Kotler

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Course of Study:
(MKF1120) Marketing theory and practice
Title of work:
Marketing in Australia (1983)
Section:
Marketing and human needs [Chapter 1: Marketing in Australia] pp. 3--27
Author/editor of work:
Kotler, Philip
Author of section:
Philip Kotler, et. al.
Name of Publisher:
Prentice-Hall of Australia
Philip Kotler
Northwestern University
Robin Shaw
Monash University
Peter FitzRoy
Monash University
Peter Chandler
Chisholm Institute of Technology
PRENTICE-HALL OF AUSTRALIA PTY LTO

© 1983 by Prentice-Hall of Australia Pty Ltd.
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National Library of Australia

Cataloguing-in-publication data
Marketing in Australia.
American ed. published as: Principles of

marketing. Englewood Cliffs, N.J.:
Prentice-Hall, 1980.
Includes index.
ISBN 0 7248 0757 8
ISBN 0 7248 0758 6 Paperback
1. Marketing management- Australia.

I. Kotler, Philip, 1931-.
658.8'00994
Original English language edition published by

Prentice-Hall Incorporated, Englewood Cliffs, New
Jersey. Copyright © 1980 by PRENTICE-HALL
INCORPORATED.
iv
Marketing
and Human Needs
Marketing touches all of us every day of our lives. We wake up in the morning
to a National radio alarm clock, which plays a Johnny Farnham song followed
by a commercia/for a Qantas holiday flight to Fiji. We move to the bathroom
where we shave with Gillette, shower with Palmolive, and use various other
toiletries and appliances produced by manufacturers around the world. We put
on our Am co jeans and shirt, and Adidas shoes. We enter the kitchen and pour
some Farmland orange juice, and prepare a bowl of Kellogg's Rice Bubbles and
sliced SPC peaches in Pura milk. After this, we drink one or two cups of Nescafe
coffee with two teaspoons of CSR sugar. We are the personal beneficiaries of
oranges grown in South Australia, coffee imported from Papua-New Guinea, a
newspaper made from Tasmanian wood pulp, and radio news coming .from as
far away as New York.
All of these products ended up in our homes. The marketing system made
this possible without effort on our part. It has designed and delivered to us a
standard of living.
In starting our discussion of marketing, we Marketing Has Different Meanings

should recognize that it means different things
to different people, affects everyone, and is What does the term marketing mean? Most
highly controversial. people think of it as synonymous with selling
3
4 Marketing in Australia
and promotion: Australians are bombarded fore visits a large stereo retail outlet. He sees
with television commercials, unsolicited mail many stereo components. As he examines
advertisements, newspaper ads, and sales them, the following questions come to his
calls. Someone is always trying to sell us mind:
something. It seems that we cannot escape
• Is the brand selection wide enough?
death, taxes or selling.
• Is there a brand that has the features I
Therefore it may come as a surprise to
want?
many people that the most important part of
• Is the price fair?
marketing is not selling. Selling is only the tip
• Is the salesperson helpful, pleasant and
of the marketing iceberg; it is only one of sev-
honest?
eral functions that marketers perform, and
• Is the service good, and is there a warranty?
often not the most important one. If the mar·
keter does a good job of identifying consumer Neil Humphreys and other buyers want the
needs, developing appropriate products, and marketplace to provide good-quality products
pricing, distributing and promoting them at convenient locations for reasonable prices.
effectively, these goods will sell very easily. The kind of marketing system found in an
The amount of 'hard selling' required will not economy will make a great difference to
be intense. people's satisfaction as buyers and consumers.
Everyone knows about 'hot' products to
which consumers are drawn in droves. When The seller. Bill Pickett is the marketing man-
Morris offered the first Mini Minor, when ager in a company that manufactures stereo
Kodak designed its instamatic camera, and equipment. To do his job well, he must decide
when Victa introduced its rotary lawn-mower, on a number of issues:
these manufacturers were swamped with
• What do consumers want in stereo equip-
orders because they had designed the 'right'
ment?
product. Not 'me-too' products, but distinct
• Which consumer groups and needs should
offers that outshone the others. Peter Drucker,
my company try to satisfy?
a leading management theorist, puts it this
• How should the product be designed and
way:
priced?
• The aim of marketing is to make selling • What guarantees and service should we
superfluous. 1 offer?
• What types of intermediaries should we
This is not to say that selling and promotion
use?
are unimportant, but rather that they are part
• What types of advertising, personal selling,
of a larger 'marketing mix' or set of marketing
promotion and publicity would be cost-
tools that must be finely orchestrated for maxi-
effective in selling this product?
mum impact.
Thus the seller faces a number of challenges
when trying to develop an attractive offer.
Marketing Affects Everyone
The market is very demanding. The seller
Marketing affects the buyer, the seller and the must apply the most modern marketing tools
citizen. This is illustrated in the following available to arrive at an offer that attracts and
examples. satisfies customers.
The buyer. Neil Humphreys, a student, The citizen. Joyce Evans, a member of par-
wants to buy stereo equipment and he there- liament, has a special interest in business's
Marketing and Human Needs 5
performance in the marketplace. As a citizen neath a pyramid of time payments, mortgages,

and legislator, she is concerned with the fol- preposterous gadgetry, playthings that divert
lowing questions: our attention from the sheer idiocy of the
charade. 3
• Are manufacturers making safe and reliable
products? There are others, however, who equally
• Are they describing their products accu- vigorously defend marketing. Consider the
rately in their ads and packaging? following:
• Is competition working in this market to Goods and services are not really produced until
keep quality high and prices low? they get to the point of consumption. There-
• Are the retailers and service people behav- fore, marketing is truly a part of production.
ing fairly towards consumers? Transporting, storing, grading, wholesaling, re-
• Are the manufacturing or packaging activi- tailing, buying, selling; alJ constitute parts of
ties hurting the environment? marketing. Selling is one of the most vital func-
tions performed, and advertising is a very im-
Joyce Evans acts as a watchdog of con- portant part of the selling function. Selling is
sumer interests, trying to improve consumer sometimes given a derogatory connotation and
education, information and protection. The condemned along with advertising, but where
marketing system has a major impact on the would we be if we could not attempt tO
lives of Australians, and they and their rep- influence the actions of others, if we could not
resentatives will want to make it work as well sell produc,ts, if we could not sell ideas? 4
as possible. Advertising nourishes the consuming power of
men. It creates wants for a better standard. of
Marketing Is Controversial living. It sets up before a man the goal of a
better home, better clothing, better food for
Marketing affects so many people in so many
himself and his family. It spurs individual exer-
ways that it is inevitably controversial. There
tion and greater production. It brings together
are persons who intensely dislike modern mar- in fertile union those things which otherwise
keting activity, accusing it of such sins as ruin- would not have met. 5
ing the environment, bombarding the public
with inane ads, creating unnecessary wants, It is clear that various social commentators
and teaching greed to youngsters. Consider have vastly different views on the meaning
the following charges: and contribution of marketing. We will con-
sider these issues later in the book after we
For the past 6000 years the field of marketing have gained a better understanding of how
has been thought of as made up of fast-buck marketing works. We will largely deal with
artists, con-men, wheeler-dealers, and shoddy-
marketing from the seller's point of view,
goods distributors. Too many of us have been
'taken' by the tout or con-men; and all of us at since the seller is trying to put together mar-
times have been prodded into buying all sorts of keting programmes that are profitable and that
'things' we really did not need, and which we create value for the consumers. At the same
found later on we did not even want. 2 time, no seller can make long-run profits with-
out taking into account the buyers' and citi-
What does a man need - really need? A few
pounds of food each day, heat and shelter, six
zens' point of view. In fact, the major ideo-
feet to lie down in - and some form of working logical breakthrough in the last thirty years
activity that will yield a sense of accomplish- has been the recognition that sellers not only
ment. That's aU - in a materia] sense. And we must take the buyers' wants into account but
know it. But we are brainwashed by our eco- must start with them.
nomic system until we end up in a tomb be- Business is now going through a further
learning phase, discovering that it must also their members from engaging in price compe-
take the citizens' interests into account. Mar- tition, client solicitation, and advertising,
keting, at its highest practical level, should trade practices investigators have recently
balance and serve the combined interests of called these restraints illegal.
sellers, buyers and citizens. This book is The fierce competition engendered by the new
oriented towards helping sellers see the im- limits on corporate growth is forcing accounting
portance of formulating and carrying out firms into aggressive new postures ... The ac-
marketing practices that are grounded in con- countants insist on referring to their efforts to
sumer and citizen interests as well as self- drum up business as 'practice development'.
interest. It is a matter not only of doing what But many of the activities that fall under this
is right but also of ensuring the long-run euphemism are dead ringers for what is called
profitability and survival of business in an 'marketing' in other fields . . . Accountants
speak of 'positioning' their firms and of 'pen-
increasingly competitive and turbulent
etrating' unexploited new industries. They com-
marketplace.
pile 'hit lists' of prospective clients and then
'surround' them by placing their firms' partners
in close social contact with the top executives of
THE RAPID ADOPTION OF MARKETING the target companies. 6
Many people think that marketing is some-

