Markets and Marketing

Markets and Marketi~rg Inter-Relationship of Various Functions of Marketing

- - - - -

Transportation
Storage
Standardisation -
Producer Buying Consumer
Selling
Financing
Risk Bearing
Market Information

Middleman

3.2.3 Classification of Marketing Functions

Concentration, equalisation and dispersion are the base pillars of marketing
function. Concentration pertains to operations concerned with the assembling
and transport of produce from the field to a common place or market.
Equalisation mainly relates to the carrying forward of produce/goods for future
distribution. Dispersion involves the operation of wholesaling and retailing at
the terminal market.

At present, there is no unanimity regarding a proper classification of marketing

functions. Some experts (e.g. L.F. Pyle, Marketing Principle) has classified
marketing functions on the basis of concentration and dispersion and these are
In this classification, the whole process of marketing is brought under two Ba~icMarketing
Function
major heads. But it is repetitive in nature which has not been acknowledged
by many experts.

The alternative attempt was made to classify marketing functions with the
idea that the marketing process is primarily concerned with the flow of goods
from the producer to the consumer. On the basis of this idea, the classification
has been made as below:

This classification is also repetitive like first one except that it contains an
additional function "Equalisation" in between concentration and dispersion.

The most accepted classification was proposed by Clark and Clark (1947) in
"Principles of Marketing". This is as given below:

(Demand

This classification is capable of giving an overall picture of the whole area of

marketing and it enjoys maximum acceptance.
51
Markets and Marketing
Check Your Progress Exercise 1
Note: a) Space is given below for the answer.
b) Compare your answer with that given at the end of the Unit.
1) Discuss the concept and objective of marketing functions?
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2) Why marketing function is considered important? Give some"reasons.

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3) How marketing functions can be classified?

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 3.3 MARKET FUNCTIONS AND THEIR ROLES
Basic Marketing Function
I
3.3.1 Function of Exchange 1
Function of exchange is defined "as the process of passing goods into the
customer's hands". This function is divided into three categories (i) selling
(ii) buying and (iii) assembling. These functions form the cornerstone for any
marketing activity.
I
The functions are briefly described as below
i) Selling
Sales function is the pivotal factor in any organisation. It involves transfer of
title of goods to the buyer. Selling is to create demand for a product even
against keen competition. The function of the salesman is to create demand,
find out buyers, giving them the information of the availability of goods to
satisfy them and assure them of reasonable prices.
Elements of Selling
Elements of selling are as follows:
a) product planning;
b) sales research;
C) creation of demand;
d) determining terms of sale; and
e) customer service.
a) Product Planning
!
It is the starting point to decide the precise nature of product. For this, the
physical factors (colour, design, feature etc.) and non-physical factors (utility,
value, quality etc.) are to be analysed.
I

!
b) Sales Research
I
It is required, as a part of marketing research to assess the exact need of the
j
consumers by analysing and interpretation of data collected.

c), Creation of demand

i It is a process by which latent demand is converted into effective demand. It
is an art. Personal and non-personal (Direct and Indirect) methods are used to
convert the latent demand into effective demand. Advertisement and publicity
r
are direct methods and demonstrations, exhibitions, providing samples etc.,
are the indirect methods.
d) Determining Terms of Sale
A seller has generally to decide various terms and conditions like price fixation,
concessions, discount, form of delivery, transfer of ownership method etd. in
advance to avoid any legal problem.
 Markets and Marketing e) Customer Service
Customer service is generally considered as "after-sales services'' to satisfy
customers and establish direct relations with customers in the new marketing
environment.
Kinds of Selling
There are different kinds of selling which includes personal selling, sales
advertisement, sales by inspection, sales by samples, sales by description etc.
In addition to these methods many more methods are recognised at village for
sale of agricultural produce. This includes open auction, closed tender system,
quoting on samples, moghum sales (based on verbal understanding between
buyers and sellers).
ii) Buying
Buying is the most important marketing activity. The primary. purpose of
buying is to assemble goods upon demand, for resale or use in production'or
personal consumption. At the time of buying, the following points must be
taken into consideration:
e.g. a) Quality : Quality product is most important for customer satisfaction.
b) Quantity : Exact assessment of quantity is required to avoid over-
stocking or under-stocking as both are dangerous for
the marketer.
c) Timing : Some products have specific demand in specific season.
Therefore, in the case of seasonal products, timing of
purchase is a critical factor.
e) Source of : Before placing the order, it is always better to know the
supply location and source of supply of goods.
1 Elements of Buying
The elements of buying include estimation of the demand, locating sources of
supply, assembling, merchandising, market news, negotiation of terms and
transfer of title and delivery.
Kinds of Buying : There are different kinds of buying. These are:
i) Hand to mouth : It is buying in small quantity; Expenses in transport,
storage etc., are saved, involve less capital.

