but he should also be aware of the latest trends in the market. All risk decisions must be based on such knowledge. Marketing decisions cannot be better than the facts on which they are based.
A marketer should have accurate information about the following aspects:
(a) The type of goods needed by the consumers
(b) The time at which the goods are needed by the consumer
(c) The quantities of purchase that are most convenient to the consumers
(d) The number of consumers
(e) The degree and type of competition present in the market etc.
The market is a very dynamic place and the trends keep changing very frequently. A marketer should have general information about the market and also specific information that affects his company and its products.
“Marketing intelligence system is an interacting, future oriented structure of people, equipment and procedures designed to generate and process the information flow which can aid business executives in the management of their marketing programmes”. – Conard Benson
A marketer can secure market information from several sources:
(a) Internal sources – Company records and documents, discussions with the employees etc.
(b) External sources – Conducting researches in the market, discussions with experts in the field and consultants, several published and unpublished information, the internet etc.
A marketer should know the techniques of collection, processing and interpretation of the information. Computers are extensively used for such purposes in the present situation.
Functions of Marketing
1. Functions of Exchange:
Despite the changing thrusts of different marketing concepts, one can easily recognize that marketing is composed of a number of functions. These functions are performed to facilitate the exchange function to take place smoothly. Thus, the core factor of the marketing process is definitely the exchange function.
The exchange function consists of three different functions,they are:
All these functions have a common feature in one respect that they are directly concerned with the change in the ownership of goods. They effect transfer of title and hence create possession utilities. These functions are intimately bonded and unitization is only a theoretical exercise. For every sale there has to be a purchase and vice versa and, assembling is the unifying function of sale and purchase.
Buying is a basic marketing activity. Often it is not considered as an important function. Sometimes, quite erroneously, this function is treated as a passive one. Many consider it as merely the opposite of selling. But it is an active “concentration function” and its impact is felt whenever retailing is reduced. For instance, today buying does not create any problem to anyone. This is because for every manufacturer there is a wide network of retailing arrangement which helps the easy outflow of goods into the market. Thus choosing is not a problem since goods are made available within consumer’s reach. If such an arrangement was not there, the buyer would have to go in search of the producer or would have to be satisfied with whatever was available in the market.
The ordinary purpose of buying is to bring commodities together, upon demand, for use in production or for personal consumption. Buying is the result of demand satisfaction. Due to the activities of members of the marketing channels, goods move from producers to intermediaries and to ultimate consumers. Buying involves ownership control and not necessarily physical concentration of goods and services. Thus buying involves careful planning, and needs setting up of policies and procedures.
Goods are collected from small and big towns and villages at a central place for their further movement to the factory, mill, consumer, etc.
Assembling is different from buying. In assembling goods of the same type, goods scattered in small lots are brought together. Here, the goods already purchased from different sources are collected at a common point. Whereas, buying is the purchase of a variety of goods and involves determination of requirements, finding sources of supply, placing orders and receiving goods.
The following types of goods need assembling:
i. A number of small producers’ produce goods, which are scattered over a vast area. Such types of goods need assembling.
ii. Non-standardized goods and goods which are of different qualities.
iii. Seasonal availability of goods.
Selling is the other side of exchange function. Selling is the heart of the marketing task. Selling in business means the transfer of ownership of goods or services to a buyer in exchange for money. According to Cundiff and Still, “Selling, in its broad sense, aims not just at making sales but also finding buyers, stimulating demand, and the providing of advice and services to buyers.” According to Pyle, “Selling comprises of all those personal and impersonal activities involved in finding, securing and developing a demand for a given product or service, and in consummating the sale of it.”
American Marketing Association defines it as – “Selling is the personal or impersonal process of assisting and persuading a prospective customer to buy a commodity or service and to act favourably upon an idea that has commercial significance to the seller.” Demand is created for a product by selling. Only through selling, demand can be developed. Hence, selling function plays an important role in the process of marketing.
2. Functions of Physical Distribution:
In the early times, marketing had two different but related functions. One was demand creation and the other was distribution of goods. When competition increased, more emphasis was laid on demand creation. The physical distribution was then viewed only as subsidiary service. This function is now recognized as the “key line” between production and marketing functions.
Proper planning and designing of physical distribution would not only save cost of distribution but also would stimulate and create demand. This is achieved by certain “place” and “time” utilities to the products. Perhaps, these may be the reasons by which physical distribution management has established itself as one of the principal branches of marketing management.
