Marketing as Exchange Process

Marketing as an Exchange Process

Marketing as an exchange process has gained significance over the years, as it has tried to conceptualise marketing behavior. We need to understand why people get engaged in the process of exchange relationships and how exchanges are created, resolved, or avoided.

Though a customer can get involved in different kinds of exchanges while buying a product, the scope of understanding exchange in the context of marketing is confined to the economic institutions and consumers in the traditional sense.

We will broaden the scope of marketing exchange as we move ahead in our discussion. Broadly there are three types of exchanges: restricted, generalized, and complex exchanges.

A restricted exchange refers to two-party reciprocal relationships, which may be represented as A↔B which signifies ‘gives to and receives from’ and A and B represent social actors such as consumers, intermediaries, salesmen, organizations, or collectives.

Most of the references in marketing literature talk about some or the other form of restricted exchanges like customer-salesman, customer-retailer or wholesaler-retailer, or other forms of dyadic relationships. There are two characteristics of restricted exchange. First, there is a great deal of attempt to maintain equality.

This is the case of repeatable social exchange acts. An attempt to gain an advantage over the other is minimized. Any breach of this equality leads to immediate emotional responses. Secondly, there is a quid pro quo mentality (Bagozzi, 1975) in restricted exchange activities.

Time intervals in mutual reciprocities are cut short and there is an attempt to balance activities and exchange items as part of the mutual reciprocal relations. For example, retailers know that they will not obtain repeat purchases if the consumer is taken advantage of or deceived.

A breach in this equality has seen demonstrations, pickets, and boycotts since restricted exchanges must involve a quid pro quo notion (something of value in exchange for something of value).

However, there are various exceptions to restricted exchanges. Generalized exchange denotes univocal, reciprocal relationships among at least three actors in the exchange situation. If the reciprocations involve at least three actors and if the actors do not benefit each other directly, but only indirectly, we can call this process as a generalized exchange process.

This process can be explained by (A↔B↔C↔A) where (↔) signifies ‘gives to’. The social actors in generalized exchanges form a system in which each actor gives to another but receives from someone other than to whom he gave.

For example, a children’s home asks a retail store to donate a few T-shirts to destitute children and destitute children wear these dresses in a public gathering which is sponsored by the retail store; other children and their parents see the advertisements and patronize the store for the noble cause. This sequence of exchange (A↔B↔C↔A) is called a generalized exchange.

More examples in this context are as follows:

  • You go into a restaurant and order your favorite meal. You eat the food and then you pay for it with your credit card. That’s a basic exchange relationship.

  • You watch the news on TV and listen to the views of a political candidate who stood for elections, and on polling day you vote for that person.

  • You see a newspaper advertisement asking you to donate blood and you return a coupon to become a blood donor.

Complex exchange refers to a system of mutual relationships between at least three parties. Each social actor is involved in at least one direct exchange, while the entire system is organized by an interconnecting web of relationships (Bagozzi, 1975).

Let us take an example of the channel of distribution. If A represents a manufacturer, B a retailer, and C a consumer, it is possible to depict the channel as A↔B↔C. Such open-ended sequences of direct exchanges may be designated as complex chain exchanges.

Many marketing exchanges involve a relatively close sequences of relationships. Caraman and Lurk criticized Kotler’s idea that a transaction takes place when one is exposed to television advertising, by proposing that it may not exhibit an exchange.

This difference is based on two factors viz. disagreement on whether the exchange that takes place must consist of transfers of tangible (as opposed to intangible) things of value and secondly, a neglect of the possibility of systems of exchanges.

The figure explains the exchange between a person and a television program and how it may be viewed as a link in a system termed a complex circular exchange.

In this example, the person experiences a direct transfer of intangible exchange between himself and the program. He gives his attention, support, the potential for purchase, and so on, and receives entertainment, enjoyment, product information, and other intangible entities.

The person also experiences an indirect exchange with the television program via a sequence of direct, tangible exchanges. Thus, after being informed of the availability of a book through an exchange with the television program and its advertising, a person may purchase it for say ₹ 10. The book publisher, in turn, may purchase the services of an advertiser, paying what amounts to percentages of sales, say, ₹ 1.

Finally, the advertiser receives the opportunity to place a commercial on the air, from the television network in exchange for what amounts to a percentage of each sale, say ₹ 100.

In this example, the occurrence of the direct intangible exchange was a necessary prerequisite for the development of the series of indirect tangible exchanges. Thus, an exchange can occur between a person and a television program.

