|

MARKETING

&

ECONOMICS

RELATIONSHIP BETWEEN

MARKETING ASSIGNMENT
ZERIN ANJUM KHAN LORA

B1506065
BBA 2015 SEC A
SUBMITTED TO :
NAWSHIN TABASSUM TUNNA
LEC. FBS BUP

Contents
How Does Economics Relate To Marketing?...................................2
Introduction to ECONOMICS and MARKETING................................3
QUANTITATIVE Marketing and Economics......................................4
The Economics of Marketing.........................................................4
Points of Agreement between marketing and economics..............4
Points of disagreement between economics and marketing..........5
MARKET ECONOMY AND COMAND ECONOMY................................6
Major Criticisms of Each System...................................................8
Importance of Marketing for the Economic Development of a
Country......................................................................................... 8
Scope of economics....................................................................10
Scope of Marketing.....................................................................15
Advances in marketing with economic growth............................16
BEHAVIORAL ECONOMICS FOR MARKETEERS..............................17
CONCLUSION............................................................................... 20

How Does Economics Relate To Marketing?

First question that comes in mind that Does Economics and Marketing
specifically relate to each there?
With marketing you are trying to increase demand for goods and services.
Getting consumers to find more utility and buy your product and service
rather than a competitor, and this competitor can be either direct, indirect or
a substitute.
Economics is all about supply and demand and utility: How goods and
services are produced, distributed, and consumed. How people find higher or
lower utility and make substitution decisions and spending behavior based
off the utility they get, real or perceived.
Economics (looking at the micro level, not macro level) is the study of why
people buy products. The two main concepts are supply and demand (and its
impact on prices), and price sensitivity (how much people buy based on a
price).
One of marketing's 4-Ps is price, and one of the factors you take into account
when setting price is the economics to your customer (and how much they
will buy at a price).
Economics are also important in marketing because a company needs to
know how much they can invest in to produce a product/service that sells to
customers (and which they are prepared to pay) AND that allows the
company to make above average profits to survive and grow.
Marketing should justify ROI (Return of Investment) and this metric trend has
been growing since the 90's. Companies have a right to know how much they
spend on marketing and what revenue it brings for how much cost.
Marketing has to balance both the economic and brand side of any product
or service for long term success.

Introduction to ECONOMICS and MARKETING

Economics is a social science that studies how individuals, governments,
firms and nations make choices on allocating scarce resources to satisfy their
unlimited wants. Economics can generally be broken down into:
macroeconomics, which concentrates on the behavior of the aggregate
economy; and microeconomics, which focuses on individual consumers.

Two of the major approaches in economics are named the classical and
Keynesian approaches. Classical economists believe that markets function
very well, will quickly react to any changes in equilibrium and that a "laissez
faire" government policy works best.
On the other hand, Keynesian economists believe that markets react very
slowly to changes in equilibrium (especial to changes in prices) and that
active government intervention is sometimes the best method to get the
economy back into equilibrium.

Marketing are activities of a company associated with buying and selling a

product or service. It includes advertising, selling and delivering products to
people. People who work in marketing departments of companies try to get
the attention of target audiences by using slogans, packaging design,
celebrity endorsements and general media exposure. The four 'Ps' of
marketing are product, place, price and promotion.
Many people believe that marketing is just about advertising or sales.
However, marketing is everything a company does to acquire customers and
maintain a relationship with them. Even the small tasks like writing thankyou letters, playing golf with a prospective client, returning calls promptly
and meeting with a past client for coffee can be thought of as marketing. The

ultimate goal of marketing is to match a company's products and services to

the people who need and want them, thereby ensure profitability

QUANTITATIVE Marketing and Economics

Quantitative Marketing and Economics (QME) publishes research in the
intersection of Marketing, Economics and Statistics. Our focus is on important
applied problems of relevance to marketing using a quantitative approach.
We define marketing broadly as the study of the interface between firms,
competitors and consumers. This includes but is not limited to consumer
preferences, consumer demand and decision-making, strategic interaction of
firms, pricing, promotion, targeting, and product design/positioning, and
channel issues. We embrace a wide variety of research methods including
applied economic theory, econometrics and statistical methods. Empirical
research using primary, secondary or experimental data is also encouraged .

The Economics of Marketing

A market is one of the many varieties of systems, institutions, procedures,

social relations and infrastructures whereby parties engage in exchange.
While parties may exchange goods and services by barter,
most markets rely on sellers offering their goods or services (including
labor) in exchange for money from buyers.

