Value for money and satisfaction
How does a consumer choose among the many products that might satisfy a particular need? Suppose a person has to commute three miles to work each day. There are several products that might satisfy this need: roller skates, bicycles, motorcycles, cars, taxis, and buses. These alternatives form a set of product possibilities. Suppose the person wants to satisfy some additional needs on the way to work, namely speed, safety, comfort, and economy. We call this the set of needs. Now each product has a different ability to satisfy the person's different needs. For example, a bicycle is slower, less safe, and more labor-intensive than a car, but it is more economical. Regardless, the person must decide which product will satisfy the need most fully. The key concept is customer value. The person will evaluate the ability of each product to satisfy his set of needs. He can rank products from the one that satisfies the most needs to the one that satisfies the least needs. Value is the consumer's assessment of the product's overall ability to satisfy his needs.
We could ask him to imagine the characteristics of an ideal product for those tasks. He might answer that the ideal product would get him to work in seconds with absolute safety, no effort, and zero cost. The value of each actual product would then depend on how close it comes to that ideal product. Suppose that his primary concern is speed and comfort in getting to work. If he could have any of these products for free, we can predict that he would choose the car. But now there is a catch: the cost of a car is much greater than the cost of a bicycle, so he would have to give up many other (valuable) things to buy the car. So he will consider the value and price of the products before he chooses. He will choose the product that creates the greatest value per dollar. Consumer behavior researchers today have moved beyond the narrow confines of economic theories about how consumers judge value and choose products.
Exchange, transactions and relationships
The fact that people have needs and wants and can attach value to products does not tell the whole story of marketing. Marketing occurs when people decide to satisfy those needs and wants through exchange. Exchange is one of four ways people can obtain products. The first way is self-production. People can satisfy their hunger by hunting, fishing, or gathering fruit. They do not have to deal with anyone else. In this case, there is no market and no marketing. The second way is extortion. Hungry people can snatch or steal food from other people. Those other people gain nothing except not being hurt. The third way is begging. Hungry people can go to other people and ask for food. They have nothing tangible to offer, except gratitude. The fourth way is barter. Hungry people can offer other people money, other goods, or services in exchange for food. Marketing arises from this fourth method of obtaining products. Exchange is the act of obtaining a desired product from someone by offering something in return. Exchange is a crucial concept that forms the basis of marketing. Exchange occurs only when the following conditions are met:
1. There must be at least two parties.
2. Each party must have something that can be of value to the other party.
3. Each party must be able to trade and deliver its goods.
4. Each party is free to accept or reject the other party's offer.
5. Each party believes that he or she should or wants to deal with the other party.
If all five of these conditions are present, then there is potential for exchange. Whether or not exchange actually takes place depends on whether the two parties can agree on terms of exchange that are more beneficial (or at least not more detrimental) to both parties than they were before the exchange.
It is in this sense that exchange is viewed as a value-creating process, meaning that exchange typically leaves both parties better off than before the exchange. Exchange must be viewed as a process, not an event. Two parties are said to be engaged in exchange if they are negotiating to reach an agreement.
When an agreement is reached, we say that a transaction has taken place. A transaction is the basic unit of exchange. A transaction is a purchase and sale of values between two parties. We can assume that party A has given object X to party B and received object Y in return. However, a transaction does not require money as one of the values being purchased and sold.
A barter transaction means that one person gives another a refrigerator and receives a television. A barter transaction can also be a purchase of services instead of goods, as when a lawyer writes a will for a doctor in exchange for a medical examination. A transaction requires an element: at least two values, agreed-upon conditions, an agreed-upon time, an agreed-upon place. Usually, there is a legal system that backs up and obliges the parties to the transaction to fulfill their commitments. Transactions can easily give rise to conflicts due to misunderstandings or intentional acts.
Without “contract law” people would lose trust in transactions and everyone would lose out. Businesses keep track of their transactions and categorize them by item, price, location and other variables.
Sales analysis is the analysis of a company's revenue sources by product, customer, and location… Transactions are different from transfers.
In the transfer, party A gives party B object X but does not receive anything tangible in return.
When party A gives party B a gift, a grant, or a charitable contribution, we say that it is a transfer, not a transaction. It may seem that marketing is limited to the study of transactions, not transfers. However, transfer behavior can also be understood through the concept of exchange. Often the transferor has certain expectations for giving, such as receiving a thank you or seeing the recipient perform better. Professional fundraisers understand the “reciprocity” motive of donors and invite them to events. Recently, marketers have expanded the concept of marketing to include the study of transfer behavior as well as transaction behavior.
In the most general sense, marketers are trying to create a behavioral response from the other party. A business wants a purchase, a political candidate wants a voting, a church wants a conversion, a social group wants an acceptance of its ideas.
Marketing consists of activities undertaken to produce desired responses towards an object from the target public.
To ensure that exchanges proceed smoothly, marketers must analyze what each party is expected to give and receive. Simple exchange situations can be represented by a diagram of two participants and the desired items and offers that flow between them.
Here we see the essence of transaction marketing. Transaction marketing is part of a larger idea than relationship marketing. Smart marketers strive to build long-term, trustworthy, mutually beneficial relationships with major customers, distributors, dealers, and suppliers. This is done by promising and consistently delivering high quality, good service, and fair prices to the other party.
This task is also accomplished by building strong economic, technical and social ties with the partners. Relationship marketing reduces transaction costs and time and in the best cases moves transactions from being negotiated one-offs to becoming routine.
The ultimate result of relationship marketing is the creation of a unique corporate asset, called a marketing network, which includes the company and its suppliers, distributors and customers with whom the company has built strong, trusting business relationships. Marketing is increasingly shifting from trying to maximize profits in each transaction to maximizing mutually beneficial relationships with partners. The working principle is to build good relationships and the transactions will automatically be beneficial.
(there's more)
