Marketing helps facilitate exchange relationships among people, organisations and nations.
It is a social process involving the activities necessary to enable individuals and organisations, to obtain what they need and want through exchanges with others, and to develop ongoing exchange relationships.
Not every exchange happens automatically, neither does every exchange result in a mutually satisfying long-term relationship.
The conditions for a successful exchange transaction, can only be met after the parties themselves have performed several tasks.
What You Will Learn
• Factors necessary for a successful exchange relationship
• Parties involved in an exchange
• Customer need and wants
• What gets exchanged
• How exchanges create value
• Defining a market
Factors Necessary For A Successful Exchange Relationship
The factors necessary for a successful exchange relationship include identifying potential partners, developing offerings, communicating information, delivering products, and collecting payments.
This is what marketing is all about.
We therefore need to consider the following questions:
1. Who are the parties involved in exchange relationships?
2. What needs and wants do parties try to satisfy through exchange?
3. What is exchanged
4. How does exchange create value?
5. How do potential exchange partners become a market for a particular good or service?
Parties Involved In An Exchange
Everyone is involved in the marketing activities to identify, communicate, and negotiate with potential exchange partners.
Both customers and organisations seek goods and services through exchange contracts.
Ultimate customers buy goods and services for their own personal use, or others within their household… called consumer goods and services.
Whilst organisational customers buy goods and services for resale, as inputs into other production of other goods and services, or for use in day to day business operations… called industrial goods and services.
Customer Needs And Wants
It’s important as business professionals, that we understand the difference between needs and wants.
Needs are the basic forces that drive customers to take action and engage in exchanges.
An unsatisfied need being a gap between a person’s actual and desired states, on some physical or psychological dimension.
Needs are not created by marketers or other social forces… they come from our basic biological and psychological makeup as human beings.
Wants on the other hand reflect a persons desires or preferences for specific ways of satisfying a basic need.
Therefore a person wants certain products, to satisfy a given need.
I need to make telephone calls, I want to buy a mobile telephone.
We must understand that different people may have different wants, to satisfy a given need.
I may be thirsty and want to drink a bottle of water, while someone else may want to drink a Coke.
An important difference to marketers on needs and wants, is that whilst marketers cannot create needs… they can influence people’s wants.
Therefore an important job for any marketer or business leader is to develop a new product, and then to stimulate customer wants for it by convincing people it can help them better satisfy one or more of their needs.
What Gets Exchanged
This is pretty straightforward in that goods and services help satisfy a customers need when they are acquired, used, or consumed.
Goods are tangible physical objects (mobile phone, watches, clothing) that provide benefit.
Whilst services are less tangible and in addition to being provided by physical objects, can be provided by people (doctors, lawyers), institutions (Roman Catholic Church), places (Disney World, Universal Studies) and activities.
How Exchanges Create Value
When people buy products to satisfy their needs, they are really buying the benefits they believe the products provide.
A good example would be you buy headache relief, not an aspirin.
Due to that fact that different customers seek different benefits, they use different choice criteria and attach different importance to product features when choosing models and brands within a product category… See image below.
For example… a person with high need for social acceptance and esteem, might seek out a high end expensive tailored suit.
They would probably attach greater importance to criteria relating to social image and the material of the suit.
So you need to think about things from the perspective of your potential customers.
What are their needs, what are the benefits they seek, what would be their choice criteria when buying products, so on and so forth.
When is comes to how customers determine price value… a customer’s estimate of a products benefits and capacity to satisfy needs and wants, determines the value he or she will attach to it.
Ultimately, most customers choose the products that they believe provides the most need-satisfying benefits per dollar.
Therefore, value is a function of intrinsic product features, service, and price, and it means different things to different people.
A customers ultimate satisfaction with a purchase, depends on whether the product actually lives up to expectations and delivers the anticipated results.
Which is why it is essential you understand everything mentioned above.
Finally, we need to always remember the value of long-term customer relationships… the present value of a stream of revenue that can be produced by a customer over time.
It costs more to attract a new customer than to keep an existing one.
Therefore, the increased loyalty that comes through developing long-term customer relationships, translates into higher profits.
Defining A Market
A market consists of individuals and organisations who are interested and willing to buy a particular product, to obtain benefits that will satisfy a specific need or want… and have the resources (time & money) to engage in such transactions.
The total market is often fragmented into several distinct market segments… each segment containing people who are relatively homogeneous in their needs, wants and product benefits sought.
As business professionals, we need to determine the following points in an effort to define the total market:
1. Which customer needs and wants are currently not being satisfied by competitive product offerings
2. How desired benefits and choice criteria vary among potential customers, and how to identify resulting segments by demographic variables
3. Which segments to target, and which product offerings and marketing programmes appeal most to customers in those segments
4. How to position the product to differentiate it from competitors’ offerings and give the firm a sustainable competitive advantage
To Wrap Things Up
As I said at the beginning, exchanges don’t happen automatically.
Several tasks must be performed to enable appropriate conditions for a successful exchange to happen.
Ignoring the importance of the factors discussed here, is seriously hampering the progress of getting your products into the hands of potential customers.
Therefore, consider all of the factors mentioned, and ensure you are working on each to give your products the best changes of success.
My ‘Business Level Marketing’ course takes this into much more detail, and explains much more in terms of the whole business function of marketing… Check it out here.