Points of Agreement between marketing and economics

1. People face trade-offs despite the humorous approach to
economics, choice is an important element of consumer behavior. No
matter how much money you have, you cant possible buy everything
you want. That means you need to make trade-offs. So, maybe you
forgo the Mercedes you want for a Chevy so you can afford to pay your
rent.
4

So, how does this relate to marketing? It means that brands dont just
compete with each other, they compete with other choices a consumer
might make. So, choice is not just between the Snickers and M&Ms
illustrated in the video, we make choices between Snickers and a hamburger.
But, we also make choices between a Snickers and shoes.

Practical implications the practical implication is that you need to

convince consumers not only that your brand is the best candy bar for the
money, but that a candy bar fills some innate need worth spending their
money on. Just using a catchy slogan and celebrity to convince consumers
they should buy a Snickers isnt enough.

2. The cost of something is what youre willing to give up to get it

true. And, not everyone is willing to give up the same amount to get
something. This supports price skimming where you charge consumers
willing to pay more a lot for something and consumers willing to pay less for
something less.
Practical implications if you have something not easily copied, you can
sell it for a lot initially and slowly lower the price over time. Sales start to
people willing to pay more and, once theyve all bought, your lower prices
convince other folks to buy your product. You can also use this in
international trade by selling at a higher price to affluent countries and
lower prices to less affluent countries.

3. People respond to incentives if you give coupons, for instance,

consumers are more likely to buy. But, all incentives dont have to be
financial. You can offer any incentive.
Practical Implications this explains why coupons and rebates work or
why consumers will wait in long lines for discounts.

4. Trade can May everybody better off in early civilizations, consumers

created what they consume. In modern society, were specialized. We create
things were good at and buy other things we need from people who are

good at making those things. This is efficient. If youre good at something,

you do it better than someone else and often do it faster and cheaper.
Practical Implications people make trade-offs with labor, too. So, rather
than creating your own advertising, you might hire an advertising agency.
The same is true for doing your social media marketing. Companies also may
need help creating their long-term strategy from a company experienced
with strategy.

Points of disagreement between economics and

marketing.
Maybe more important than the points of agreement are the points of
disagreement. And, there are some serious areas of disagreement between
economics and marketing.

1. People are rational theres lots of evidence that people arent

rational. Look at people who spend their rent money going on vacation
or people who buy a luxury car then live in a dangerous part of town.
People are emotional and often buy based on how they feel.

Practical implications emotional appeals work better than rational

appeals. Look at the success of the e-Trade baby a totally emotional
appeal for even a major financial commitment. Dont forget emotions in
retail settings people will buy more if theyre happy. So, creating a setting
that makes people happy will result in more sales.

2. Markets are efficient this assumes people have perfect knowledge

which almost never exists. Its also a long-term focus. In the long run, maybe
bad products fail to sell and their firms go out of business. But, in the short
run, lots of bad products exist and consumers lose money buying them.
Social networks help create better information so bad products are driven
out of the market sooner, but inefficiencies still exist.

MARKET ECONOMY AND COMMAND ECONOMY

Market economies and command economies occupy two polar extremes in

the organization of economic activity. The primary differences lie in division
of labor or factors of production and the mechanisms that determine prices.
The activity in a market economy is unplanned; it is not organized by any
central authority and is determined by the supply and demand of goods and
services. Alternatively, a command economy is organized by government
officials who also own and direct the factors of production.
A market economy is an economic system in which economic decisions and the pricing of
goods and services are guided solely by the aggregate interactions of a country's citizens
and businesses and there is little government intervention or central planning. This is the
opposite of a centrally planned economy, in which government decisions drive most aspects
of a country's economic activity.

Market Economy - The "Free Enterprise System"

The two fundamental aspects of market economies are:
1. Private ownership of the means of production
2. Voluntary exchanges / contracts
The most common title associated with a market economy is capitalism.
Individuals and businesses own the resources and are free to exchange and
contract with each other without decree from government authority. The
collective term for these uncoordinated exchanges is the "market."
Prices arise naturally in a market economy based on supply and demand.
Consumer preferences and resource scarcity determine which goods are
produced and in what quantity; the prices in a market economy act as
signals to producers and consumers who use these price signals to help
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make decisions. Governments play a minor role in direction of economic

activity.

Command Economy - Central Direction

A command economy is a system where the government, rather than the free market,
determines what goods should be produced, how much should be produced and the price at
which the goods will be offered for sale. The command economy is a key feature of any
communist society. China, Cuba, North Korea and the former Soviet Union are examples of
countries that have command economies.