Peter F. Drucker has described the physical distribution function as the “Industry’s Dark Continent”, because this function seldom received attention in strategic marketing planning. In fact, it is the distribution function that includes all the activities necessary in getting a product from the manufacturer to the final consumer.
Transportation is a necessary function of marketing because most of the markets are geographically separated from the areas of production. Majority of manufacturing plants are far away from their most important markets because of various factors. All goods are not utilized at the place of their origin. They require some kind of transportation to create place utility.
Holtz Claw vividly puts the importance of transportation in the following lines:
“Minerals or other raw materials are to be transported from the place of extraction or production to the factory; crops are to be carried from the farm to the local market or primary market and from there to the places of consumption. Finished products are to be transported from the warehouse to the wholesale warehouse, from the warehouse to the retail dealer and from the dealer to the ultimate consumer”.
The function of storage is performed through housing or storing the products properly. The place where the goods are stored is known as a warehouse. The term “ware” means article or merchandise collectively and warehouse is a building or room for storing goods. Thus, storage is one of the physical distribution functions of marketing and warehouse is the tool with which this function is performed.
3. Facilitating Functions:
i. Marketing Finance:
Finance plays an important role in every economic activity which involves buying and selling. It holds the key to all human activities.
Finance is to be systematically controlled and regulated so that it-may contribute to the different functions of business administration such as purchasing, production, marketing and so on. Thus, according to Pyle “Finance is to facilitate operation of marketing machine, money or credit is the lubricant”. Producers, wholesalers, retailers and customers all require finance to produce, sell and purchase goods.
ii. Marketing Risk:
Marketing risk may be defined as the danger of loss from unforeseen circumstances in future. It implies an element of uncertainty or possibility of loss. The uncertainty or risk is assumed by participants who are in marketing and more particularly by those who take the title of goods. Market operations are based more on future conditions than on the present conditions. Exposure of business to the danger of financial losses, which are caused by multiplicity of reasons, in a nutshell, can be termed as marketing risks.
Standardization and grading are very helpful to the customer to identify the product. Product identification by consumers is essential for repeat sales.
It is the process by which a standard, already decided, is attained. Broadly stated, standardization involves the determination of basic measures to which products must conform and includes the process of conforming to such standards. Standardization is considered to be a facilitating or ancillary function of marketing because it helps in the efficient performance of the various marketing functions, particularly buying and selling.
Grading is the process of grouping the products on the basis of common characteristics or standards. Standardization, in the case of manufactured goods and for most of the industrial goods, is a function of production. Once a standard is set up there will be no difficulty in maintaining it. Because in manufacturing operations, not only the finished products are standardized, but materials, processes, and performances are also standardized. The case is, however, different with regard to the products of agriculture and extractive industries.
There is a lack of uniformity or standards in the variety of natural products available from the soil. The features of these products vary from one firm to the other and from season to season. The production process itself is largely beyond the control of the producer.
Thus, there will be variations between two or more products of the same variety. In short, natural products can never be standardized. But such products afford one facility that they are capable of being divided, assorted, grouped or classified into certain common lots that show same similarities. This process is known as “grading”. In other words, “grading is the process of sorting individual specimens of a given product to the standard grades or classes to which they belong.” Grades may be fixed or variable grades.
Grades are fixed if the required characteristics are determined in advance but are variable if available products are sorted out on the basis of characteristics present in that lot. They are not permanent and vary from time to time and lot to lot.
The information needed for effective marketing is obtained from the data collected from various sources.
Functions of Marketing
1. Functions of Exchange:
i. Buying Function – Buying functions have to be performed at various levels. A manufacturer has to buy raw materials, chemicals, etc. for production purpose. A wholesaler has to buy goods from manufacturers for the purpose of sale to the retailers. A retailer has to sell goods to consumers.
i. Transportation – Physical distribution consists of those marketing activities related to the physical handling of goods. Goods have to be transported from the end of production line to the consumer. Decision has to be taken on the efficient mode of transport.
The importance of finance at reasonable rate of interest cannot be overemphasized. Arrangement for securing finance is very important for a marketer. There are various sources of finance like Commercial Banks, Government Agencies, Cooperative Banks, etc. The marketer must have knowledge of the terms and conditions of credit facilities provided by different financial institutions.
There are many risks which a marketer has to bear in the process of marketing goods and services. There are certain risks which can be insured against, such as fire and accident risks. But there are other risks which cannot be insured, such as risks involved in changes in Government Policy or business cycle risks, etc.