The International Sector
thing practised only by large companies in
highly capitalistic countries, companies like Marketing is practised throughout the world.
Reckitt & Colman, IBM, Kodak, Gillette, In fact, several European and Japanese multi-
McDonald's and Coca-Cola. In fact, market- nationals - companies like Nestle, Siemens,
ing is spreading rapidly both within and out- Toyota and Hitachi - have in many cases
side the business sector. outperformed their marketing counterparts in
the United States.' Multinationals, in general,
The Business Sector
are a continuing force in the introduction and
In the business sector, marketing entered the spread of modern marketing practices
consciousness of different industries at throughout the world. As a result, manage-
different times. It spread most rapidly in con- ment in smaller companies is beginning to
sumer packaged-goods companies, consumer- ask: What is marketing? How does it differ
durables companies and industrial-equipment from plain selling? How can we introduce
companies - in that order. Industrial-com- marketing into the firm? Will it make a
modity companies (steel, chemicals, paper) difference?
came later to marketing consciousness, and In socialist countries such as the USSR and
many still have a long way to go. Within the those of Eastern Europe, marketing has tra-
last decade, service firms - especially in rec- ditionally had a bad name. Today, however,
reational and financial areas - have opened various functions of marketing, such as mar-
themselves to marketing. Bankers initially keting research, branding, advertising, and
showed great resistance to marketing, but in sales promotion, are spreading rapidly. In the
the end they embraced it enthusiastically. USSR, for example, there are now more than
The most recent business groups to en- I 00 state-operated advertising agencies and
counter marketing have been those providing marketing-research firms.• Several companies
professional services, such as lawyers, ac- in Poland and Hungary have marketing
countants and doctors. Although various pro- departments, and several socialist universities
fessional societies have generally prohibited teach marketing.
The Non-profit Sector • Marketing is the performance of busi-

ness activities that direct the flow of
Marketing's most recent entry has been in the
goods and services from producer to con-
non-profit sector of the economy. Such diverse
sumer or user. 9
organizations as colleges of advanced edu-
cation, hospitals, museums and performing This definition, unfortunately, makes market-
arts groups are currently taking a look at mar- ing sound largely like distribution and fails to
keting. Consider the following developments: indicate its role in determining what goods are
to be produced. It does not indicate the
• Many performing groups cannot attract specific business activities that constitute mar-
large enough audiences. Even those that keting. Another way to describe marketing is
have seasonal sellouts face huge operating as follows:
deficits at the end of the year.
• Many non-profit organizations that • Marketing is getting the right goods and
flourished in earlier years - the YMCA, services to the right people at the right
Salvation Army, Girl Guides, and place at the right time at the right price
Women's Christian Temperance Union - with the right communication and
are now re-examining their missions in an promotion.
effort to reverse membership declines. This definition does give an idea of the
These organizations all have marketplace specific activities that marketers carry out.
problems: their administrators are struggling However, it fails to define marketing activity
to k~~p them alive in the face of rapidly chang- broadly enough, in ignoring the fact that
ing client attitudes and diminishing financial things other than goods and services can be
resources. Many institutions have turned to marketed. Furthermore, it defines marketing
marketing as a possible answer to their prob- as a business process rather than a social pro-
lems. As a sign of the times, the Evanston cess. Here is a thought-provoking definition of
Hospital of Evanston, Illinois, recently ap· marketing:
pointed a vice-president of marketing and was • Marketing is the creation and delivery of
the first hospital in the world to do so. a standard of living. 10
Government agencies are also showing an
In contrast to the previous definitions, this
increasing interest in marketing. Australia takes a macro or social view of marketing.
Post and Telecom have developed marketing However, it does not reveal the fundamental
plans for their respective operations; the army and universal nature of marketing. We would
has a marketing plan to attract recruits and is like to propose the following definition:
one of the top advertising spenders in the
country. Other government agencies are be- • Marketing is human activity directed at
coming involved in marketing energy conser- satisfying needs and wants through
vation, 'national pride', and other public exchange processes.
causes. To understand this definition, we have to ex-
plain the following more basic concepts:
WHAT IS MARKETING? needs, wants, demands, products, exchange,
transactions and markets.
We have said many things about marketing
Needs
without defining it. Marketing has been
defined in a number of ways. The American The most fundamental concept underlying
Marketing Association's official definition is: marketing is that of needs. Inanimate objects
do not have needs, but living matter does: express itself as a want for fish and chips, and
plants require water and sunlight to survive; some flavoured milk. Wants always have a ref-
animals require air, water and food. Higher erence to culturally defined objects. Within
animals have emotional as well as biological the same culture, there will be some variation
needs. We define human need as follows: in individual wants because of individual ex-
perience and tastes.
• A human need is a state of felt depri-
As a society becomes more complex, its
vation in a person.
members' wants expand. First, the inhabitants
Human needs are plentiful and complex. are exposed to more objects, some of which
They include basic physiological needs for pique their curiosity, interest and desire.
food, clothing, warmth and safety; social Second, producers undertake specific actions
needs for belongingness, influence and to build desire for the things they produce.
affection; and individual needs for knowledge The surest way to do this is to try to form a
and self-expression. These needs are not connection between a given object and
created by advertising but are a basic part of people's pre-existing needs: the product is
human make-up. promoted as a satisfier of one or more particu-
When a need is not satisfied the person is lar needs. The marketer does not create the
unhappy, this being greater the more intense need; it is there. If marketers are successful,
and central the need. An unhappy person will however, they can create a want.
do one of two things - undertake steps to ob- Sellers often confuse wants and needs. A
tain an object that will satisfy the need, or try manufacturer of drill bits may think that the
to extinguish the desire. That is, need re- customer needs a drill bit, but what the cus-
duction can occur in two ways: tomer really needs is a hole. In this sense there
are no products; only services performed by
Obtaining desired products. If another product can provide the
goods or services service better or more cheaply, the customer
Need reduction =
Extinguishing the desire will have a new want but the same need.
Manufacturers who focus only on existing
People in Western industrial societies tend to wants, and fail to recognize the underlying
follow the numerator: they manage their needs need structure, are in danger of one day wak-
by trying to find objects that will satisfy them. ing up to no demand. They suffer from
People in Eastern societies, however, have tra- 'marketing myopia.' 11 These sellers are so en-
ditionally followed the denominator: they try amoured of their products that they lose sight
to eliminate or reduce their needs whenever of the customers' needs. They forget that a
possible. physical object is a tool to solve a consumer
problem.
Wants
Demands
Human wants are the expression of human
needs as they are shaped by a person's culture People have numerous wants, many of which
and individual development. Suppose some- they cannot satisfY. Every person has a finite
one is hungry. If that person lives in Bali, the set of resources (income, savings, time,
need may be expressed as a want or desire for energy) and must decide which things are
mangoes, suckling pig and beans. If that affordable and will make him or her feel better
person lives in Australia, the same need may off. A want becomes a demand when the
person is able and willing to buy the object he for the money that he or she is willing to
or she desires. spend.
There is no doubt that modem needs and
wants have assumed staggering proportions.
Products
In one year alone, Australians purchased 1905
million litres of beer, 926 000 tonnes of beef The existence of human needs, wants and de-
and veal, 50 000 cremations, 317 million train mands implies the concept of products. We
journeys, 624 000 motor vehicles, and define product as follows:
468 000 life-insurance policies. These and
• A product is something that is viewed as
other consumer goods and services led to a
being capable of satisfying a need or
derived demand for more fundamental inputs,
want.
such as 7 million tonnes of raw steel and
792 000 tonnes of locally produced paper. All the products that are capable of satisfy-
These are just a few of the wants and needs ing a certain need may be called the product
that are expressed in a $100 billion (thousand choice set. Suppose a woman feels a need to
million) economy. enhance her appearance. This product set in-
A society could plan next year's production cludes cosmetics, new clothes, a Gold Coast
by using this year's mix of demand, as is the holiday, a beautician's services, plastic sur-
practice in the USSR and other centrally gery, and so forth. These products are all com-
planned economies. Demands, however, are petitive but are not all equally desirable: the
not very reliable. People tire of some things more accessible satisfiers, such as cosmetics,
they are currently consuming; they seek var- clothing and a new haircut, are more likely to
iety for its own sake; and they make new be purchased first.
choices in response to changing prices and in- Another means of illustrating this point is
comes. Kelvin Lancaster has pointed out that to represent any specific product as a circle
products are really bundles of attributes and and ask how much the product would satisfy
people choose the products that give them the the person's want, also represented as a circle.
best bundle of things they are seeking. 12 Thus Figure 1-la indicates that product A has no
a Mini Moke represents a benefit bundle of want-satisfying ability relative to the person's
basic transportation, low purchase price, and want X. Figure 1-1 b shows that product B has
fuel economy; and a Mercedes represents a partial want-satisfying ability (it may be mini-
benefit bundle of high comfort, luxury and mal or substantial). Figure 1-lc shows that
status. The car that a person chooses is the product C has virtually complete want-
one that packages the best bundle of attributes satisfying ability, i.e. it is an ideal product.
Product Want
B X
a No want b Partial want c Complete want