ii) Forward buying : It is also known as "Speculative Buying". This is

practised usually by the retailers, when prices move
UP. "

The other types of buying are buying by inspection, buying by samples,

buying by description, period buying, reciprocal buying, concentrated buying
and scattered buying.
iii) Assembling
Assembling is a process of collecting goods from different places (big or
small town, village etc.) and putting it together at central place or its further
 movement to the factory or consumers. The main advantage of assembling is Basic Marketing Function
that it facilitates widening of market, grading, reduces cost of transportation
and handling, regularise the supply of seasonal products, provides facilities

unregulated market, involvement of large number of middlemen, imperfect

standardisation.

I 3.3.2 Physical Distribution

Physical distribution.function is now recognised as a link between production
. and marketing functions. Main physical distribution functions are storage and
transportation.
i) Storage and Warehousing
Storage
Storage is a major marketing function under modem market conditions. This
service is essential for the storage of farm products due to its perishable
character. Storage function is necessary in concentration as well as in
distribution. It is performed by a manufacturer, wholesaler, retailer or
professional warehouse keepers.
Storage becomes necessary for the following reasons:
Essential for scientific storage of the goods of perishable nature.
Necessary for maintaining a regular supply of goods in all seasons.
Essential because of timely production and continuous consumption e.g.
fruits, vegetables, poultry, fish and dairy prod,ucts.
Necessary to guard against delayed shipments.
Adjusts the demand and supply position of the product in the market.
Helps to promote the orderly market.
Warehousing
The storage function is made effective through the establishment of warehouses.
"Ware" means 'article' and 'house' here means putting in (a room etc) for
1
storing.

p Broadly, warehouses can be divided into three categories on the basis of

ownership, place of necessity and special provisions.
.
(I) On the Basis of 'Ownership'
.

There are three types of ownership wareh~use- Private, Public and Cooperative.
Private warehouse is for own purpose of the firm, manufacturer or trader.
Cooperative warehouses are managed by primary cooperative society. The
best known and the most widely accepted services are offered by public
warehouses which are generally for the general public to store a variety of
merchandise. The rents of such warehouses are usuallv fixed bv the resvective .
Markets and Marketing states in which these are located.
(2) On the Basis of 'Place of Necessity'
Under this category, there are three types of warehouse and these are:
In-plant warehousing, Field warehousing and Bonded warehousing.
A large number of manufacturers find it convenient to distribute the products
from the plants directly to the retailers or to customers. For this, in-plant
warehousing is required. It reduces cost of handling and improves the service.
Field warehouses are centrally located warehouses from where distribution is
done to wholesalers and retailers. This is necessary where products (e.g.
fertilisers) from different plants are to be mixed together. On the other hand,
bonded warehouses are located near ports. They enable the unloading of
commodities from a ship safely into a place until the owner of the goods takes
delivery of them.

(3) On the Basis of 'Speciality'

These special commodity warehouses are constnicted specially to house certain
commodities. For example, grains, wools, cotton; explosives etc. require special

.
facilities like maintenance of fixed temperature and non-exposure to light etc.

Refrigerated Warehouse
It is commonly known as cold storage which are required for perishable
products to make them fresh or giving them second life for its distribution at
larger distances or even in the off-seasons. It is more beneficial for the farm
products.
ii) Transportation
Transportation is one of the important functions of marketing activities as
transportation plays a prominent role in the distribution of goods between
places i.e. from production to consumption.

Function of Transport
It promotes quick marketing which enhances growth of industries.
It encourages zonal specialisation in productive activities.
It creates place utility by bridging the gap between production and
consumption centres.
It plays an important role in stabilising prices of several commodities by
moving them from surplus areas to deficit areas.
It ensures even flow of commodities into the hands of the consumers.

Classification of Transport

In general, there are three categories of transport mode$ - Land, Water and
Air. These are further classified.