These days the importance of after-sales facilities cannot be ignored by the marketer. The marketer has to plan for providing after-sale services, like repairs, replacements.
Functions of Marketing – Classified into 3 General Categories: Merchandising Activities, Physical Distribution Activities, Supporting Activities
Marketing functions may be classified into three general categories containing nine functions in all:
Merchandising begins with an analysis of market needs and the development of products to meet these needs and it ends with the activities involved in stimulating market demand most directly. Physical distribution makes the products available at the times and places desired by final buyers. Supporting activities have the main purpose of improving the effectiveness with which merchandising and physical distribution activities are performed.
Merchandising consists of activities necessary to determine and meet market needs in terms of products and to stimulate market demand.
i. Production Planning and Development:
To be marketed successfully, most products must possess characteristics that conform closely to buyers’ needs and desires and this needs product planning and development.
ii. Standardizing and Grading:
These activities involve establishment of basic measure or limits to which articles must consistently conform- A standard specifies what basic characteristics a product must have to be designed by certain grades. Standards should be based on the qualities desired by buyers. Grading is the act of separating the goods according to the established specifications, e.g., size, quality, weight, etc.
Standardizing and grading are important to efficient marketing. Both make it possible for customers to purchase by description instead of by inspection; for example, to order a tonne of steel or coal of a specified grade by telephone.
iii. Buying and Assembling:
Buying as a marketing activity, is the procurement of items for eventual resale to ultimate consumers. Most of the items purchased by producers are used in the manufacturing process and generally reach final buyers in a different form as part of finished products. Assembling is closely related to buying. It brings together either (a) different quantities of a wide variety of items for resale by a single establishment or (b) a larger quantity of similar items for resale in a particular region. The first type of assembling is done by retailers such as department stores who bring together products from different sources making it possible for consumers to satisfy a variety of wants on a single shopping trip.
The second type is found in the activities of centrally located wholesalers of agricultural produce who buy from numerous growers throughout the country and distribute assembled produce to local wholesalers for eventual resale by retailers.
In the wide sense, selling has the purpose not only of making sale (i.e., ownership transfers) but of identifying prospective customers, stimulating demand and providing information and service to buyers. To achieve these goals, the marketer must combine such activities as personal selling, advertising, sales promotion, packaging and customer service
Personal selling is the chief means through which marketing programmes are implemented. The strength of personal selling lies in its ability to personalize sales messages to individual customers. Capitalizing on this strength requires trained and competent sales personnel. Substantial investments have to be made in recruiting, training, paying and supervising sales personnel.
Thus personal selling is a relatively high-cost selling method. Since advertising is a relatively low-cost way to convey selling messages to numerous customers, it is important in most marketing programmes. It is generally used to stimulate market demand.
2. Physical Distribution Activities:
Storage and transportation are the activities necessary to move products from their times and places of production to their times and places of consumption. As countries develop and as multinational trade increases, both storage and transportation increase in importance.
Because in a developed economy products are generally produced in anticipation of market demand, storage is important.
Because most markets are geographically separated from production areas, transportation is an important marketing activity. To avoid pollution, many factories are located in a non-urban location and transportation is necessary for moving finished product to urban markets.
3. Supporting Activities:
Supporting activities do not relate directly to the effecting of ownership transfers but support or contribute to the carrying out of other marketing activities Supporting activities include marketing, financing, marketing risk bearing and obtaining marketing information.
i. Marketing financing:
Marketers are concerned with financing. Marketing organizations have two main sources of credit —trade credit and banks. Trade credit, used in short-term financing, is extended by suppliers.
ii. Marketing Risk-Bearing:
Marketing risks arise from both supply and demand changes and natural hazards. Any institution that carries an inventory takes the risk that supply and demand conditions may change. Thus marketers who perform the storage activity also perform not only financing but risk-bearing.
A marketer may transfer part of the risk burden. Risks attached to natural hazards such as fire and floods, damage in transit can be transferred to insurance companies in return for premium payments. Because many marketing risks cannot be transferred, marketers try to reduce them.
Risks of change in market demand are reduced through accurate sales forecasting and marketing research; again risk of a change in market demand is reducible through aggressive programmes of advertising, personal selling and the like.
iii. Obtaining and Analysing Marketing Information:
Both for the sound formulation of marketing programmes and for the proper direction of marketing activities, management needs to obtain and analyse a great deal of marketing information.