satisfaction satisfaction satisfaction
Figure 1-1 Three degrees of want satisfaction

The concept of an ideal product can be activities and ideas. A consumer chooses be-
made more rigorous. Suppose the product is tween different entenainers to watch on tele-
vanilla ice-cream. We choose a set of import- vision, different places to go to for a holiday,
ant product attributes - say, 'creaminess' and different organizations to contribute to, and
'sweetness' - and ask the consumer how much different ideas to support. From the con-
of each attribute he or she would ideally want. sumer's point of view, these are alternative
Suppose the consumer's answer is represented products. If the term product seems unnatural
by 'Ideal' in Figure 1-2. Now the consumer is 3:t times, we can substitute the term satisfier,
asked to taste various existing brands of van- resource or offering - all of which describe
illa ice-cream and describe their respective something of value to someone.
levels of creaminess and sweetness (also rep-
resented in Figure 1-2). We would thus pre-
dict that the consumer would buy brand B, Exchange
because it comes closer than the other brands
The fact that people have needs, wants and
to 'packaging' the ideal levels of the two attri-
demands, and that there are products capable
butes the consumer wants. We are assuming
of satisfying them, is necessary but not
that price and other attributes are not import-
sufficient to define marketing. Marketing
ant to the consumer, and that purchase situ-
exists when people decide to satisfy needs and
ation factors - e.g. stock conditions, a dam-
wants through exchange.
aged container, a desire to try something
different - play no pan. • Exchange is the act of obtaining a desired
object from someone by offering some-
thing in return.
Exchange is one of four ways in which in-
• dividuals can obtain a desired object. Let us
Brand C again suppose that someone is hungry. This
Ideal person can try to obtain food in the following
• ways:
•
Brand B
I. Self-production. The hungry person can re-
lieve this hunger through personal efforts
(hunting, fishing, fruit -gathering). There is
Brand A no necessity to interact with anyone else:
• there is no market and no marketing.
Sweetness 2. Coercion. The hungry person can forcibly
wrest or steal food from someone else. No
benefit is offered to the other party except
Figure 1-2 Vanilla ice-cream brands in a brand
space made up of creaminess
the chance not to be harmed.
and sweetness 3. Supplication. The hungry person can ap-
proach someone and ask or beg for food.
It is impottant not to limit our concept of The supplicant has nothing tangible to
product to physical objects. The key thing offer except gratitude.
about a product is the service that it renders. 4. Exchange. The hungry person can approach
Anything capable of rendering a service, i.e. someone who has food and offer some re-
satisfying a need, can be called a product. source (money, another good, some service)
This includes persons, places, organizations, in exchange.
Of these four ways of satisfying individual d). Each party is free to accept or reject the
needs, exchange has a great deal in its favour. offer of the other party (or panies).
The person wanting a specific product does e) Each pany believes it is proper to deal
not have to prey on others or depend on alms. with the other party (or panies) in this
Nor does this person have to produce every way.
necessity, regardless of skill: it is possible to
These five conditions set up a potential for
concentrate on producing those things for
exchange. Whether exchange actually takes
which he has the greatest comparative advan-
place depends upon the parties' coming to an
tage, and trade them for needed items pro-
agreement on the terms. If they agree, we con-
duced by others. The members of a society
clude that the act of exchange leaves all of
end up specializing in production, thus lead-
them better off (or at least not worse off) be-
ing to much more total output than under any
cause each was free to reject or accept the
alternative.
offer. In this sense, exchange is a value-
Specialization in production, however, does
creating process. Just as production creates
not always lead to a society in which exchange
value, so does exchange create value through
is the basis of distributing goods. Goods may
enlarging the consumption possibilities facing
be distributed in a society in one of three
any individual.
ways: 13
It should be noted that exchange is a
human activity without counterpan in the
I. Reciprocity. In some SOCieties, each pro- animal kingdom. Ant colonies and gorilla
ducer supplies goods or services to whoever societies show some division of labour but
wants them and, in turn, goes to others for little evidence of formal exchange. The politi-
whatever is needed. A cobbler will repair cal economist Adam Smith observed that:
shoes for others and will in turn go to the 'Nobody ever saw a dog make a fair and de-
butcher, the baker and the candlestick- liberate exchange of one bone for another with
maker for the things he needs. The modern another dog. Nobody ever saw one animal by
family works on this principle, each mem- its gestures and natural cries signify to an-
ber providing services for other members other, this is mine, that is yours; I am willing
without formal exchange arrangements. to give this for that.' 14
2. Redistribution. In other societies, producers Whereas people, according to Smith, have
turn over some pan of their output to a a natural 'propensity to baner, truck, and
chief or a central depot. The output is sub- exchange one thing for another', anthropol-
sequently redistributed to persons accord- ogists have cast doubt over whether exchange
ing to their needs, status or power. is a natural human propensity or a learned
3. Exchange. In most modern societies, pro- disposition (see Exhibit 1-1 ). Whatever the
ducers offer to sell their goods to others in case, exchange seems to be a uniquely human
exchange for money. Exchange is the core activity.
concept of the discipline of marketing. For
exchange to take place, five conditions must
be satisfied: Transactions
a) There are at least two parties. If exchange is the core concept of the disci-
b) Each pany has something that might be pline of marketing, what is the discipline's
of value to the other pany (or panies). unit of measurement? The answer is, a trans-
c) Each pany is capable of communication action. A transaction consists of a trade of
and delivery. values between two panies: A gives X to B,
and gets Y in return. Thus, in a monetary marketers have recently broadened the con-
transaction, Jones gives $400 to Smith and cept of marketing to include the study of
obtains a television set. Not all transactions transfer behaviour as well as transaction
require money as one of the traded values, behaviour.
however. A barter transaction would consist,
for example, of Jones giving a refrigerator to
Markets
Smith in return for a television set; it may also
consist of the trading of services instead of The concept of transactions leads to the con-
goods, as when lawyer Jones writes a will for cept of a market.
physician Smith in return for a medical
• A market is the set of all actual and
examination.
potential buyers of a product.
A transaction involves several measurable
entities: (i) at least two things of valt,1e; To understand the nature of a market, let
(ii) conditions that are agreed to; (iii) a time us imagine a primitive economy consisting of
of agreement; (iv) a place of agreement. Trans- four persons: fisher, hunter, potter and
actions can easily give rise to conflicts based farmer. Figure 1-3 shows three different ways
on misinterpretations or malice, and thus a in which these tradespeople could meet their
legal system usually arises to support and en- needs. In the first case, self-sufficiency, each
force certain behaviour on the part of the person relies completely upon himself to
transactors. Without a 'law of contracts~, gather the goods he needs for living. Thus the
people would approach transactions with dis- fisher spends most of his time fishing but also
trust and everyone would lose. takes time to hunt, make pottery, and farm to
Business firms keep records of their trans- obtain the other goods. He is therefore less
actions and sort them by item, price, cus- efficient at fishing, and the same is true of the
tomer, location and other specific variables: in other tradespeople. In the second case,
sales analysis, for example, they try to analyze decentralized exchange, each person sees the
where the company's sales are coming from by other three as potential 'buyers' of his product
product, customer, territory, and so on. and therefore making up a market. Thus the
A transaction should be distinguished from fisher may make separate trips to exchange his
a transfer, i.e. where A gives X to B but re- goods for those of the hunter, potter and
ceives nothing explicit in return (as with gifts, farmer. In the third case, cenxralized exchange,
subsidies and altruistic acts). It would seem to a merchant appears and sets up in a central
follow that marketers should confine their area called a marketplace. Each tradesperson
study to transactions and not to transfers. brings his goods to the merchant and trades
However, a little more thought suggests that for all the things he needs. Thus the fisher
transfer behaviour also includes a concept of now transacts with only one 'market' to obtain
exchange. The transferrer gives a gift in the the goods he needs, rather than with three
expectation of some immediate or eventual other persons. The emergence of a merchant
benefit, such as gratitude, a good feeling, relief substantially reduces the total number of
from a sense of guilt, or the wish to put the transactions required to accomplish a given
other party under an obligation. Professional volume of exchange. In other words, mer-
fund-raisers are acutely aware of the 'recipro- chants and central marketplaces increase the
cal' motives underlying donor behaviour and transactional efficiency of the economy. 15
try to supply the utilities being sought by the As the number of pe; Jns and transactions
givers; if they neglect donors or show no grati- increases in a society, the number of mer-
tude, they will soon lose them. As a result, chants and marketplaces also increases. In
·--·~·--~------- ----------~----·---~
Exhibit 1-1 The Origin of Trade