Under a command economy, governments own all of the factors of

production such as land, capital and resources, and government officials
determine when, where and how much is produced at any one time. This is
also sometimes referred to as a "planned economy." The most famous
contemporary example of a command economy was that of the former
Soviet Union, which operated under a Communist.
Since decision-making is centralized in a command economy, the
government controls all of the supply and sets all of the demand. Prices
cannot arise naturally like in a market economy, so prices in the economy
must be set by government officials.
In a command economy, macro-economic and political considerations
determine resource allocation, whereas in a market economy, the profits and
losses of individuals and firms determine resource allocation.

Major Criticisms of Each System

Karl Marx, a German philosopher, argued that

A market economy was inherently unequal and unjust because
power would be concentrated in the hands of the owners of
capital.
Marx is credited with coining the term capitalism.
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John Maynard Keynes, an English economist, believed that

Pure market economies were unable to effectively respond to
major recessions and instead advocated for major government
intervention to regulate business cycles.
Ludwig von Mises, an Austrian economist, argued that
Command economies were untenable and doomed to failure
because no rational prices could emerge without competing, private
ownership of the means of production. This would lead to
necessarily massive shortages and surpluses.

Milton Friedman, an American economist, noted that

Command economies must limit individual freedom to operate.
He also believed that economic decisions in a command economy would be
made based on the political self-interest of government officials and not
promote economic growth.
Importance of Marketing for the Economic Development of a Country

Marketing has acquired an important place for the economic development of

the whole country. It has also become a necessity for attaining the object of
social welfare.
As a result of it, marketing is considered to be the most important activity in
a business enterprise while at the early stage of development it was
considered to be the last activity. For convenience, the importance of
marketing may be explained as under:
I) Delivery of standard of living to the society:
A society is a mixture of diverse people with diverse tastes and preferences.
Modern marketing always aims for customer satisfaction. So, main liability of
marketing is to produce goods and services for the society according to their
needs and tastes at reasonable price.
Marketing discovers needs and wants of society, produces the goods and
services according to these needs creates demand for these goods and
services. They go ahead and promote the goods making people aware about
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them and creating a demand for the goods, encouraging customers to use
them. Thus, it improves the standard of living of the society.
ii) Decrease in distribution cost:
Second important liability of marketing is control the cost of distribution.
Through effective marketing the companies can reduce their distribution
costs to a great extent. Decrease in cost of distribution directly affects the
prices of products because the cost of distribution is an important part of the
total price of the product.

iii) Increasing employment opportunities:

Marketing comprises of advertising, sales, distribution, branding and many
more activities. So the development of marketing automatically gives rise to
a need for people to work in several areas of marketing. Thus the
employment opportunities are born. Also successful operation marketing
activities requires the services of different enterprises and organization such
as wholesalers, retailers, transportation, and storage, finance, insurance and
advertising. These services provide employment to a number of people.
iv) Protection against business slump:
Business slump cause unemployment, slackness in the success of business
and great loss to economy. Marketing helps in protecting society against all
these problems.
v) Increase in national income:
Successful operation of marketing activities creates, maintains and increases
the demand for goods and services in society. To meet this increased
demand the companies need to increase the level of production in turn
raising their income. This increase, in turn, increases the national income.
Further effective marketing leads to exports adding to the national income.
This is beneficial to the whole society.

Scope of economics

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Like its nature, the scope of economics is a vexed question and economists
differ widely in their views. The reason is aptly put by Marshall in one of his
letters to Lord Keynes: It is true of almost every science that, the longer one
studies it, the larger its scope seems to be: though in fact its scope may
have remained almost unchanged. But the subject matter of economics
grows apace. The continuous growth in the subject matter of economics has
led to divergent views about the scope of economics.
A discussion about the true scope of economics includes the subject matter
of economics, whether economics is a science or an art, or is it a positive or
a normative science.