56
(a) Land Transport
Land transport includes Roadways, Railways and Tramways etc.
1) Road transport is the commonest form of transporting. On road, there is
transport by human energy like porters, coolies who carry goods on back
or heads. Transport by animals includes bullock, camel, donkey, elephant,
horse etc. Transport by carts is bullock-carts, horse-carts while transport
by automobiles includes scooter, motorcycle, auto-rickshaws, car, trucks,
buses etc.

2) Rail Transport : Railways are used to carry bulky items for long
distances.

3) Pipelines: Pipelines are specialised carriers designed to transport the

crude and refined petroleum and natural gas from walls to refineries and
further to distribution centres through pipelines.
(b) Water Transport
Water transport is one of the more economic modes of transport. There are
two modes of Water Transport - Inland Water Transport and Ocean Transport.
Inland water transport includes rivers, canals lakes, and channels, within the
national boundary of the country for which it is known as inland water transport.
The other mode is ocean transport which is very important for the growth of
foreign trade. It is again divided into coastal and overseas shipping. Coastal
shipping provides service within the nation while overseas shipping is mainly
used in the case of international trade.
(c) Air Transport

Air transportation plays significant role in trading perishable products and

emergency parts.
Markets and Marketing
The merits and demerits of different mode of transnorts are as h~?lnw.

SI. Mode Advantages Disadvantages

No. of Transport
1) 'Road Transport Cheapest method, safety, Irregular operations,
flexibility, varied uses limited capacity, slow
speed, high cost.
2) Rail Transport Large capacity for bulk and Lesser accessibility,
heavy commodities; Long inflexibility, non-suitable
distance travel, cheap rate for shorter distances, high
maintenance expenditure.
3) Water transport Cheapest means, carrying Low speed, seasonal
capacity, suitable for difficulties (winter and
international trade. rainy) more time involved,
limited area of operation.
4) Air transport Rapid speed, No obstruction Higher cost, Low carrying
in between, boon to capacity, Dependence on
perishable goods climatic conditions.

(Bansal, 2004) 1
3.3.3 Facilitating Functions
!
Facilitating functions play important role in marketing activities. These are 11
i) Standardisation
1
4

Standardisation is the process by which a standards already decided is attained.

Standardisation involves the determination of basic measures to which articles
must conform (i.e. fixing standards) and includes the process of conforming
to such standards. It implies the establishment of uniform quality specifications
between two places, between one time and another, between buyers and sellers
as a basis for the grade. Standardisation' is considered to be facilitating or
ancillary function of marketing.
1
1

i
The main characteristics of standardisation listed below: 1
i
It helps in the efficient performance of the various marketing functions,
particularly in buying and selling.
It determines grades or class of products for both agricultural and
industrial.
It helps the producer to set higher prices.
It assures consumers of the specific quality of the product.
ii) Grading
Grading is the use of standard or set of standards, for sorting upgraded products
into lots that are approximately identical in variety, size, quality etc.
The main characteristics of grading are:
a) it permits the buyers to select more precisely what he wants.
b) it helps to protect the interest of consumer.
 The terms "grading" and "standardisation" should not be misunderstood and Basic Marketing Function
misused. Grading is used for sorting out products into groups of uniform kind,
quality and size. Standardisation implies the establishment of a certain standards
based upon intrinsic physical properties and qualities of products. It means
standards are fixed first and grading follows.
iii) Financing
Money is required for all type of marketing activities. It is required by
manufacturers, wholesalers, retailers and consumers. All require funds at their
end to produce, sell and purchase goods. It is difficult to perform various
marketing functions without the availability of adequate and cheap finance.
As in the case of business, marketing activities require fixed capital and

etc. Commercial banks, cooperative credit societies and government agencies

are among the different sources of marketing finance.
iv) Risk Bearing
A marketing enterprise has to bear many risks in the process of marketing
goods.

This may arise for unforeseen events (flood, earthquake etc.) social hazards
(theft, burglary, war etc.) accident, decayldeterioration etc.

The business risks can be divided mainly as:

Market or Economic Risk - (due to competition, change of price, change in
customer preference and demand).

Natural risk - (Due to fire, flood, storm, drought, earthquake, lightening, pest
and disease attack etc).

Human risk - (Dishonesty of employees, carelessness of employees, losses

due to sickness and accident of labour, mishandling of commodities etc).