Since exchange is the idea underlying marketing, we might ask how exchange or trade
originated in human society. Exchange is so pervasive in modern society that we may ignore
the fact that it is an invention and not inevitable human practice. For example, there is no
evidence of trade behaviour among certain groups, such as the Incas, Eskimos and early
Polish peasants. Eskimos, in fact, consider the idea of exchange vulgar, believing that a
person should give something without expecting anything in return.
Scholars are not in agreement as to the origins of trade. Several years ago, George
Robbins summarized seven different theories as to how trade began.
1. Trading is instinctive. This theory holds that human beings have an inborn instinct
to 'truck and barter'. Although this instinct is not as strong as those of self-
preservation and sex, it nevertheless appears in much of human society. A modi·
fication of the theory holds that this trait will appear more strongly in certain people
than others: every society will spawn individuals who are instinctive traders or
'born' salespeople who get their kicks from swapping goods.
2. Trading grew out of warfare. This theory holds that many primitive tribes initially
resorted to warfare in order to gain the economic goods they need or want. But the
casualties of war led them to search for other ways to obtain those goods, and
eventually they hit upon the idea of trading with the other tribes. Trading thus
becomes a sublimation of warlike behaviour.
3. Trading originated in predation. This theory holds that much of human history is
filled with groups and individuals who extracted tribute from others by conquering
them. Those collecting tribute eventually offered something in return, such as
security or small gifts, to keep the tributees from rebelling. It is held that trading
may have picked up some of its negative overtones because it grew out of such
practices.
4. Trading grew out of friendly gift-giving. The practice of friendly gift-giving has
appeared in many societies. Through receiving gifts, people may have learned the
utility of exchange. Having become accustomed to giving and receiving gifts, they
transformed the principle into trading behaviour.
5. Trading originated with the 'silent trade'. Anthropologists have noted many tribes
which have engaged in 'silent trade', where one tribe leaves its goods on a prom-
ontory and retires from sight to permit another group to come out of hiding to take
these goods and leave something in return. Silent trade took place primarily
between tribes of very different cultures, who wished to obtain certain goods
without resorting to war on the one hand or building friendship on the other.
6. Trading arose from surpluses. A popular theory holds that trading developed from
an early division of labour, which resulted in certain families or tribes having a
surplus of certain goods. They looked for others who had a surplus of needed
goods, 'ind proposed to offer some of their goods in exchange.
~
(continued)
Exltlbil 1-1 (continued)
7. Trading developed from the property concept. Pecple discover that possession of
certain scarce goods gives them power or status, which leads to a concept of
ownership and property. Those who want something belonging to another must
make a strong offer, hence leading to the concept of trading.
All of these theories have elements of truth and yet none applies to all societies where
trading has been observed. Trading can be found in societies that never went to war, that
did not practise gift-giving, and that did not have a strong concept of property. The question
of how trading originated, like the question of how the solar system was formed, may never
be fully answered but nevertheless leads to many interesting speculations.
Source: Adapted from George W. Robbins. 'Notions about the Origins of Trading', Journal of Marketing, January 1947, pp, 228-36.
advanced societies, marketplaces need not be job-counselling firms. Sitnilarly, a money

physical locations: with the development of market emerges to meet the needs of people
modern communications and transport, a mer- who wish to borrow, lend, save or safeguard
chant can advertise a product on late-evening money. The donor market emerges to meet
television, take telephone orders from hun- the financial needs of non-profit organizations
dreds of customers, and mail the goods on the so that they can carry out their work.
following day without any direct contact with
the buyer.
Marketing
A market can grow up around a good, a
service, or anything else of value. For The concept of markets finally brings us full
example, a labour market exists when there circle, to the concept of marketing. Marketing
are persons ready to offer their labour to means human activity that takes place in re-
others in return for wages or products. Vari- lation to markets. Marketing means working
ous institutions will grow up around a labour with. markets, which means attempting to
market to facilitate its functioning, such as actualize potential exchanges for the purpose
employment agencies, job advertising, and of satisfying human needs and wants. Thus
Fisher Hunter Fisher 'I( ,. Hunter Fisher Hunter
0 0 \ I
0 0 8
Potter Farmer Potter ..: ,. . Farmer
I
Potter
" Farmer
Self-sufficiency Decentralized exchange Centralized exchange
Figure 1-3 Evolution toward centralized exchange

we return to our definition of marketing as as the activities of 'sellers', buyers also carry
human activity directed at satisfying needs out marketing activities. The homemaker
and wants through exchange processes. searches for the goods he needs at prices he is
Exchange processes involve work. The willing to pay; the purchasing agent who
seller has to search for buyers, identity their needs a commodity in shon supply has to
needs, design appropriate products, promote track down sellers and offer attractive terms.
them, store and transplant them, negotiate, A sellers' market is one in which the buyer is
and so on. Such activities as product develop- the more active 'marketer', and a buyers'
ment, search, communic3tion, distribution, market is one in which the seller is the ntore
pricing and service are core marketing active 'marketer'.
activities. In the early 1950s the growing supply of
Although it is normal to think of marketing goods created a buyers' market, and marketing
Exhibit 1·2 Various Approaches to the Study

of Marketing
Any phenomenon can be studied from several points of view. The to/lowing approaches
have been prominent In the history of marketing, and they are listed In the rough order of
their appearance.
1. Commodity approach. The-commodity approach focuses on particular commodities