The success of a company’s marketing operations largely depends upon management’s knowledge and appraisals of such important information as the size, location and characteristics of different markets for several products, the nature of present and prospective customers making up various market segments, their needs and wants and buying habits, competitor’s strengths, weaknesses, plans, etc.
Management secures these marketing information, appraises the significance and adjusts company operations accordingly. Marketing information is gathered in different ways. Executives obtain much market news informally through casual conversations, from using business and trade journals, daily newspapers and from reports submitted by field sales personnel.
Functions of Marketing – With Examples
Exchange refers to transfer of goods and services form money’s worth.
This process can be divided into:
1. Buying and assembling, and
1. Buying and Assembling:
Buying is the first step in the ladder of marketing functions. A manufacturer has to buy raw materials for production, wholesaler has to buy finished goods for the purpose of sale to the retailers, and a retailer has to buy goods for resale to the consumers. Efficient buying is essential for successful selling. Large sized business concerns maintain a separate department namely purchasing department for the purpose of buying.
Modes of Buying:
Goods may be purchased in any of the ways given below:
(i) By inspection – Under this method goods are bought after examining the goods by the buyer in the seller’s premises.
(ii) By Sample – A purchase by sample is made after the buyer examines the sample of goods supplied by the seller.
(iii) By Description – Some sellers issue catalogues containing description of goods offered for sale. The intending buyer places an order specifying a particular number mentioned in the catalogue.
(iv) By Grading – This refers to standard quality of goods. Under this method purchase can be made by telegram, telephone, or mail.
(v) Assembling begins after the goods have been purchased. It refers to gathering of goods already purchased from different places at one central place. Assembling facilitates transportation and storage. It is significant in case of seasonal goods and agricultural products.
The ultimate aim of every business is to earn profits and in realising this aim selling plays an important role. Nothing really happens until somebody sells something. Selling enables a firm to satisfy the needs of consumers. It is the process through which ownership of goods is transferred from the seller to the buyer. Sales are the source of income for the manufacturers, wholesalers and retailers.
The importance of selling has increased significantly with an increase in the number of articles offered for sale by a large number of producers. When the production was on a small basis the producers had no problem to dispose of their products. But now, with the increase in the volume of production, selling has become a problem and the producer has to induce people to sell his products.
There are two important functions under this classification:
1. Transportation, and
2. Storage and ware housing.
Transport means carrying of goods, materials and men from one place to another. It plays an important role in marketing. It creates place utility by moving goods from the place where they are available in plenty, to places where they are needed. Both assembling and distribution of goods are done by using transport.
Transportation facilities not only movement of goods from the places of production to the places of consumption but it also enables the consumers to go to marketing areas where there is wide choice of goods than in the places where they like.
Transportation is also useful in stabilizing the prices of various commodities by moving them from the areas where they are in surplus to the areas where they are scarce. Various types of transport are used for carrying goods like – (i) land transport, (ii) Water transport and (iii) Air transport.
2. Storage and Ware Housing:
Storage is another function of marketing process and it involves the holding and preservation of goods from the time they are produced to the time they are consumed. Generally, there is a time gap between the production and consumption of goods.
Therefore, there is need for storing so as to make the goods available to the consumers as and when they are required. By bridging the gap between production and, consumption, storage creates time utility. It also creates place utility by holding goods at different places.
The importance of storage can be studied as follows:
i. Generally, goods are produced in anticipation of demand of the product in future market. All the goods are not sold immediately after production. For the unsold stock of goods storage is indispensable.
ii. Some goods are produced throughout the year but demand for them is only in a particular season. For example rain coats, umbrellas, Diwali crackers etc. These commodities are to be stored till the arrival of the season.
iii. Many commodities are produced during a particular season but they are used throughout the year. Such goods have to be stored so as to make them available throughout the year. For example – agricultural products.
iv. Certain products which can get higher prices in future market are stored for a longer period. For example, tobacco, liquor, rice, chillies etc.
Warehouse is a place for storage of goods. The function of storage can be carried successfully with the help of warehouses. Warehouses create time utility by storing the goods throughout the year and releasing them as and when they are needed.