The risks may be avoided, minimised or shifted. There are specialised agencies
or institutions to undertake these risks. But certain unavoidable risks are to be
accepted. To minimise the loss in such circumstance, it is necessary to develop
appropriate strategy through preparation of marketing plans, segmenting the
market and adopting test marketing methods.
V) Market Information
b
Marketing information is a facilitating function and plays very important role.
Now a days there are lot of challenges before marketing managers. The
collection of adequate, reliable and timely market information may help to
tackle the problems. Primary information can be collected personally from
I
respective persons; secondary source of information may be Government and
non-government agencies, Department of marketing, Bureau of Statistics,
Reserve Bank of India, AIR, Doordarshan etc. A good marketing information
system will help the management to plan, control and understand effects
arising out of previous decisions and their implementations.
Markets and Marketing vi) Others
Other facilitating functions are market promotion, packaging, product planning
etc. Market promotion is basically a communication process and it can be
done through different sale activities like advertising, personal selling, sale
promotion etc. In case of packaging, modern methods are valuable to the
manufacturer to establish his branded products. It ensures cleanliness. There
is also need of product planning to match the demand and supply.

Check Your Progress Exercise 2

Note: a) Space is given below for the answer.
b) Compare your answer with that given at the end of the Unit.
1) What are the elements of selling?

2) Bring out the significance of storing and warehousing in the modern

marketing.

3) How is transport important in marketing? How would you select an

appropriate mode of transport for moving different articles?
The lucrative markets of the developed world has so far acted as the primary
driving force behind the development of the "Certified Organic Sector" in
India. It is predominantly the NGOs and people's organisations that have been
spearheading the organic agriculture movement in different parts of the country.
a) Market Functions
The organic market is also gaining momentum in different parts of the country.
This is the high time to focus on all marketing actions for the interest of all
organic growers and consumers. The market functions in organic sectors are
as below:

(i) Selling: Organic farm production and trade has emerged as an important
sector in India as in other parts of the developing world. The organic
farming market in India is growing rapidly especially for export which
is valued at Rs. 70-100 crore (US$ 16-20 million) during the last few
years. Major organic produces in India include plantation crops i.e. tea,
coffee and cardamom, spices i.e. ginger, turmeric, chillies and cumin,
cereals i.e. wheat, rice, jowar and bajra, pulses i.e. pigeonpea, chickpea,
green gram, red gram and black gram, oilseeds i.e. groundnut, castor,
mustard and sesame, fruits i.e. banana, sapota, custard apple and papaya,
and vegetables i.e. tomato, brinjal and leafy vegetables, besides honey,
cotton and sugarcane especially for jaggery. Various channels like
exclusive stores/outlets, cooperative buyers group, organic corners in
large supermarkets are promoting sale of organic produce. Even village,
organic growers can now sell their produce even in local bazad'haat'.
(ii) Assembling: The distribution of agricultural products such as fresh fruits
and vegetables involves large number of brokers and agents. For this
reason, the produce has to undergo a series of transfers before it reaches
the consumers. Assembling ,is one of the key steps in organic market.
Some organic bazaars (e.g. Aurangabad, Maharashtra) where different
organic growers assemble their product for sale. Even the middleman
plays significant role in assembling different organic produce for its
further movement to the consumer.
(iii) Buying: Many consumers are aware of ill effects of conventional farming
where chemical inputs like fertilisers/pesticides are used extensively.
Consumers are interested to purchase food items containing no chemicals/
residues. There are many private companies like Ion exchange (Mumbai)
Sresta (Hyderabad), Jatan (Vadodara), Navdanya (Delhi), and Fab India
(Delhi) which are involved in exports and local marketing of organic
produce. Top organic food categories include vegetables, fruits, spices,
bakery products etc.
(iv) Storage~ansportation: Storage and transportation are main physical
distribution functions. As fruits, vegetables and spices are main organic
commodities and perishable by nature, it is very necessary to store them
properly. The arrangement of storage/godown/warehousewill be made in
Markets and Marketing such a way that these organic products should not be in direct contact
with prohibiting materials like chemical fertiliser, pesticides etc.
Maintenance of product integrity is the important objective during storage
and transportation of organic products. Any handling and processing of
organic products is required to be optirnised to maintain the quality and
integrity of the product and directed towards rninimising the development
of pests and diseases. Processing and handling of organic products needs
to be done separately in time or place from handling and processing of
non-organic products.
b) Facilitating Functions
(i) Finance: Finance is said to be the lubricant that facilitates the operation
of marketing machine. There are many Govt. schemes where there are
provision of financial assistance for production of organic inputs, capacity
building through service providers, sale of organic produces etc.; schemes
are also available with various banks and cooperative societies.
(ii) Standardisation: Internationally, there are many standards like IFOAM
standard, CODEX standard, EU regulations, USDA standard etc for
organic production. In India, Government of India launched National
Programme for Organic Production (NPOP) in 2000. Under this
programme, National Standards for Organic Production (NSOP) and
certification measures for a certification system have been established.
These standards are in conformity to the National Standards of EU,
IFOAM and CODEX.
As per export import policy of Government of India, an agricultural
product will be allowed for export as "Organic Product" only if it is
produced, processed or packed under a valid organic certificate issued by
a certifying agency duly accredited by the Government accredited agency.
It is mandatory that the producers of organic products adhere to well-
developed procedures and practices during all the stages of operation and
conform to regorous production guidelines and must go through the
process of certification.
(iii) Risk Bearing: In organic agriculture, there is risk that the yield may
decline for initial 2-3 years as compared to yield under conventional
farming. This risk can be covered if the prices of the product are kept a
little higher. Most of the farmers grow organic crops in anticipation of
high income. But if the organic market is not developed properly, farmers
may face problem.
(iv) Packaging : Packaging is very important for marketing of organic
produce. It should not be packed in any container made of propitiatory
chemicals as specified in National Standard.
(v) Market Information: The success of any marketing strategy depends on
knowledge on the market. Global marketing, buyer choice and
competitions are the issues for generating need for niarketing information
system (MIS). It consists of people, equipment and procedure to gather,
sort, analyse and evaluate information which are required for marketing
decision makers. Organic market in India is still to reach the niche level.
62
Markets and Marketing
LET US SLIM LTP
There are two major functions of marketing: functions of exchange and
functions of physical distribution. The other one is facilitating functions. The
process of exchange is the core element of marketing and it consists of selling,
assembling and buying. The sale function involves transfer of title of goods
to the buyer. The element of selling includes product planning, sales research,
and creation of demand. Assembling is an act of collecting goods from scattered
areas, into a bigger lot at one place. Buying is important marketing activity.
Its purpose is to bring commodities together for consumption or for use in
production. The factors like quality, quantity, timing, prices, and sources of
supply are to be considered before buying. Depending on the product
characteristics and nature of demand by consumers, there are different kinds
of buyers.