Subject Matter of Economics:

Broadly speaking, the formulation of a definition is a succinct procedure of
elucidating the subject matter. As discussed in detail above, the majority of
economic thinkers from Adam Smith to Pigou have defined the subject
matter of economics as the study of the causes of material welfare or as the
science of wealth.
Marshall, in particular, confined it to the consumption, production, exchange
and distribution of wealth by men engaged in the ordinary business of life.
Men who are rational beings and act under the existing social, legal and
institutional set up. It excludes the behavior and activities of socially
undesirable and abnormal persons like drunkards, misers, thieves, etc.
Professor Robbins, however, finds this subject matter as too restricted in
scope to embrace all the facts. He cites numerous examples to show that
certain human activities possess a definite economic significance but have
little or no connection with material welfare. The same good or service may
promote material welfare at one time and under one set of circumstances
and not at another time under different circumstances.
Robbins is, therefore, of the view that for a good or service to have economic
significance it must command a price. And for a good or service to command
a price, it is not essential that it must promote material welfare, rather it
must be scarce and capable of being put to alternative uses. Thus economics
is not concerned so much with the analysis of the consumption, production,
exchange and distribution of wealth as with a special aspect of human
behavior that of allocating scarce means among competing ends.
This fundamental problem is ever present in all times and places and in all
sets of circumstances. Thus the subject matter of economics includes the
daily activities of the household, of the competitive business world and the
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administration of public resources in order to solve the problem of scarcity of

resources.
The subject matter of economics includes the study of the problems of
consumption, production, exchange and distribution of wealth, as well as the
determination of the values of goods and services, the volume of
employment and the determinants of economic growth. Besides, it includes
the study of the causes of poverty, unemployment, underdevelopment,
inflation, etc. and steps for their removal.

Economics as a Science:
There is considerable disagreement among economists whether economics is
a science and if it is so, is it a positive or a normative science?
In order to answer these questions, it is essential to know what science is
and to what extent the characteristics of science are applicable to
economics.
A science is a systematized body of knowledge ascertainable by observation
and experimentation. It is a body of generalizations, principles, theories or
laws which traces out a causal relationship between cause and effect. For
any discipline to be a science; (I) it must be a systematized body of
knowledge; (ii) have its own laws or theories; (iii) which can be tested by
observation and experimentation; (iv) can make predictions; (v) be selfcorrective; and (vi) have universal validity. If these features of a science are
applied to economics, it can be said that economics is a science.
Economics is a systematized body of knowledge in which economic facts are
studied and analyzed in a systematic manner. For instance, economics is
divided into consumption, production, exchange, distribution and public
finance which have their laws and theories on whose basis these
departments are studied and analyzed in a systematic manner.
Like any other science, the generalizations, theories or laws of economics
trace out a causal relationship between two or more phenomena. A definite
result is expected to follow from a particular cause in economics like all other
sciences. An example of a principle in chemistry is that, all other things being
equal, a combination of hydrogen and oxygen in the proportion of 2: 1 will
form water. In physics, the law of gravitation states that things coming from
above must fall to the ground at a specific rate, other things being equal.
Similarly, in economics, the law of demand tells us that other things
remaining the same, a fall in price leads to extension in demand and a rise in
price to contraction in demand. Here rise or fall in price is the cause and,
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contraction or extension is its effect. Hence economics is a science like any

other science which has its own theories and laws which establish a relation
between cause and effect.
Economics is also a science because its laws possess universal validity such
as the law of diminishing returns, the law of diminishing marginal utility, the
law of demand, Greshams law, etc.
Again, economics is a science because of its self-corrective nature.
It goes on revising its conclusions in the light of new facts based on
observations. Economic theories or principles are being revised in the fields
of macroeconomics, monetary economics, international economics, public
finance and economic development.
But certain economists do not accord economics the status of a science
because it does not possess the other features of a science. Science is not
merely a collection of facts by observation. It also involves testing of facts by
experimentation. Unlike natural sciences, there is no scope for
experimentation in economics because economics is related to man, his
problems and activities.
Economic phenomena are very complex as they relate to man whose
activities are bound by his tastes, habits, and social and legal institutions of
the society in which he lives. Economics is thus concerned with human
beings who act irrationally and there is no scope for experimentation in
economics.
Even though economics possesses statistical, mathematical and econometric
methods of testing its phenomena but these are not so accurate as to judge
the true validity of economic laws and theories. As a result, exact
quantitative prediction is not possible in economics.
For instance, a rise in price may not lead to contraction in demand rather it
may expand it if people fear a shortage in anticipation of war. Even if
demand contracts as a result of the rise in price, it is not possible to predict
accurately how much the demand will contract. Thus, as opined by Marshall:
In sciences that relate to man exactness is less attainable.
But this does not mean that economics is not a science. It is definitely a
science like any other science. Biology and Meteorology are those sciences in
which the scope for predictability is less. The law of tides explains why the
tide is strong at a new and full moon and weak at the moons first quarter.
At the same time, it is possible to predict the exact hour when the tide will
rise. But it may not happen so. The tide may rise earlier or later than the
predicted time due to some unforeseen circumstances. Marshall, therefore,
13

compared the laws of economics with the laws of tides rather than with the
simple and exact law of gravitation. For the actions of men are so various
and uncertain, that the best statement of tendencies, which we can make in
a science of human conduct, must needs be inexact and faulty.

