Exchange Transactions and Relationships

Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired object from someone by offering something in return. Exchange is only one of many ways people can obtain a desired object. For example, hungry people can find food by hunting, fishing or gathering fruit. They could beg for food or take food from someone else. Finally, they could offer money, another good or a service in return for food.

As a means of satisfying needs, exchange has much in its favour. People do not have to prey on others or depend on donations. Nor must they possess the skills to produce every necessity for themselves. They can concentrate on making things they are good at making and trade them for needed items made by others. Thus exchange allows a society to produce much more than it would with any alternative system.

Exchange is the core concept of marketing. For an exchange to take place, several conditions must be satisfied. Of course, at least two parties must participate and each must have something of value to offer the other. Each party must also want to deal with the other party and each must be free to accept or reject the other's offer. Finally, each party must be able to communicate and deliver.

These conditions simply make exchange possible. Whether exchange actually takes place depends on the parties coming to an agreement. If they agree, we must conclude that the act of exchange has left both of them better off or, at least,

not worse off. After all, each was free to reject or accept the offer. In this sense, exchange creates value just as production creates value. It gives people more consumption choices or possibilities.

Whereas exchange is the core concept of marketing, a transaction is marketing's unit of measurement. A transaction consists of a trading of values between two parties. In a transaction, we must be able to say that one party gives X to another party and gets Fin return. For example, you pay a retailer £300 fora television set or the hotel £90 a night for a room. This is a classic monetary transaction, but not all transactions involve money. In a barter transaction, you might trade your old refrigerator in return for a neighbour's second-hand television set.

transaction

A erode between i

parties that involves at least two things of value, agreed-upon conditions, a time of agreement and a place of agreement.

Going Back lo Barter

With todays high prices, many companies are returning to the primitive but time-honoured practice of barter - trading goods and services that they make or provide for other goods and services that they need. The European barter market is estimated to be worth up to S200 million a year and forecasts put the value at nearly $1 billion by the year 2000. On a global scale, companies barter more than $275 billion worth of goods and services a year, and the practice is growing rapidly.

Companies use barter to increase sales, unload extra goods and save cash. For example, companies are offering television programmes to broadcasters in exchange for air-time: Unilever owns the European rights to the TV game shows, Wliesl of Fortune and Jeopardy, which it barters to stations all over Europe. Others like PepsiCo traded Pcpsi-Cok and pizza parlours to the Russians for ships and Stolichnaya vodka, while Pierre Gardin served as a consultant to China in exchange for silks and cashmeres, and Turnkey Contracts and Consultancy, a Singapore company, was paid in Burmese logs for the construction of an International Business Centre in Burma's capital city, Rangoon.

As a result of this increase in barter activity, many kinds of speciality company have appeared to help other companies with their bartering. Retail-trade exchanges and trade clubs arrange barter for small retailers. Larger corporations use trade consultants and brokerage firms. Media brokerage houses provide advertising in exchange for

Marketing Highlight

products, and international barter is often handled by counter-trade organizations.

Barter has become especially important in today's global markets, where it now accounts for as much as 40 per cent of all world trade. The present world currency shortage means that more and more companies are being forced to trade for goods and services rather than cold, hard cash. International barter transactions can be very complex. For example, a trader for KGD International, a New York-based bartering company, arranged the following series of exchanges:

[The trader] supplied a load of latex rubber to a Czech company in exchange for 9,000 metres of finished carpeting. lie then traded the carpeting for hotel room credits. The rooms were traded to a Japanese company for electronic equipment, which [the trader] bartered away lor convention space. The final [exchange] came when he swapped the convention space for ad space that his company used.

SOURCES: 'TV barters for the future'. The Kumpean (25-31 March 1994); Victor Mallet, 'Barter proves best for business, Burma style', Financial Times (8 February 1994), p. 8; Quote from Cyndee Miller, 'Worldwide money crunch fuels more international barter', Marketing Nemos (2 March 1992). p. 5; also see Arthur Bragg, 'liarterinf; comes of age', Sales and Marketing Management (January 1988), pp. 61-3; Joe Mandese, 'Marketers swap old product for ad time, space', Advertising Age (14 October 1991), p. 3.

relationship marketing The process recreating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders.

A barter transaction can also involve services as well as goods: for example, when a lawyer writes a will for a doctor in return for a medical examination (sec Marketing Highlight 1.1). A transaction involves at least two things of value, conditions that are agreed upon, a time of agreement and a place of agreement.

In the broadest sense, the market tries to bring about a response to some offer. The response may tie more than simply 'buying' or 'trading' goods and services. A political candidate, for instance, wants a response called 'votes', a church wants 'membership', and a social-action group wants "idea acceptance'. Marketing consists of actions taken to obtain a desired response from a target audience towards some product, service, idea or other object.

Transaction marketing is part of the larger idea of relationship marketing. Smart marketers work at building long-term relationships with valued customers, distributors, dealers and suppliers. They build strong economic and social tics by promising and consistently delivering high-quality products, good service and fair prices. Increasingly, marketing is shifting from trying to maximize the profit on each individual transaction to maximizing mutually beneficial relationships with consumers and other parties. In fact, ultimately, a company wants to build a unique company asset called ^ .marketing network, A marketing network consists of the company and all of its supporting stakeholders: customers, employees, suppliers, distributors, retailers, ad agencies, and others with whom it has built mutually profitable business relationships. Increasingly, competition is not between companies but rather between whole networks, with the prize going to the company that has built the best network. The operating principle is simple: build a good network of relationships with key stakeholders, and profits will follow/' Chapter 11 will explore relationship marketing and its role in creating and maintaining customer satisfaction.

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market

The sec of all actual arid potential buyers of a product or service.

Continue reading here: The Selling Concept in Marketing

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