The American Marketing Association (AMA) defines marketing as:
“The performance of business activities directed toward, and incident to, the flow of goods and services from producer to consumer or user”(American Marketing Association, 1948) 1
“The performance of business activities that direct the flow of goods and services from producer to consumer or user” (American Marketing Association, 1960) 1
“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”(American Marketing Association, 1985) 1
According to the above, marketing definitions – Marketing have always focused on both tangible goods and services, that is, the marketing principles were applied equally to both goods and services, but, in the real picture services were never considered a product by itself, they were considered as complementary tools to assist the sale of goods. The services like warehousing, transportation, packaging etc were recognised as activities assisting sales of products even though these services are intangible products.
The nature of the economy and the needs of the management have been changing, especially during the last 10 to 15 years. The evolution of services marketing is reflected in 3 stages: Crawling out (pre-1980), Scurrying About (1980-85) and Walking Erect (1986-94) by Brown, Fisk, Bitner (1994) 2. According their observation in the beginning the marketing discipline was focussed on selling agricultural products. Subsequently, the scope expanded to marketing physical goods with very little or no interest in services marketing at this stage. When the developed countries started slow transition towards a service economy there arose a challenge for the existence between the services marketing and goods marketing.
It was then, that Shostack (1977) 3 in the late 70’s clearly stated that marketing seems to be overwhelmingly product-oriented as the traditional marketing principles and marketing mix concept was derived from manufactured goods, many service-based companies are confused about the applicability of product marketing. The traditional marketing mix was made up of 4 factors (4 Ps – price, promotion, product and place), which when used in a perfect blend/combination would lead to successful achievement of marketing objectives. McCarthy (1975) was the first to formulate the marketing mix. Once the target market is selected, the selection of a appropriate marketing strategy is required, which is deciding the perfect blend/combination of the 4 factor (4 Ps).
The four P components of the marketing mix
(source: McCarthy as cited in Kotlers: “marketing management” ed.10, pp15)
* Product – the first of the 4 ps is the most important one, because if the product is not good enough to satisfy the customer needs no marketing mix can make it sale. The functions of designing the product and its features, setting a quality standard, the branding, attractive packaging, added services – after sales, warranty, product life and returns fall under this head and the success or failure of the product highly depends on these functions.
* Price – once the product is ready for sales, the process of determining price follows. It is a very crucial part as it is one of the factors that affect the consumers buying decision to a great extent. This factor also covers the decisions of offering discounts, allowances, determining the payment terms that is will the payment be in cash or on credit and the credit terms.
* Promotion – after determining the pricing of the product, there arises a need to generate awareness among the target market about the product, its unique features which can be done through advertising and sales promotion. Deciding the advertising media, the offers and promotion, public relations and direct sales all fall under this factor is equally important in order to make the product a success. Offers and promotion can be in form of – buy one get one free, discounted prices, get accessories free with product etc. E.g Vodafone, orange, t-mobile provides a free mobile and insurance on purchase of mobile contract on their respective networks.
* Place – since the target market is already located and product is ready to sell, the question of how the customers can reach the product is answered here. Decision on which channel of distribution needs to be used is determined here, it also covers the decision on number of intermediaries involved – retailer or wholesalers etc., the mode of transportation to be used, the inventory to managed, warehousing etc. best example for a very good distribution network are companies like Pepsi and coke the products of which are available in smallest of towns.
Shostack showed the urgency for a need to have a marketing mix which also considers the service marketing aspect in addition to the one, which already existed (product, price, place and promotion). In agreement with Shostack, most authors argued that strategies developed for the physical goods are inappropriate for services and that service marketing is entirely different and require a new concept, enthusiasm derived from service characteristics. Customarily firms focusing on product marketing relied on the concept of traditional marketing mix paradigm, developed by McCarthy, to pursue their marketing objectives. He divided the paradigm into four broad groups: product, price, promotion and place. These groups were also taken into consideration while deciding on for a marketing strategy for a service sector.
Unlike products there has never been a special marketing strategy or marketing mix for services. Service firms have always been behind in marketing arena as compared to the product firms. As stated by Gronroos (1978)4, there is a difference between marketing goods and marketing services. This is because goods are neither abstract nor tangible whereas difficulty arises in developing a particular, real, solid and tangible service. Not only this but the literature developed in marketing so far mainly focuses only on the marketing of the products with little emphasis on the service industry, therefore, the perception and the theories that have been used in the product marketing so far, have been utilised for the service marketing as well with no or slight prominence on developing a separate concept for the service industry. He further stated that the traditional marketing mix hypothesis that holds applicability to the product marketing couldn’t be applied to the service-marketing perception. Instead he applied the ‘concept of accessibility’ for an enhanced understanding of the service sector.