Economics as an Art:
Art is the practical application of scientific principles. Science lays down
certain principles while art puts these principles into practical use. To
analyses the causes and effects of poverty falls within the purview of science
and to lay down principles for the removal of poverty is art. Economics is
thus both a science and an art in this sense.
However, certain economists do not consider it advisable to treat economics
as both a science and an art. For the pressure of practical problems will
hinder the development of economics as a science. This will, in turn, react on
the effectiveness of the corresponding art. Therefore, any attempt to solve a
particular economic problem in full will so complicate the problem that the
work may become hopeless.
For this reason, Marshall regarded economics as a science pure and applied,
rather than a science and an art.
Economists today are realizing more and more the need for practical
application of the conclusions reached on important economic problems.
Therefore, Economics should not be considered as a tyrannical oracle whose
word is final. But when the preliminary work has been truly done, Applied
Economics will at certain times on certain subjects speak with the authority
to which it is entitled. Economics is thus regarded both a science and an art,
though economists prefer to use the term applied economics in place of the
latter.

Economics Positive or Normative Science:

Before we discuss whether economics is a positive or normative science, let
us understand their meanings which are best described by J.N. Keynes
(father of Lord Keynes) in these words: A positive science may be defined as
a body of systematized knowledge concerning what is, a normative science
as a body of systematized knowledge relating to criteria of what ought to be,
and concerned with the ideal as distinguished from the actual. Thus positive
14

economics is concerned with what is and normative economics with ought

to be.

Economics as a Positive Science:

It was Robbins who in his An Essay on the Nature and Significance of
Economic Science brought into sharp focus the controversy as to whether
economics is a positive or normative science.
Robbins regards economics as a pure science of what is, which is not
concerned with moral or ethical questions. Economics is neutral between
ends. The economist has no right to pass judgment on the wisdom or folly of
the ends itself. He is simply concerned with the problem of scarce resources
in relation to the ends desired.
The manufacture and sale of cigarettes and wine may be injurious to health
and therefore morally unjustifiable, but the economist has no right to pass
judgment on this, since both satisfy human wants and involve economic
activity.
Following the classical economists, Robbins regards the propositions
involving the verb ought as different in kind from the proposition involving
the verb is. He finds a logical gulf between the positive and normative fields
of enquiry as they are not on the same plane of discourse.
Since Economics deals with ascertainable facts and ethics with valuations
and obligations, he finds no reason for not keeping them separate, or
failing to recognize their essential difference. He, therefore, opines that the
function of economists consists in exploring and not advocating and
condemning. Thus an economist should not select an end, but remain
neutral, and simply point out the means by which the ends can be achieved.
Like Robbins, Friedman also considers economics as a positive science.
According to him, the ultimate goal of a positive science is the development
of a theory or hypothesis that yields valid and meaningful (not rustic)
predictions about phenomena not yet observed. In this context, economics
provides systematic generalizations which can be used for making correct
predictions. Since the predictions of economics can be tested, economics is a
positive science like physics which should be free from value judgements.
According to Friedman, the aim of an economist is like that of a true scientist
who formulates new hypotheses. Hypotheses permit us to predict about
future events or to explain only what happened in the past. But predictions
of such hypotheses may or may not be limited by events. Thus economics
claims to be a positive science like any other natural science.
15

Thus economics is a positive science. It seeks to explain what actually

happens and not what ought to happen. This view was held even by the
nineteenth century economists. Almost all leading economists from Nassau
Senior and J.S. Mill onwards had declared that the science of economics
should be concerned with what is and not with what ought to be.

Economics as a Normative Science:

Economics is a normative science of what ought to be. As a normative
science, economics is concerned with the evaluation of economic events
from the ethical viewpoint. Marshall, Pigou, Awtrey, Frazer and other
economists do not agree that economics is only a positive science. They
argue that economics is a social science which involves value judgements
and value judgements cannot be verified to be true or false. It is not an
objective science like natural sciences. This is due to the following reasons.
First, the assumptions on which economic laws, theories or principles are
based relate to man and his problems. When we try to test and predict
economic events on their basis, the subjectivity element always enters.
Second, economics being a social science, economic theories are influenced
by social and political factors. In testing them, economists are likely to use
subjective value judgements.
Third, in natural sciences experiments are conducted which lead to the
formulation of laws. But in economics experimentation is not possible.
Therefore, the laws of economics are at best tendencies.