Several types of warehouses are used for storage of goods, which are as follows:
i. Private Warehouses – Private warehouses are owned by big business units for the storage of their own goods. Only big business houses can afford to have such type of ware houses.
ii. Public Warehouses – These are the business concerns which offer storage space on rent. These ware houses are licensed by the Govt. They are helpful to businessmen who cannot afford to maintain their own warehouses. These warehouses are generally located near railway lines and main roads.
iii. Bonded Warehouses – These are located near the ports for the storage of imported goods. When the importer cannot pay customs duties immediately on the goods imported by him, he can store them in bonded houses. Importer can remove the goods in parts after paying import duty.
There are the functions which help or facilitate in the transfer of goods and services from the producer to the consumer. They are not directly connected with the transfer of goods.
Under this category the following functions are included:
Finance is the life blood of every business. It is needed for marketing of goods and services. The goods produced or purchased cannot be sold immediately to the ultimate consumers and much time is involved in marketing process. Hence there is need for finance for the purchase of raw materials, meeting transportation, storage costs, insurance etc.
Further, generally goods are passed on from manufacturer to wholesaler and from wholesaler to retailer on credit basis. Ultimate consumers also prefer to purchase goods on credit. Therefore, all agencies engaged in marketing have to make some arrangement for finance. Prof J.F. Pile has rightly stated that, “finance is the lubricant of marketing machinery”.
There are three main sources of finance.
They are as follows:
(i) Long-Term Finance – It is needed for purchasing fixed assets like land, building, Plant and machinery, furniture etc. The main sources of this finance are shares, debentures, financial institutions.
(ii) Medium-Term Finance – It is needed for raising working capital. The main sources are financial institutions and commercial banks.
(iii) Short-Term Finance – It is mainly required for meeting short term payment normally for less than one year. It can be raised from commercial banks and trade creditors.
2. Risk Bearing:
Risk means the possibility of loss due to some unforeseen circumstances in future. Marketing process is confronted with risks of many kinds at every stage. Risk may arise due to changes in demand, a fall in price, bad debts, natural calamities like earthquakes, rains etc.
The marketing risks may be classified under the following heads:
(i) Time Risk – Goods are bought by the business with a view to sell them at a profit out of anticipated rise in prices in future. During the time lag conditions might change and the price my fall. Thus time risk is involved in marketing.
(ii) Place Risk – Place risk arises when the prices of the same product are different in different places. The businessmen may purchase goods in market where prices are low with a view to sell them at other places where the prices are high. But the price in the other market may come down causing loss.
(iii) Competition Risk – Businessmen have to face risk arising from the forces of competition. The competing firms may introduce modern methods of production due to which quality may be improved or cost of production may be reduced. Under such circumstances, a firm may be forced to sell at a loss which is called risk of competition.
(iv) Risk of Change in Demand – The manufacturers produces goods on large scale in anticipation of demand in future. But, sometimes the demand of the product may not come to expectations resulting in losses.
(v) Risk Arising from Natural Calamities – Risks from natural causes are beyond human control. These include rains, earthquake, floods, heat and cold. These risks cause heavy loss.
(vi) Human Risks – These risks arise due to adverse behaviour of human beings like theft, strikes, lockouts, bad debts etc.
(vii) Political Risks – Political risks arise due to change in political factors such as – changes of government / changes in government policies etc.
3. Market Information:
According to Clark and Clark market information means, “all the facts, estimates, opinions, and other information used in marketing of goods”. The main object of any business is to create and maintain demand for the product produced. For this purpose market information is useful. On the basis of information the seller can know what type of goods are needed by the consumer, when and where they are needed and in what quantity.
Standardisation means establishment of certain standards based on intrinsic qualities of a commodity. The quality may be determined on the basis of various factors like size, colours, taste, appearance etc. It is helpful to the consumers as they can safely rely on the quality of the standardised products.
Grading means classification of standardised products in to certain well defined classes. In the words of Clark and Clark, “It involves the division of products into classes made up of units possessing similar characteristics of size and quality”. Grading is very important for agricultural products like Wheat, Cotton etc. Grading is of two types, fixed and variable. Fixed grading refers to the grading of goods according to fixed standards whereas variable grading refers to the application of varying standards.
Branding means giving a name or symbol to a product in order to differentiate it from competitive products. It helps the consumers in identifying their products. Branding may be done by selecting symbols and marks such as – Charminar cigarettes, Camel inks, Binny textiles, or by using the name of manufactures such Ford cars, Godrej steel furnniture. A good brand should be brief, simple, and easy to spell and remember.
Packing means wrapping and crating of goods before distribution. Goods are packed in packages or containers in order to protect them against breakage, leakage, spoilage and damage of any kind. It consists of placing the goods in boxes, tins, bottles, cans, bags, barrels of convenient size to the buyers.