The basic objective of distribution is to provide goods at low cost. The two
elements of physical distribution are transportation and storage/warehousing.
There are three types of transportation - Land, Water and Air. Roadways and
Railways are main transports on land while inland water includes canal, river
etc.

The other important functions are facilitating functions which consists of

financing, risk bearing, standardisation and grading and marketing information.

The organic marketing India is yet to reach a niche level. The export market
is gaining momentum, but domestic market is yet to be developed. It is
necessary to focus all marketing activities in organic sector for its capacity
building and good marketing.

KEY WORDS
Function of Exchange : Functions of exchange is defined as the process
of passing goods into the customers hands.
Concentration : Concentration pertains to operations concerned
with the assembling and transport of produce
from the field to a common place or market.
Equalisation : Equalisation mainly relates to the carrying
forward of produce/goods for future distribution.
Assembling : Assembling is a process of collecting goods from
different places and putting it together at central
place or its further movement to the factors of
the consumers.
Creation of Demand : It is a process by which latent demand is
converted into effective demand.
Grading : Grading is the use of a standard or set of
standards, for sorting un-graded products into
lots that are approximately identical in variety,
Markets and Marketing

of demand placelmarket.
Check Your Progress Exercise 3
1) Storage is a major marketing function as a part of physical distribution.
It is necessary because:

a) It is essential for scientific storage, of the goods of perishable nature.

b) It is necessary for maintaining a regular supply of goods in all seasons.
c) It is essential because of timely production and continuous
consumption e.g. fruits, vegetables, poultry, fish and dairy products.
d) It is necessary to guard against delayed shipment.
e) It adiusts the demand and supply position of the product in the

f) It helps to promote the orderly market.

2) The standardization of organic produce is essential in terms of authentication
of the product. The quality is assured through standardization. The
consumer should see that the product they are going to purchase is
properly standardized.

3) Marketing functions are important for any products. Similar is the case
with organic products. The nature of demand and supply can be estimated
by understanding the market functions.