Scope of Marketing

Marketing As a 'Science. It is essential for being called marketing

that there be some of the rules or principles of its own and in it the scientific
practices are followed. Marketing proves to be the most effective in the form
of a science since it has some of its own principles and rules, and in it are
used the scientific methods like those of other social sciences. Today, before
undertaking the manufacturing of a product, the producer tries to collect
various kinds of researches and knowledge for instance, marketing research,
purchaser-behavior research, etc. All these facts prove the marketing to be a
science.

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Marketing As an Art. Along with a special qualification and ability, if

some work is undertaken, it is known as 'art'. Within the marketing itself, is
covered the salesmanship. On the basis of salesmanship, some of the
shopkeepers extend their sales too much in comparison to that of their other
contemporary sellers. Marketing too is an art which is acquired by studies
and ability and by the proper training this art is led to perfection. The various
problems of marketing are solved by a special art only.
After studying both the above, it might be said that marketing is both an
art and a science, since in it the scientific techniques and art are used, and
thereafter various decisions undertaken.
The scope of marketing really is related to the old and new concept of
marketing. Formerly the scope of marketing used to remain very much
limited since the wants of the consumers too were quite limited. The
competition was almost equivalent to nil. In the marketing, the satisfaction of
the consumers was not at all considered. The marketing was commodity
based and immediately after the sale of the products, the marketing process
was over. Nowadays, the scope of marketing has become quite extensive,
and the satisfaction of the customers too is kept in view. The process of
marketing continues even after the sales have been affected. Today, the
function of conforming the product, in accordance with the changing wants,
habits and fashions of people, is undertaken by the process of marketing.
Within the scope of marketing, -the following activities are covered:
Decisions and Researches Pertaining to Customers. Now-a-days,
the customer is considered to be the crownless ruler of the market: Every
producer or manufacturer or business concern intends to know as to what is
the interest, fashion, economic position, of the customers; where do they
live, what is their paying capacity, etc. Taking decisions on the basis of all
these things, the producers bring their products to the customers accordingly
and by means of their satisfaction, earn the maximum profits.
Decisions Regarding the Commodity. Before manufacturing the
product, various decisions have to be taken up, for instance, the size of the
product, its shade or color, design and brand, packing, etc. These all are
equally the main components forming the marketing process.
Decisions Regarding Price-Determination. Every producer or
manufacturer and the business organization has also to determine
beforehand, prior to undertaking its marketing, as to what shall be the price
of their product? While deciding the price of the product, the paying capacity
of the customer and the cost of production has to be borne in mind.
Decisions Regarding the Medium of Distribution. There are various
media of distribution. the multiple or chain shops, the super bazar, the
17

wholesalers, the retailer, etc. The manufacturer or the business concern has
also to determine as to what shall remain the medium of distribution of the
commodity and how much long shall be its chain, requiring how much of
expenditure. While taking the decision of the means of distribution, various
matters have also to be borne into mind.
Decisions Regarding Sales Promotion and Advertisements. In this
age of stiff competition, the sales promotion and advertisements have
become almost an inseparable part of the marketing. There are various
media of sales promotion and advertisements taking the decisions about
which is also an indispensable part of the sphere of marketing management.
In the sales promotion, various decisions are required to be taken regarding
the training of the sales representatives, their emoluments and the relevant
incentives, etc.
Decisions Regarding After-Sales Service. For the satisfaction of the
customers, the provision of after-sales service is very necessary. Within the
after-sales service, are included the free repairs, the return or exchange of
the product during the guarantee period if the product proves defective or
worthless, etc. In it is included the decision that for how much period, what
type of service has to be extended to the customers, and through whom.