Functions of Marketing – 3 Most Important Functions: Merchandising Function, Physical Distribution and Auxiliary Function
1. Merchandising Functions:
(i) Buying Function:
Buying function is performed at several levels. For example, manufacturer buys raw-material for production purposes; a wholesaler buys goods from manufacturer for purpose of sales to retailers. A retailer buys from wholesaler for sale of goods to consumers. Buying is done by description, inspection, sample, grading. Buying includes various decisions like type of product, time of purchase, sources of purchase etc.
(ii) Assembling Function:
Assembling means goods are purchased from various sources and assembled at one place to suit the needs of the buyers.
(iii) Selling Function:
Selling involves transfer of ownership from seller to buyer. Selling is an important part of marketing.
Selling is a very important function:
(a) It is easy to produce goods but very difficult to sell them.
(b) It is vital to the success of any firm.
(c) It has become growingly important due to emergence of severe competition.
(d) All other activities of business ultimately depend on sales.
(iv) Packaging and Branding:
Packaging has acquired great significance in sale of goods. More and more people have started purchasing packed goods to minimize adulteration and ensure quality, reputed goods. New innovations in packaging have enhanced their importance. Packing helps in product differentiation.
Branding – Brands identify source or maker of a product, endow products with added value to satisfy consumers and enhance financial value of firms.
2. Functions of Physical Distribution:
Transport is very important function of marketing. Transport is required to take product from place of manufacture to consumer; former being in one carrier and latter in another corner or even in foreign countries. This function includes decisions regarding made of transport, service selection, freight, carrier routing vehicle scheduling processing claims, etc.
(ii) Inventory Management:
(a) Various inventory models, viz., Economic Order Quantity (EOQ), Optimum number of orders per year, etc.
(b) Inventory control techniques, e.g., ABC Analysis, FNS Analysis etc.
(c) Short term sales forecasting.
(d) Product mix at stocking points.
(e) Number, size and location of stocking points.
(f) Just-in-time strategy.
(a) Space determination
(b) Stock layout and design
(c) Stock placement
(d) Storage – Goods are to be kept safely without damage. Storage especially important in case of seasonal goods.
(iv) Material Handling:
(a) Equipment Selection
(b) Equipment Replacement
(c) Stock Retrieval
(d) Order Picking Procedure.
3. Functions of Facilities (Auxiliary Functions):
(i) Marketing Financing:
Marketing finance means ‘arranging adequate finance for distributing goods and services to consumers/customers’. Importance of extending credit facilities as a selling tool cannot be underestimated. A marketer can arrange for different kinds of finance viz., short-term finance, medium term finance or long-term finance. The sources of finance are also several viz., commercial banks, co-operative banks, credit societies, government agencies, etc.
(ii) Risk Taking:
There are many risks in the process of marketing. Some risks arise due to unforeseen circumstances. Some risks can be insured e.g., risks due to flood, fire, robbery theft, non-payment and accidents. But other risks cannot be insured e.g., risks due to increased competition, price fluctuations, technological risks, changes in fashions and consumer tastes, business cycle risks, risks due to changes in government policies, etc., Risk taking includes Insurance, Futures Trading, Product Diversification. Sales forecasting, market research and advertisement can also minimise such risks.
Buyers and sellers always prefer standardised goods and services. The reason is that it retrieves the buyers from inspecting the product and unnecessarily wasting time. Standardisation is now accepted as a convenient and ethical basis of marketing. Standards are determined on the basis of qualities, types, size, shapes, colours, weight, etc. Standardisation makes products and their prices uniform. Standardisation makes sales much easier and marketing quite extensive.
(iv) After-Sales Service:
It is an important function. Marketer has to plan for after-sales services, e.g., repairs, replacement, maintenance, etc.
An important function of marketing. Price determination includes factors like cost of product severity of competition, competitors’ prices, buying capacity of consumers, government policies, etc.
(vi) Market-Related Information:
Marketing manager must possess full information about market trends, government policies, products of competitors, changing customer fashions, distribution network, advertisement media and pricing policies. Marketing manager, on the basis of market related information, can stabilize demand / market share of his product, by suitably changing production, distribution and product pricing.
Information collected by different business enterprises, specialized agencies, Government, and research scholars published in different papers, journals and magazines, are quite helpful. In the absence of such information, company has to do market research itself.