Complex chains and complex circular exchanges involve predominantly conscious systems of social and economic relationships. There is overt coordination of activities and expectations in an organized behavioral system. Generalized and complex exchanges are also present in relatively unconscious systems of social and economic relationships.

In order to satisfy human needs, individuals and organizations are engaged in social and economic exchanges with other people in society and organizations. They use different media of exchange. Media of exchange are the vehicles with which people communicate and influence others for the satisfaction of their needs.

These vehicles include media, money, persuasion, inducement, power, punishment, and normative and ethical commitments. Products and services are also another media of exchange. Researchers have done a lot of research on how these vehicles affect the behavior of consumers. They have found out that managers use a lot of these vehicles with socio-physiological context to explain salesman-customer relationships.

But marketing is not only concerned with influencing people’s behavior; it involves satisfying existing needs and wants and anticipating future needs. Take the example of retailers in India; they get into a relationship with consumers, which goes beyond the visible economic transactions.

Human behavior is more than the outward responses or reactions of people to marketing stimuli. Man not only reacts to stimuli or behavior of others but he self generates his own act also. His behavior is purposeful, intentional, and motivated.

He is an information seeker and generator as well as an information processor. Human behavior is a conjunction of meaning with action and reaction. Similarly, the exchange is more than the mere transfer of a product or service for money.

The reasons for such a transfer lie in the social and psychological significance of the experience, feelings, and meanings of the parties in the exchange. Marketing exchanges may exhibit one of the three classes of meanings: utilitarian, symbolic, or mixed.

A utilitarian exchange is an interaction, in which goods are given in return for money or other goods and the motivation behind the actions lies in the anticipated use or tangible characteristics commonly associated with the objects in the exchange.

It is often referred to as economic exchange and most treatments of exchange in marketing implicitly rely on this usage. Utilitarian exchange theory is based on the foundation of an economic man (Schneider, 1974).

It is assumed that:

  • Men are rational in their behavior

  • They attempt to maximize their satisfaction in exchanges

  • They have complete information on alternatives available to them in exchanges

  • These exchanges are relatively free from external influences.

A symbolic exchange refers to the mutual transfer of psychological, social, or other intangibles entities between two or more parties. The symbol is a general term for all instances where experience is mediated rather than direct; where an object, action, word, picture or complex behavior is understood to mean not only itself but also some other ideas or feelings (Levy, 1959).

It assumes that sellers are engaged in an exchange of not just products but also symbols that these products carry, so marketing managers should manage not only the physical production and distribution of the product but also a set of tangibles and the symbolic values it carries. People buy things not for what they can do, but also for what they mean.

According to some, marketing is both utilitarian and symbolic and it is very difficult to separate them. The very creation and resolution of marketing exchanges depend on the nature of the symbolic and utilitarian mix. This has given rise to what we popularly call a a marketing man, which is based on the following assumptions (Bagozzi, 1975).

  • Man is sometimes rational, sometimes irrational.

  • He is motivated by tangible as well as intangible rewards, by internal as well as external forces.

  • He engages in utilitarian as well as symbolic exchanges involving psychological and social aspects.

  • Although faced with incomplete information, he proceeds the best he can and makes at least rudimentary and sometimes unconscious calculations of the costs and benefits associated with social and economic exchanges.

  • Although occasionally striving to maximize his profits, marketing man often settles for less than optimum gains in his exchanges.

  • Finally, exchanges do not occur in isolation but are subject to a host of individual and social constraints: legal, ethical, normative, coercive, and the like.

Social marketing can also be explained in a broader exchange concept. Some are of the view that social marketing is all about the use of marketing skills for social causes. Others refer to social marketing as the study of market and marketing activities within a total social system (Lazer and Kelly, 1973).

It explains how and why exchanges are created and resolved in social relationships. Social marketing attempts to determine the dynamics and nature of the exchange behavior in these relationships. Is there an exchange relationship in social marketing?

Let us answer this question with the following example (Figure ).

Society authorizes the government through its votes and tax payments to provide needed social services such as welfare. In return, the members of society receive social insurance against common human maladies. Government, in turn, pays the salaries of social workers, gives them authority to provide social services, and so on.

It also distributes welfare payments directly to the needy. These transfers make the marketing system one of the generalized exchanges. So social marketing is a subset of the generic concepts of marketing as it deals with the creation and resolution of exchanges in social relationships. Marketing concepts can be explained with the use of different kinds of exchange principles.

  • Tapan K Panda, Marketing Management, Excel Books.

  • Philip Kotler, Marketing Management, Pearson, 2007.

  • V S Ramaswami and S Namakumari, Marketing Management, Macmillan, 2003.

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