Advances in marketing with economic growth

As economic growth proceeds, several changes in marketing take place. With

economic development, the activities and tasks of marketing increase.
Activities such as storage and processing, packaging and retail distribution
become more important. Greater activity moves away from the site of
production and towards marketing. This, in turn, creates employment
opportunities and further specialization (diversification of the community).
Since livestock products typically have positive income elasticities of
demand, economic growth can lead directly to new opportunities for
production. Thus, the livestock subsector increases in importance.
With development, more economic agents may enter trade, helping to
improve marketing services and, in some cases, allowing the market to
capture external economies of scale. This refers to a situation where the
presence of many agents allows each one to operate at a lower cost. An
example is the case where increased trade in some commodity (e.g.
livestock allows for the establishment of large storage facilities (e.g. preslaughter holding areas), which lowers per unit storage costs. The physical
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infrastructure can also be affected in a positive way by large markets, in the

form of better roads and communication, offering the potential for external
economies of scale.

BEHAVIORAL ECONOMICS FOR MARKETEERS

Long before behavioral economics had a name, marketers were using it.
Three for the price of two offers and extended-payment layaway plans
became widespread because they workednot because marketers had run
scientific studies showing that people prefer a supposedly free incentive to
an equivalent price discount or that people often behave irrationally when
thinking about future consequences. Yet despite marketings inadvertent
leadership in using principles of behavioral economics, few companies use
them in a systematic way. In this article, we highlight four practical
techniques that should be part of every marketers tool kit.
1. Make a products cost less painful
In almost every purchasing decision, consumers have the option to do
nothing: they can always save their money for another day. Thats why the
marketers task is not just to beat competitors but also to persuade shoppers
to part with their money in the first place. According to economic principle,
the pain of payment should be identical for every dollar we spend. In
marketing practice, however, many factors influence the way consumers
value a dollar and how much pain they feel upon spending it.
2.Stay current on your favorite topics
Retailers know that allowing consumers to delay payment can dramatically
increase their willingness to buy. One reason delayed payments work is
perfectly logical: the time value of money makes future payments less costly
than immediate ones. But there is a second, less rational basis for this
phenomenon. Payments, like all losses, are viscerally unpleasant. But
emotions experienced in the presentnoware especially important. Even
small delays in payment can soften the immediate sting of parting with your
money and remove an important barrier to purchase.
Another way to minimize the pain of payment is to understand the ways
mental accounting affects decision making. Consumers use different
mental accounts for money they obtain from different sources rather than
treating every dollar they own equally, as economists believe they do, or
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should. Commonly observed mental accounts include windfall gains, pocket

money, income, and savings. Windfall gains and pocket money are usually
the easiest for consumers to spend. Income is less easy to relinquish, and
savings the most difficult of all.
Technology creates new frontiers for harnessing mental accounting to benefit
both consumers and marketers. A credit card marketer, for instance, could
offer a Web-based or mobile-device application that gives consumers realtime feedback on spending against predefined budget and revenue
categoriesgreen, say, for below budget, red for above budget, and so on.
The budget-conscious consumer is likely to find value in such accounts
(although they are not strictly rational) and to concentrate spending on a
card that makes use of them. This would not only increase the issuers
interchange fees and financing income but also improve the issuers view of
its customers overall financial situation. Finally, of course, such an
application would make a genuine contribution to these consumers desire to
live within their means.
3. Harness the power of a default option
The evidence is overwhelming that presenting one option as a default
increases the chance it will be chosen. Defaultswhat you get if you dont
actively make a choicework partly by instilling a perception of ownership
before any purchase takes place, because the pleasure we derive from gains
is less intense than the pain from equivalent losses. When were given
something by default, it becomes more valued than it would have been
otherwiseand we are more loath to part with it.
Savvy marketers can harness these principles. An Italian telecom company,
for example, increased the acceptance rate of an offer made to customers
when they called to cancel their service. Originally, a script informed them
that they would receive 100 free calls if they kept their plan. The script was
reworded to say, We have already credited your account with 100 calls
how could you use those? Many customers did not want to give up free talk
time they felt they already owned.
Defaults work best when decision makers are too indifferent, confused, or
conflicted to consider their options. That principle is particularly relevant in a
world thats increasingly awash with choicesa default eliminates the need
to make a decision. The default, however, must also be a good choice for
most people. Attempting to mislead customers will ultimately backfire by
breeding distrust.