and classes of products to determine how they are produced and distributed to
intermediate and ultimate consumers. The major product classes studied are farm
produce, minerals, manufactured goods, and services.
2. lnsttlutionaf approach. The institutional approach focuses on the nature, evolution
and 1unctions of particular \nstitutions in the marketing system, such as producers,
wholesalers, retailers and various facilitating agencies. An institutionalist may study
a department store, for example, to determine both how it has developed over the
years and its likely future direction.
3. Functional approach. The functional approach focuses on the nature ana dynamics
of various marketing functions, such as buying, selling, storing, financing and pro-
moting. A functionalist studies how these functions are carried on in various prod-
uct markets and by various marketing institutions.
4. Managerial approach. The managerial approach focuses on the use of marketing
in successfully positioning organizations and products in the marketplace. Mana-
gerial marketers are especially interested in marketing analysis, planning, organ-
ization, implementation and control.
5. Social approach. The social approach focuses on the social contributions and costs
created by various marketing activities and institutions. It addresses such issues
as market efficiency, product obsolescence, advertising truthfulness, and the eco-
logical impact of marketing.
became identified with sellers trying to find marketing is a difficult task, and it is ques-
buyers. This book will take such a view, and tionable because it tries to change rather
examine the marketing problems of sellers in than serve people's wants. One's attitude
a buyers' market. However, it will occasion- toward conversional marketing depends on
ally allude to the marketing done by buyers to whether the ~cause' is seen as worthwhile.
produce desired exchanges. 2. Stimulational marketing. This is the task of
trying to stimulate a want for an object, in
people who initially have no knowledge of
MARKETING MANAGEMENT or interest in it (e.g. trying to get people to
buy 'pet rocks').
Those who engage in exchange learn how to 3. Developmental marketing. This is the task of
do it better over time. In particular, sellers trying to develop new goods or services that
learn how to professionalize their marketing meet a clear market need (e.g. the effort to
management. We define marketing manage- develop an efficient electric car). •
ment as follows: 4. Remarketing. This is the task of trying to
rebuild · interest in a stable or declining
• Marketing management is the analysis, product (e.g. the various steps that church
planning, implementation and control of groups are taking to attract followers in the
programmes designed to create, build face of growing competition from secular
and maintain mutually beneficial acti ities).
exchanges and relationships with target 5. Syn romarketing. This is the task of trying
markets for the purpose of achieving to a er the time pattern of demand so that
organizational objectives. it '11 better match the time pattern of
sup ly (e.g. where public-transport author-
The popular image of the marketing man-
ities try to encourage more passengers to
ager is that of someone whose primary task is travel during off-peak periods and thus
to stimulate demand for the company's prod-
reduce the amount of equipment needed
ucts. This, however, is too limited a view: during rush hours).
marketing managers are concerned not only
6. Maintenance marketing. This is the task of
with the creation and expansion of demand,
trying to maintain the existing level of sales
but also with its modification and possible re-
in the face of competition. The mainten-
duction. Marketing management must regu-
ance marketer monitorS the environment
late the level, timing and character of demand
continuously and is ready to make neces-
in a way that will help the organization
sary changes in order to protect the sales
achieve its objectives; marketing management
level.
is demand management.
7. Demarketing. This is the task of trying to
The organization forms an idea of a desired
reduce the demand for goods or services on
level of transactions with a market; at any
a temporary or permanent basis (e.g. the
point in time, the actual demand level may be
use of pricing and promotion techniques to
below, equal to or above this, which leads to
encourage consumers to reduce their
eight distinguishable marketing tasks: 16
energy consumption). Demarketing calls
1. Conversional marketing. This is the task of for using the normal marketing tools in
trying to get people who dislike something, reverse, such as reducing availability, adver-
to like it (e.g. many people have a fear of tising and service, and increasing prices. 17
flying, and the airline industry tries to con- 8. Countermarketing. This is the task of trying
vert them into willing flyers). Conversional to destroy the demand for or interest in a
particular product (e.g. an anti-smoking portance to non-price differences within the

campaign to persuade people who like product class.
smoking to stop smoking). Countermarket- 4. The organization's task is to continue to
ing is a difficult marketing task in that the improve production and distribution ef-
aim is to get people who like something to ficiency, and lower costs, in order to attract
give it up. and hold customers.
The production concept is an appropriate
management philosophy in two situations.
MARKETING-MANAGEMENT
The first is where the demand for a product
PHILOSOPHIES
exceeds supply: here consumers are ready to
buy any version of the product they can find.
We have described marketing management as The second is where the product's cost is high
the conscious effort to achieve desired
and must be brought down by producing it
exchange outcomes with target markets. Now
more efficiently. Henry Ford's philosophy was
the question arises of the philosophy that
to perfect the production of one car model (the
guides these efforts. Very often the interests of
Model T) so that its cost could be brought
the organization, the customers and society
down; he joked about offering people a car of
are in conflict: it is desirable that marketing
any colour as long as it was black. Texas In-
activities be carried out according to a clear
struments is a prime contemporary prac-
concept of both responsive and responsible
titioner of putting major effort into achieving
marketing.
production volume and lower costs in order to
There are five alternative concepts which
bring down prices. It succeeded in winning a
provide business and other organizations with
major share of the pocket-calculator market
guidelines for their marketing activity: the
with this philosophy, and is applying it again
production, product, selling, marketing and
in the manufacture of digital watches.
societal marketing concepts. Some service organizations also follow the
production concept. Many medical and dental
practices are organized on assembly-line prin-
The Production Concept
ciples, as are some government agencies such
The production concept is one of the oldest as unemployment offices. While this results in
concepts guiding sellers. handling many cases per hour, this type of
management is open to the charge of imper-
• The production concept assumes that con-
sonality and insensitivity to consumers.
sumers will favour those products that
are available and affordable. The major
The Product Concept
task of management is therefore to im-
prove the efficiency of both production The product concept is another major concept
and distribution. guiding sellers.
The implicit assumptions of the production • The product concept assumes that con-
concept are: sumers will favour those products that
offer the most quality for the price, and
I. Consumers are primarily interested in
therefore the organization should devote
product availability and low price.
its energy to improving product quality.
2. Consumers know the prices of the compet-
ing brands. The implicit premises of the product concept
3. Consumers do not see or attach much im- are:
I. Consumers buy products rather than solu- unless the organization makes a substan-
tions to needs. tial effort to stimulate their interest in its
2. Consumers are primarily interested in products.
product quality.
The implicit premises of the selling concept
3. Consumers know the quality and feature
differences of the competing brands.
are:
4. Consumers choose between competing I. Consumers have a normal tendency to
brands on the basis of obtaining the most resist buying most things that are not
quality for their money. essential.
5. The organization's task is to continue to 2. Consumers can be induced to buy more
improve product quality, in order to attract through various sales-stimulating devices.
and hold customers. 3. The organization's task is to organize a
strong sales-oriented department, in order
Many a manufacturer believes that if he
to attract and hold customers.
can build a better mousetrap, the world will
beat a path to his door. 18 But he is often The selling concept is practised most
rudely shocked. In the first place, buyers are aggressively in the instance of 'unsought
looking for a solution to a mouse problem and goods', i.e. those goods that buyers do not
not necessarily a mousetrap - the solution usually think of buying. Examples include
might take the form of a chemical spray, an insurance, encyclopaedias, and burial plots;
exterminating service, or something that relevant industries have established various
works better than a mousetrap. In the second techniques of tracking down prospects and
place, the inventor of the better mousetrap hard-selling them on the benefits of their
will get nowhere unless positive steps are product.
taken to design, package and price this new Hard-selling is also practised by manufac-
product attractively, place it in convenient dis- turers and resellers when they have a surplus
tribution channels, bring it to the attention of of goods on their hands. Car dealers often are
persons who need it, and convince them that prime practitioners of the selling concept:"
it has superior qualities.
Companies that operate according to a From the moment the customer walks into the
product concept can be found in all fields. showroom, the car salesman will engage in
'psyching him out', and exaggerating the car's
Railways management was so sure that it had
virtues. If the customer likes the floor model, he
a superior form of traru;port that it overlooked may be told that there is another customer about
the emerging challenge of the airlines, buses, to buy it and that he should decide on the spot.
trucks and cars. Historically, universities If the customer balks at the price (which is
assumed that high-school students would con- artificially high to begin with), the salesman
tinue to want their product. offers to talk to the manager to get a ospeda\
concession. The customer waits ten minutes
and the salesman returns with 'the boss doesn't
The Selling Concept like it but I got him to agree'. The aim is to
The selling concept (also called the sales con- 'work up the customer' to buy then and there.
cept) is another hallowed way in which many
The sales concept is also practised in the
producers guide their exchange activity.
non-profit area. Consider a political party:
• The selling concept assumes that con· having chosen a parliamentary leader and can-
sumers will either not buy, or not buy didates, it will vigorously sell this leader to the
enough of, the organization's products voters. The leader and his supporters visit
electoral districts from early morning to late the following contrast between the two
evening shaking hands, kissing babies, and orlentatlons:
making breezy speeches. Countless dollars are Selling focuses on the needs of rhe seller; mar~
spent on radio and television advertising, keting on the needs of the buyer. Selling is pre·
pastors and mailings. Any flaws in the candi· occupied with the seller's need to convert his
dates are shielded from the public because the product into cash; marketing with the idea of
aim is to get the sale, not worry abou~ post· satisfying the needs of the customer by means of
purchase satisfaction. the product and the whole cluster of things as~
sociated with creating, delivering and finally
consuming it. 21
The Marketing Concept
The marketing concept replaces and re·
The marketing concept is a more recent one verses the logic of the selling concept (see Fig·
in the history of exchange relations." ure 1·4). The selling concept starts with the
• The marketing concept assumes that the firm's existing products, and uses selling and
key to achieving organizational goals promotion to stimulate a profitable volume of
consists of the organization's determin· sales. The marketing concept starts with the
ing the needs and wants of target mar- firm's target customers and their needs and
kets and adapting itself to satisfying wants, coordinates a set of appropriate prod·
these more effectively and efficiently ucts and programmes, and derives profits
than its competitors. through satisfying its customers. In essence,
the marketing concept is a customer needs and
The marketing concept has been expressed in wants orientation backed by integrated mar-
more colourful ways, such as 'Find wants and keting effort aimed at generating customer sat-
fill them', 'Make what you can sell instead of isfaction as the key to satisfying organizational
trying to sell what you can. make', 'Love the goals.
customer and not the product'. It is evident in The marketing concept is a company's
advertising slogans such as 'Have it your way' commitment to the time-honoured economic
and 'You're the boss'. approach known as consumer sovereignty:
The underlying premises of the marketing
concept are:
Focus Means End
I. Consumers may be grouped into different
market segments according to their needs
SeiJing
and wants. Products and
Profits through
sales volume
2. The consumers in any market will favour promoting
the offer of that organization which comes a The selling concept
closest to satisfying their particular needs
and wants.
3. The organization's task is to research and
choose target markets, and develop Customer Integrated Profits through
effective offers and marketing programmes, needs marketing cu.storn~r
sat1sfact1on
in order to attract and hold customers.
b The marketing concept
The selling concept and the marketing con-

cept are frequently confused by business- Figure 1-4 The selling and marketing
people and the public alike. Levitt draws concepts contrasted
20 MarKeting in Australia
the determination of what is to be produced I. Coca-Cola is a product from which cus-

should not be in the hands of the companies tomers derive little nutritional benefit.
or in the hands of government but in the 2. The sugar and phosphoric acid are not
hands of consumers. The companies produce beneficial for people's teeth.
what the consumers want, and thus maximize 3. The brominated vegetable oil in colas has
consumer welfare as well as their profits. been removed from the American Food and
Have many countries adopted this Drug Administration's list of products
approach? We know that the marketing con- 'generally recognized as safe'.
cept is behind the success of such companies 4. The caffeine in colas has been found to pro-
as IBM, Avon, and McDonald's; we also duce tremor, insomnia, gastrointestinal dis-
know that it is more prevalent in consumer- orders, and possible cell damage in the
goods companies than in industrial-goods drinker or the unborn foetus.
companies, and in larger companies than in 5. Saccharin, used in Coca-Cola's low-calorie
smaller companies. 22 In many cases the mar- drink Tab, may be banned by health
keting concept, although professed, is not authorities.
practised in any methodical way: the company 6. The soft-drink industry has catered to the
may have the forms of marketing (such as a demand for convenience by the increasing
marketing manager, product managers, mar- use of one-way (disposable) bottles. The
keting plans, marketing research) but not the one-way bottle is wasteful of resources, in
substance. 23 It takes several years of top- that one returnable bottle can make seven-
management determination to turn a sales- teen trips before it is no longer usable.
oriented company into a truly market-oriented Many one-way bottles are not bio-
company. degradable, and thus often become litter.
The Societal Marketing Concept This and similar situations have led to the
call for a new concept which goes beyond that
Some people have recently begun to question of marketing. Among the proposals .are the
whether the marketing concept is an adequate 'human_ concept', 'intelligent consumption
philosophy for business in an age of environ- concept' and 'ecological imperative concept', 25
mental deterioration, resource shortages, all of which tackle different aspects of the
explosive population growth, worldwide same problem. We would like to propose the
inflation and neglected social services. 24 The 'societal marketing concept', defined as
issue is whether the firm that does an excellent follows:
job of sensing, serving and satisfying individ-
ual consumer needs is necessarily acting in the
• The societal marketing concept holds that
best long-run interests of consumers and
the key task of the organization is to de-
society. The marketing concept sidesteps the
termine the needs, wants and interests of
confliCt between consumer wants, consumer
target markets, and to deliver the desired
interests and long-run societal welfare.
satisfactions more effectively and
As a concrete instance, consider the Coca-
efficiently than its competitors in a way
Cola Company. Its products do an excellent
that preserves or enhances the con-
job of meeting the wants of people for tasty
sumer's and the society's well-being.
soft-drinks. But is it really serving their long-
run interests? Here are some criticisms that
have been levelled against the company by The underlying premises of the societal mar-
consumer and environmental groups: keting concept are:
Exhibit 1-3 McDonald's Corporation: The Marketing

Concept in Practice
Among the prime practitioners of the marketing concept is McDonald's CorpOration, the fast-
food hamburger retailer. In its short twenty-five years, McDonald's has served Australians,
Americans and citizens of sevei"al other countries more than 27 billion (thousand million)
hamburgers. With over 4200 outlets worldwide, its current annual sales are running at
$US4.6 billion. This leading position is the result of a thoroughgoing marketing orientation:
McDonald's knows how to serve people well and adapt to changing needs and wants.
Before McDonald's, Americans could buy hamburgers in restaurants or diners but not
without problems. In many places, the hamburgers were poor in quality, service was slow,
decor was poor, conditions were unclean, and the atmosphere noisy. In 1955 Ray Kroc
(then a salesman of malted-milk machines) became interested in a particular restaurant
owned and managed by Richard and Maurice McDonald. He liked their concept of a fast·
food restaurant and proposed a programme of selling franchises. This was the beginning
of the successful McDon~ld's system, formulated as an alternative whereby the customer
could walk into a spotlessly clean outlet, be greeted by a friendly and efficient order-taker,
and receive a tasty hamburger a minute after placing the order, with the chance to eat it
there or take it away. There were no jukeboxes or telephones to create a teenage hangout
and in fact, McDonald's became a family affair, particularly appealing to the children.
As times changed, so did McDonald's. The sit-down sections were enlarged, the
decor improved, and new outlets opened in high-traffic parts of the city. McDonald's was
clearly being managed to evolve with changing customer needs and profitable opportunities.
McDonald's management also knows how to efficiently design and operate a complex
service business. It chooses its locations carefully, selects highly qualified franchise oper-
ations, gives complete management training (in the United States, at its Hamburger Univer-
. sity), supports its franchises with a high quality national advertising· and Sales promotion
programme, monitors product and service quality through continuous customer surveys, and
puts great energy into improving the technology of hamburger production to simplify oper·
ations, bring down costs, and speed up service.
I. Consumers' wants do not always coincide Societal marketing involves four consider-
with their long-run interests or those of ations in marketing decision-making: con-
society. sumer needs and wants, consumer interests,
2. Consumers will increasingly favour organ- company interests, and society's interests.
izations that show a concern for meeting The major question facing companies is how
their wants, long-run interests, and societal marketing will affect their profit-
society's long-run interests. ability, as they cannot be expected to absorb
3. The organization's task is to serve target losses or lower profits in its pursuit. Fortu-
markets in a way that produces not only nately there are many companies which have
want satisfaction but long-run individual increased their profits by practising the so-
and -social benefit, in order to attract and cietal marketing concept, and thus others can
hold customers. be expected to give it serious consideration.
THE GOALS OF A MARKETING SYSTEM group) to have easy access to the media to
voice their opinion.
This brings us to the final question in this
The recent proliferation of marketing legis·
chapter: What should society seek from its
lation and regulation throughout the world
marketing system? The question is particu-
raises a fundamental question: What are the
larly pertinent, as various governments
proper goals of a marketing system? Any pol·
around the world are increasingly regulating
icy interventions in a marketing system should
the normal marketing activities of firms. Some
be guided by a clear image of what marketing
of the interventions may seem quite extreme:
is supposed to contribute to that society. (For
• Government officials in India are consider- further discussion of this issue, see Chapter
ing prohibiting the branding of certain 21.) At least four alternative goals have been
suggested: maximize consumption, maximize
staple products such as sugar, soap, tea and
rice. The allegation is that branding is in- consumer satisfaction, maxisnize choice and
evitably accompanied by costly packaging maximize life quality.
and high advertising and promotional ex-
Maximize Consumption
penditures, which push up prices.
• Government officials in the Philippines are Many business executives view marketing as a
talking about solving the same problem business function charged with the task of
through socialized pricing. Certain staples maximizing the amount of goods and services
consumed heavily by the poor would have that the public buys and consumes, which in
their prices held down through either sub- tum will maximize consumption, production,
sidy or price control. employment and wealth. This goal can be in·
• Government officials in Norway are con- ferred from typical headlines in the business
sidering proposals to ban certain 'luxury' press: 'Wrigley Seeks Ways to Get People to
goods from the market, such as private Chew More Gum'; 'Opticians Introduce
swimming pools, tennis courts, aircraft and Fashion in Glasses to Stimulate Demand';
luxury vehicles. They think Norway's re- 'Steel Industry Maps Strategy to Expand
sources are too limited to permit their use Sales'.
for these purposes, even where they are The underlying assumption is that the
affordable by the affluent. These officials more people buy and consume, the happier
want to promote the idea of 'collective con- they are. This is captured in the phrase 'more
sumption' of expensive goods and services. is better', and has been a driving force in the
• To promote 'truth-in-advertising', the US Australian economy. Yet some people have
Federal Trade Commission experimented begun to doubt that increased material goods
with three new measures in the early 1970s. mean more happiness; they see too many
Advertising substantiation requires firms to affluent people leading unhappy lives, and
be prepared to provide documentary evi- deny that the good life is achieved through
dence backing any claim they make in an continuous an'd conspicuous consumption.
ad. Corrective advertising requires a firm Their personal philosophy is 'less is more' and
found guilty of a false claim to spend 25 per 'small is beautiful'.
cent of its subsequent advertising budget to Frederick Pohl, in a science-fiction story
announce that error to the public. Counter called The Midas Touch, dramatizes the pos·
advertising encourages groups that have a sible dire consequences of too much consump·
different view about the social value of tion. In this story, society has reached a point
some product (such as an anti-smoking where factories are completely automated.
Goods roll out continuously, and people are Maximizing consumer choice unfortu-
required to consume as much as they can so nately also has some flaws. First, goods and
that they will not be buried under these goods. services will be more expensive since the
Ordinary people are given high consumption great variety of products will call for shorter
quotas, while an elite is excused from having production runs and higher levels of required
to consume so much and its memb~rs are inventories. The higher cost of goods will
furthermore given the few jobs that still exist reduce the consumers' real income and their
so that they will not have to face the bleakness ability to buy a greater quantity of goods.
of no work. Second, the gain in consumer satisfaction
from the great variety of goods will be offset
Maximize Consumer Satisfaction by the greater cost of search time and effort.
Consumers will have to spend more time
Most marketers see the goal of marketing as learning about the features of different ver-
that of maximizing consumer satisfaction sions of a product, more time making an
rather than consumption. Chewing more gum evaluation, and possibly more time travelling
or owning more cars is significant only if these to the specific dealer carrying the chosen prod-
objects bring about real increases in consumer uct. Third, an increase in the number of
satisfaction. brands will not necessarily mean an increase
Unfortunately, consumer satisfaction as a in the consumers' range of real choice: there
goal of the marketing system poses some for- are, for example, many brands of beer in Aus-
midable conceptual and measurement prob- tralia but most of them have the same basic
lems. First, no welfare economist has worked taste. When a product category features many
out a meaningful scale by which the total sat' brands with few differences, this is ·called
isfaction created by a particular product or product proliferation and the consumer faces
marketing activity can be assessed. Second, 'false choice'. Finally, the presence of great
the direct satisfaction that individual con- variety will not always be welcomed by all cus-
sumers obtain from particular 'goods' fails to tomers as some will feel that too much choice
take into account some of the 'bads' created in causes frustration and anxiety.
the process, such as pollution and environ-
mental damage. Third, the satisfaction that
people experience when consuming, for Maximize Life Quality
example, status goods, depends precisely on The aim of a marketing system must tran-
how few other people have these goods. For scend a narrow hedonistic view of consumer
these and other reasons, it is difficult to evalu- satisfaction. In a complex technological
ate a marketing system in terms of how much society, many different forces affect the happi-
satisfaction it delivers. ness of its citizens: the concept of 'life quality'
Maximize Choice
appears to be a useful way to encapsulate these
various forces.
Some marketers believe that the ideal market- People everywhere try to improve the qual-
ing system is one that maximizes consumer ity of their lives. The quality oflife is a func-
choice, i.e. produces a great variety of prod- tion of: (i) the quantity, quality, range, accessi-
ucts and brands and thus enables consumers bility and cost of goods and services; (ii) the
to precisely satisfy their individual tastes. In quality of the physical environment; and (iii)
such an economy, individual consumers are the quality of the cultural envi,ronment. In the
able to maximize their lifestyles and, there- future, marketing systems will be judged not
fore, their satisfaction. only by the degree to which consumer wants
Exhibit 1-4 What is the Difference Between