4. Dont overwhelm consumers with choice

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When a default option isnt possible, marketers must be wary of generating

choice overload, which makes consumers less likely to purchase. In a
classic field experiment, some grocery store shoppers were offered the
chance to taste a selection of 24 jams, while others were offered only 6. The
greater variety drew more shoppers to sample the jams, but few made a
purchase. By contrast, although fewer consumers stopped to taste the 6
jams on offer, sales from this group were more than five times higher.1
Large in-store assortments work against marketers in at least two ways. First,
these choices make consumers work harder to find their preferred option, a
potential barrier to purchase. Second, large assortments increase the
likelihood that each choice will become imbued with a negative haloa
heightened awareness that every option requires you to forgo desirable
features available in some other product. Reducing the number of options
makes people likelier not only to reach a decision but also to feel more
satisfied with their choice.
5. Position your preferred option carefully
Economists assume that everything has a price: your willingness to pay may
be higher than mine, but each of us has a maximum price wed be willing to
pay. How marketers position a product, though, can change the equation.
Consider the experience of the jewelry store owner whose consignment of
turquoise jewelry wasnt selling. Displaying it more prominently didnt
achieve anything, nor did increased efforts by her sales staff. Exasperated,
she gave her sales manager instructions to mark the lot down x and
departed on a buying trip. On her return, she found that the manager
misread the note and had mistakenly doubled the price of the itemsand
sold the lot. In this case, shoppers almost certainly didnt base their
purchases on an absolute maximum price. Instead, they made inferences
from the price about the jewelrys quality, which generated a context-specific
willingness to pay.
The power of this kind of relative positioning explains why marketers
sometimes benefit from offering a few clearly inferior options. Even if they
dont sell, they may increase sales of slightly better products the store really
wants to move. Similarly, many restaurants find that the second-mostexpensive bottle of wine is very popularand so is the second-cheapest.
Customers who buy the former feel they are getting something special but
not going over the top. Those who buy the latter feel they are getting a
bargain but not being cheap. Sony found the same thing with headphones:
consumers buy them at a given price if there is a more expensive option
but not if they are the most expensive option on offer.

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Another way to position choices relates not to the products a company offers
but to the way it displays them. Our research suggests, for instance, that ice
cream shoppers in grocery stores look at the brand first, flavor second, and
price last. Organizing supermarket aisles according to way consumers prefer
to buy specific products makes customers both happier and less likely to
base their purchase decisions on priceallowing retailers to sell higherpriced, higher-margin products. (This explains why aisles are rarely organized
by price.) For thermostats, by contrast, people generally start with price,
then function, and finally brand. The merchandise layout should therefore be
quite different.

Marketers have long been aware that irrationality helps shape consumer
behavior. Behavioral economics can make that irrationality more predictable.
Understanding exactly how small changes to the details of an offer can
influence the way people react to it is crucial to unlocking significant value
often at very low cost.

CONCLUSION

We can't assume that markets always work well, or that the unintended
consequences of buyers' and sellers' actions will always serve the public
interest. Even so, the consensus among contemporary economists,
regardless of political conviction, is that an imperfect market system is far
better than none at all. We do not live in a world that can be made perfect.
Our task is to choose among the imperfect alternatives, the achievable
worlds.
The basic contours of the economic argument have been laid out. You have
seen the beginnings of what economists have to say about choice, the
accounting of budget constraints under which people make choices, the
market as the coordinator of individual choices, and now some critical
questions about the role and effectiveness of the market. These notions
constitute the basic vocabulary of economics, the materials for its
conversation. As the British Prime Minister, Winston Churchill, said after an
air victory early in their struggle against Hitler: "This is not the end. It is not
even the beginning of the end. But it is, perhaps, the end of the beginning."
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A marketing strategy is something that constantly evolves, adapting to

changing market conditions. Within Enterprise, the outcomes from its many
different types of business are constantly reviewed and evaluated.
Judgements are then fed into the decision making process. This enabled new
strategies to be developed to improve operations.
However, while strategies change, one aspect of the business has remained
in place. This is a continued focus on high levels of customer service and
employee relations . Organisations in our era are extremely sensitive - as
they must be - to demographic, political, technological and economic
developments. Environmental changes most affect strategic perspective.
With respect to the marketing mix, quality in the biscuit industry is a key
factor. For example, Arnott's uses its Sunshine brand to compete at the
budget end of the market, but promotes its own brand on the basis of quality
at the upper end. Competition with non-biscuit products such a snack food
and confectionery is partly on the basis of packaging. Even though the two
companies have different specialities, the price, distribution and promotion
are very similar. It can be seen that Arnott's have a stronger market share
than Nabisco due to stronger promotion, more variety of products and brand
loyalty.
An effective marketing program brings together all of the elements of the
marketing mix to achieve the organisation's marketing objectives by
delivering to customers what they want and need. Thus, the most successful
companies will be those that can meet these needs most effectively

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