Economics and Marketing?
We might think that the concerns of marketing ar~ the same as those of economics. True,
economics is the parent discipline of marketing, but marketing has gone beyond economics
in some of the questions it raises and elsewhere has gone into other questions more deeply.
Economics is a 200-year-old science whose core concept is that of scarcity: econ-
omists have noted that human beings have infinite needs but that nature is niggardly. Given
scarce resources, a society must make decisions on which needs to satisfy. Economists
study the following three major problems:
• What goods and services should the society produce?
• How should these goods and services be produced?
• Who should get them?
The answers to these questions differ according to whether the society is organized
along capitalist, communist or other principles. All the questions revolve around the issue
of economic efficiency in resource allocation, i.e. ~ow to make resources go as far as
possible in satisfying wants in a society. '~
Free-enterprise economists start with the two als of consumer sovereignty and
economic efficiency. They assume that consumers striv to maximize their economic satis-
faction, that they have reasonably full information about the quality and price of the avail-
able goods, and that they are able to move easily to where the best buys can be found.
These economists also assume that producers and sellers maximize their economic profit,
know the costs of different resources and technologies at different scales of operation, and
know how to put all of this information together to achieve the maximum profit. The free
interaction of rational consumers and rational producers is assumed to produce maximum
economic output and satisfaction.
Marketing began only seventy-five years ago, with the attempt to understand certain
questions that economists had neglected or oversimplified. Whereas economists tried to
explain, say, food prices through demand and supply curves, marketers were interested in
tracing the complex sequence of activities that led to final price and consumption levels:
farmers' decisions to plant certain crops, purchase certain seed fertilizer and equipment; the
selling of their crops to grain elevators; the purchase of the grain by food processors, who
sold the processed food to wholesalers, who in turn sold it to retailers, who in turn sold it
to consumers. During this complicated process, several functions were carried out, inc/ud~
ing several levels of buying and selling, assembly, sorting, grading, storing, transporting,
risk-bearing and financing. The final price reflected these many operations and the overall
efficiency of the marketing process. This was a far cry from the economists' oversimplified
picture of price setting.
Thus marketing started out as an effort to develop a richer description of distribution
institutions and processes. Marketers were interested in exploring the 'whys' of consumer
and seller behaviour, and were not wllling to explain it merely in terms of utility and profit
maximization. This inevitably led to less reliance on economic concepts and more use of the
findings of modern psychology, sociology and anthropology. Today marketing is essentially
an applied behavioural science rather than a branch of economic science, and its students
are interested in three analytical questions:
Exhibit 1·4 {continued)
1 . Consumer behaviour. What are the needs and wants of consumers, how are they
formed and influenced, and how do consumers go about satisfying these needs
and wants?
2. Seller behaviour. How do providers or sellers go about trying to supply and influ-
ence the wants and buying behaviour of consumers?
3. Market channel behaviour. What institutions and activities come into being to fa·
cilitate exchange and the satisfaction of human wants?
The answers to these questions provide the key to improving the performance of the
marketing system and, therefore, consumer welfare. Students of marketing are also
interested in the following normative questions:
1 . How can consumers be helped to become better buyers?
2. How can providers be helped to become better sellers?
3. How can marketing institutions be improved to increase consumer satisfaction and
welfare?
This leads to the normative purpose of the marketing discipline: to help sellers sell
better, buyers buy better, and government agencies regulate better in the interest of pro-
moting efficiency, consumer satisfaction, and life quality through the marketplace.
are directly satisfied but also by the impact of and possibly intensify as more and more insti-
marketing activity on the quality of the physi- tutions in the business sector, on the inter-
cal and cultural environment. national scene and in the non-profit sector
apply marketing concepts and techniques in
the pursuit of improved performance.
SUMMARY Marketing may be defined as the study of
how various parties go about satisfying their
Marketing is a subject that touches everyone. needs and wants through exchange and market
It is the means by which a standard of living processes. The key concepts involved are
is developed and delivered to a people. It in- needs, wants, demands, products, exchange,
volves a large set of activitie~, including mar- transactions and markets.
keting research, product development, distri- Marketing management is the conscious
bution, pricing, advertising, personal selling, effort of one or both parties to manage the
and a number of other functions. Too many exchange process to secure desired outcomes.
people mistakenly believe that marketing con- It involves analysis, planning, implementation
sists of only one or a few of these functions, and control of programmes designed to create,
whereas marketing is actually a high level in- build and maintain mutually beneficial ex-
tegration of several functions designed to changes and relationships with target markets
sense, serve and satisfy consumer needs while for the purpose of achieving organizational
meeting the goals of the organization. objectives. The major marketing tasks are con-
Marketing practices have been both praised versional marketing, stimulational marketing,
and criticized because of their major impact developmental marketing, remarketing,
on people in their roles as buyers, sellers and synchromarketing, maintenance marketing,
citizens. The controversy is likely to continue demarketing and countermarketing.
Any one of five alternative philosophies sumes that the main tasks of the company are
may guide organizations in their exchange ac- to determine a chosen set of customers, needs,
tivity. The production concept assumes that wants and preferences, and to adapt accord-
consumers will readily respond to products ingly so that these are satisfied. The societal
that are available and affordable, and therefore marketing concept assumes that the main task
management's major task is to improve pro- ·of the company is to generate customer satis-
duction efficiency and bring down prices. The faction, and long-run consumer and societal
product concept assumes that consumers will well-being, as the key to satisfying organi-
respond favourably to quality products that zational goals and responsibilities.
are reasonably priced, and therefore little ad- Different goals have been proposed for a
ditional marketing effort is required. The sell- marketing system, such as maximizing con-
ing concept assumes that consumers will not sumption, consumer satisfaction, consumer
tend to buy enough of the company's products choice, or life quality. The orientation of this
unless substantial selling and promotion book is that the goal of the marketing system
efforts are made. The mark~ting concept as- is to maximize the quality of life.
QUESTIONS FOR DISCUSSION
1 . How does marketing differ from selling? Do you think that marketers have suc-
ceeded in educating the public as to the difference between the two?
2. Discuss how marketing affects the buyer, the seller and the citizen with regard
to the Holden Commodore.
3. Why has marketing been embraced by many non-profit organizations in recent
years? Elaborate on a specific example ..
4. What distinguishes the definition of marketing used in this text from all others?
5. Compare and contrast needs, wants and demands. How does the consumer
reconcile these three concepts? Relate them to a recent purchase of your own.
6. You are planning to go to a fast-food outlet for lunch. Apply the notions of
products, exchange and a market to this situation.
7. How may the product concept and the production concept be contrasted? Give
an example of each.
8. Why has the societal marketing concept superseded the marketing concept in
some organizations? ·
9. What four alternative goals of a marketing system were discussed? Which one
do you feel is the best, and why?
NOTES
1 Peter F. Drucker, Management: Tasks, Responsi· 2 Richard N. Farmer, 'Would You Want Your
bilities, Practices (New York: Harper & Row, Daughter to Marry a Marketing Man?', Journal
1973), pp. 64-65. of Marketing, January !967, p. I.
' Sterling Hayden, Wanderer (New York: Knopf, '

6
See Philip Kotler, 'The Major Tasks of Market-
1963). ing Management', Journal of Marketing, October
• John Schneider, quoted in R. R. Walker, Com- 1973, pp. 42-49.
municators (Melbourne: Lansdowne Press, "See Philip Kotler & Sidney J. Levy, 'Demarket-
1967), p. 21. ing, Yes, Demarketing', Harvard Business Re·
' Sir Winston Churchill. view, November-December 1971, pp. 74-80.
6 Deborah Rankin, 'How C.P.A.'s Sell Them- 18
See 'So We Made a Better Mousetrap', Presi·
selves', New York Times, 25 September 1977. dent's Forum, Autumn 1962, pp. 26-27.
1
Ralph Z. Sorensen II, 'U.S. Marketers Can Ul See lrwinJ. Rein, Rudy's Red Wagon: Communi·
Learn from European Innovators', Harvard cation Strategies in Contemporary Society
Business Review, September-October 1972, (Glenview Ill.: Scott, Foresman, 1972).
pp. 89-99.
20 See John B. McKitterick, 'What is the Market-
8
Thornas V. Greer, Marketing £n the SO'Diet Union
ing Management Concept?', The Frontiers of
(New York: Holt, Rinehart & Winston, 1973).
Marketing Thought and Action (Chicago:
' Marketing Definitions: A Glossary of Marketing American Marketing Association, 1957),
Terms, Committee on Definitions (Chicago: pp. 71-82; Fred J. Borch, 'The Marketing
American Marketing Association, 1960). Philosophy as a Way of Business Life', The Mar·
10
This definition was originally proposed by Paul keting Concept: Its Meaning to Management,
Mazur and was modified by Malcolm McNair. Marketing Series, No. 99 (New York: American
See Malcolm P. McNair, 'Marketing and the Management Association, 1957), pp. 3-5; and
Social Challenge of Our Times', Keith Cox & Robert J. Keith, 'The Marketing Revolution',
Ben M. Enis (eds), A New Measure of Responsi- Journal of Marketing, January 1960, pp. 35-38.
bility for Marketing (Chicago: American Market- 21 Levitt, 'Marketing Myopia'.
ing Association, 1968), p. 2.
11
See Theodore Levitt's classic article, 'Marketing 12 Carlton P. McNamara, 'The Present Status of
Myopia', Harvard Business Review, July-August the Marketing Concept', Journal of Marketing,
1960, pp. 45-56. January 1972, pp. 50-57.
'~Kelvin J. Lancaster, 'A New Approach to Con- " Peter M. Banting & Randolph E. Ross, 'The
sumer Theory', Journal of Political Economy, 14 Marketing Masquerade', Bus£ness Quarterly
(1966), pp. 132-57. (Canada), Spring 1974, pp. 19-27. Also see
" Cyril S. Belshaw, Traditional Exchange and Mod- Philip Kotler, 'From Sales Obsession to Market·
ern Markets (New York: Prentice-Hall, 1965). ing Effectiveness', Harvard Business Review,
November-December 1977, pp. 67-75.
" Adam Smith, Tke Wealth of Nations, 1776 (New
24 Laurence P. Feldman, 'Societal Adaptation: A
York: Crowell-Collier and Macmillan, 1909),
p. 19. New Challenge for Marketing', Journal of Mar-
15 keting, July 1971, pp. 54-60; and Martin L. Bell
For further discussion, see Wroe Alderson, 'Fac·
& C. William Emery, 'The Faltering Marketing
tors Governing the Development of Marketing
Concept', Journal of Marketing, October 1971,
Channels', in Richard M. Clewett (ed.), Market-
ing Channels for Manufactured Products (Home- pp. 37-42.
wood, III.: Richard D. Irwin, 1957), pp. 211-14. 25 Leslie M. Dawson, 'The Human Concept: New
The number of transactions in a decentralized Philosophy for Business', Business Horizons,
exchange system is given by N(N-1)/2. With December 1969, pp. 29-38; James T. Rothe &
four persons, this means 4(4- 1)/2 = 6 trans· Lissa Benson, 'Intelligent Consumption: An At-
actions. In a centralized exchange system, the tractive Alternative to the Marketing Concept',
number of transactions is given by N, here 4. MSU Bus£ness Topics, Winter 1974, pp. 29-34;
Thus a centralized exchange system reduces the and George Fisk, 'Criteria for a Theory of Re·
number of required transactions to accomplish a sponsible Consumption', Journal of Marketing,
given volume of exchange. April 1973, pp. 24-31.

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COMMONWEALTH OF AUSTRALIA

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Typeset by Savage & Co. Pty Ltd,

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American ed. published as: Principles of

1. Marketing management- Australia.

Original English language edition published by

In starting our discussion of marketing, we Marketing Has Different Meanings

performance in the marketplace. As a citizen neath a pyramid of time payments, mortgages,

Many people think that marketing is some-

The Non-profit Sector • Marketing is the performance of busi-

a No want b Partial want c Complete want

Figure 1-1 Three degrees of want satisfaction

Exhibit 1-1 The Origin of Trade

Exltlbil 1-1 (continued)

advanced societies, marketplaces need not be job-counselling firms. Sitnilarly, a money

Fisher Hunter Fisher 'I( ,. Hunter Fisher Hunter

Self-sufficiency Decentralized exchange Centralized exchange

Figure 1-3 Evolution toward centralized exchange

Exhibit 1·2 Various Approaches to the Study

1. Commodity approach. The-commodity approach focuses on particular commodities

particular product (e.g. an anti-smoking portance to non-price differences within the

The selling concept and the marketing con-

the determination of what is to be produced I. Coca-Cola is a product from which cus-

Exhibit 1-3 McDonald's Corporation: The Marketing

Exhibit 1-4 What is the Difference Between

Exhibit 1·4 {continued)

QUESTIONS FOR DISCUSSION

' Sterling Hayden, Wanderer (New York: Knopf, '

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