Chapter-3 Marketing Functions

Chapter-3
Marketing Functions
This Chapter consists of :
 Introduction to Marketing Functions

 Merchandising Functions: (a) Buying: Nature and elements; Methods of buying (b) Selling:
Nature and Elements of selling.
 Physical Distribution Functions: (a) Transportation: Features and Functions of Transport, Types
or Modes of Transport, Strengths and Weaknesses of Land, Water and Air Transport ; Factors
Affecting in Selecting Mode of Transport. (b) Warehousing : Concept, Functions, Importance and
Types of Warehousing.
 Facilitating Functions : Grading & Standardization, Financing, Risk Bearing , and Market
information.
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Prepared and written by Hem Raj Gurung (Lecturer of Sagarmatha College, Devdaha, Rupandehi)
 Introduction to Marketing Functions:
Marketing Fucntions are specialized activities performed in marketing.They are necessary to take
goods from the place of production to the place of consumption. So , the activities related to the flow of
products from producers to consumers are known as marketing functions. They are the acts, operations,
or services in order to link the original producer and the ultimate consumer. It helps to transfer the
ownership of the product from producer to intermediaries and intermediaries to ultimate consumers.So
Marketing Functions acts as a bridge between producer and user or consumer.
The functional scope of marketing is very wide. Various activities need to be performed in the
process of transferring goods or services from producers to consumers. Different authors and scholars
have different views on marketing functions.
Prof. Pyle has classified marketing functions broadly into two groups: concentrating and dispersing.
Edmund D. Mcgarry has given the list of six marketing functions such as contractual, merchandising,
pricing , propaganda, physical distribution and terminators.
The most widely accepted classifications of Marketing Functions is given by Cundiff and Still. They
classified marketing functions under three major heads: a) Merchandising functions, b) Physical
distribution functions, and c) Facilitating or Auxiliary Functions.
 Merchandising Functions:
Merchandising functions are mainly related with buying and selling of goods and services.
Merchandising function is the systematic planning designed to get the required product to the
market at the right time, at the proper place and in adequate quantity. Merchandising functions
include several activities, which are performed to meet the customer needs perfectly and
making the product available in the market abundantly. Buying and selling are the main
merchandising functions of marketing. So merchandising functions consist of following activities:
Buying:
Buying is one of the important functions of marketing. It is the transfer of ownership
from seller to buyer. Buying is the procurement of goods or services fro eventual resale
to the consumer or industrial user. The individuals, groups, firms or organizations
involved in selling need several things including raw materials and parts to sell them as
finished goods to consumers.
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A manufacturer requires to buy raw materials to produce, wholesaler needs to buy
finished product in bulk from manufacturer, retailers buy required product from
wholesaler and ultimate user or consumer buy finished product from the retailers. So
buying is an essential merchandising function without ti business organization cannot
continue their marketing activities. Effective buying leads to efficient and convenient
selling . So buying should be rational. Buying is also known as procurement, purchasing
or assembling.
According to Condiff and Still: “ Buying is the procurement of goods or services for
eventual resale to the consumer or industrial user “.
Thus, buying refers to the pruchase of raw materials for use in production and the
purchase of finished goods for sale.
Nature of Buying:
The nature of buying can be explained in following points:
Continuous process
Involving
expenditure or cost
Nature of Buying Basis of organizational

operation
Exchange function
Integrated function
Figure: Nature of buying
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1. Continuous process:
3. Basis of orgainazational operation:
a
ti
o
N
g
lin
b
m
e
s
A
Buying is a continuous process. Human needs and wants are never ending. As soon as one need
is fulfilled, another needs and wants are created. Therefore, people continue buying. They buy
goods and services for several motives such as some poeple buy for personal uses, some buy for
manufacturing , some for resale etc.
2. Involving expenditure or cost:

Buying involves payement of certain fees or charges for the acquisition of goods and services.
The charges or fees may be monetary and non-monetary.
Buying is the first step in the process of marketing. Organization requires varieties of goods and
services for the smooth operation.They do not have those goods with themselves . They have to
buy or acquire it from others.
4. Exchange function:
Buying involves transfer of ownership. Producers, wholesalers, retailers, agents perform the
function of exchange. Thus, buying is one aspect of exchange function.
5. Integrated function:
Buying comprises all those activities involved in finding out a suitable source of supply, selecting
the desired quantity,quality, grade and size, and coming to an agreement with reference to
price, delivery date and other condition. So it is an integrated funtion.
Elements of Buying:
Buying is not a guess work. It is a planned activity. Buying should be systematic and rational. The
principal elements or sub-functions of buying are shown in figure below:
A. Planning of Purchase:
On the basis of market information buyers prepare prachase plan. They study customers
needs and wants and identify the products’ quality, quantity, style, design, size and
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shape. Before making any purchase, what to be sell, when to sold, what to buy,where
to buy, how much to buy these things should be planned. Purchase plan is very much
based on market demand. Purchase budget, Turnover, government policies etc should
be carefully considered while preparing purchase plan. Purchase plan carries three
important aspects. They are purchase budget, stock turnover and price change and
buying.
B. Contactual Function:
Buyer has to make good linkage with the suppliers. To make buying, buyers should
search the concerned suppliers. Sutable suppliers should be determined and maintain
the contact with them . While making contact with suppliers, suppliers’ capacity, their
reliability, their reputation, their services, physical infrastructure etc should be
examined.
C. Assembling:
Assembling is different from buying but closely related to it. It is collection of goods
from different places or sources at a convenient place or a centre market at right time.
Assembling is necessary in case of products produced by small producers scattered over
a wide area.
D. Negotiation:
Buying is possible only through agreement. Buying is a mutual agreement where
consent of both parties are essential. So to come to the mutual agreement there should
be proper talk between the parties regarding quantity, quality,price,delivery,mode of
payment,means of transport etc. Negotiation may take place between producer and
middlemen, wholesalers and retailers and retailer and consumers during buying of the
goods and services.
E. Contractual Function:
A contract is a legal form of negotiation. While buying, contract mentioning the rights
and duties of both parties should be made . Contractual function begins once the buyer
and seller agree into the terms and condtions of buying and selling. The contract binds
both buyer and sellers to work according to the agreement.
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Methods or types of Buying
Buying is dynamic activity. There are various types and methods of buying on the basis of quantity and
qualityy of goods to be purchased and on the basis of the number of suppliers of the goods required.
Hence the important types and methods of buying are as follows:
Conservative buying Concentrated buying Buying by inspection
Speculative Buying Diversified buying Buying by sample
Buying by tender Reciprocal buying Buying by description
Contract Buying
Figure: Methods/ Types of Buying
1. Based on Quantity of goods:

On the basis of quantity of goods to be purchased , buying methods can be classified into
conservative buying, speculative buying, buying by tender and contract buying.
a) Conservative buying:
Sometimes buying is made in very small quantity to fulfill the current or emergency
need of business organization, it is known as conservative buying. This is also known
as small order buying, current need buying , hand to mouth buying or economical
buying. For example: housewives are petty buyers, their buying can be called
conservative buying. This kind of buying is not suitable for big orgainzations.
b) Speculative buying:
Sometime price rises or product scarcity can be anticipated. So buying is made in
huge or bulk quantity to be benefitted from the future price rise. This kind of buying
is known as speculative buying. Bulk buying is good for big organizations. There is
heavy discount in speculaive buying. The transportation cost and order cost is
minimum .
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c) Buying by tender:
Manufacturer and large business firms can make buying through the tender notice.
Buyers invites the tenders in written advertisement via national daily or electronic
media providing the full details of the required goods. Various suppliers, if
interested to bid the tender with the suitable price in which they can sell the goods
is compare, analyze and select the suitable supplier. Several agreements of buying
and selling are pre-mentioned in the tneder. Goods are purchased from the selected
suppliers. Generally, Government organizations, non government organizations
and large scale business firms buy through tender. They buy on large scale quantity.
d) Contract buying:
When the goods are required in large quantity and for long period, the buyer can
make a written contract with the supplier. Both buyers and sellers are abided by the
contract. This method of buying is preferred when the price of the product is stable.
2. Based on Number of Suppliers:

Based on the number of suppliers, buying methods can be classified into concentrated
buying, diversified buying and reciprocal buying.
a) Concentrated Buying:
When the goods are purchased from a single supplier or a few suppliers, it is known as
concentrated buying. This method of buying helps to promote intimacy between buyers
and sellers. In this buying, the buyers can get better service and quality goods due to the
close relationship. However, it is very risky to rely on only one or limited number of
suppliers.
b) Diversified or Scattered Buying:

This buying is opposite to the concentrated buying. In this buying , goods and services
are purchased from many suppliers. There are lower prices and attrative services due to
healthy competition among suppliers. There are less chances of facing scarcity of goods
and services. So there is higher selection facility and high chances of enhancing public
relation.
c) Reciprocal Buying:
In this buying, buying is made with the motive to increase the customers. This buying is
based on the principle of “ I will buy from you , if you will buy from me”. Reciprocal
buying was common among organizations producing oil, rubber, chemicals, steel, etc.
So in this buying , a buyer may need some goods that a seller may be able to supply. The
seller may also need some goods that the buyer of his goods may be able to supply. This
leads to the mutual transaction between buyers and sellers.
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3. Based on Quality of Goods:
On the basis of number of suppliers, buying methods can be classified into buying by
inspection, buying by description and buying by sample.
a. Buying by Inspection:
This is a traditional but simple method of buying.. in this method, buyer examines
the whole lot of goods on the spot and makes the buying decision. Demonstration,
exhibition, faire are the suitable places to meet the buyers and the sellers.
b. Buying bySample:
In this method of buying , buyers inspect some of the sample of the product to be
purchased and make a buying decision. A sample is regarded as the representative
of the bulk. This is a time saving method of buying. This method of buying is suitable
when there is distance involved between buyer and seller.
c. Buying by Description:
This method of buying is used in case of big and expensive products whose sample
cannot be easily provided. Therefore, suppliers or producers provide the detail
description of the product in the form of catalogue and brochures.
Selling:
Selling is the important and difficult function of marketing. Marketing is the brain of business and selling
is the heart of marketing. Business success largely depends upon the efficient selling of products. Selling
involves transfer of ownership to the buyers.So marketing activities cannot be complete without selling
function. Simply, selling consists of exchange of a product by a seller with a customer for money. It
involves the transfer of title and possession from the seller to the buyer. But selling has a broad meaning
in this modern world. In case of the modern concept of selling, it must result in satisfaction of the
consumer and profitability for the organization.
According To American Marketing Association: “ Selling may be defined as the personal or impersonal
process of assisting and persuading a prospective customer to buy a commodity or a service or to act
favourably upon an idea that has commercial significance to the seller.”
According To Condiff, Still and Govoni: “ Selling in its broad sense, has the purpose not onlyof making
sales but it is identifying prospective customer, stimulating demand and providing information and
service to buyers.”
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Nature of Selling:
The nature of selling can be explained in following points:
1. Everyone Sells
2. Removes ignorance
3. Selling is both scince and art
4. Selling is profession
5. Selling is descipling
6. Continuous process
7. Exchange of ownership
Explanations and descriptions of above points related with the nature of selling on brief.
1. Everyone Sells : Selling is a pervasive function. Selling activity is performed by everyone. Almost
everyone in business uses certain principles of selling in everday work. Politicians are selling
thousands of dreams and promises to win public vote. Young graduates are sellig their skills and
knowledge to the employers, infants sells emotion to their mothers, young college students sell
convincing ideas to their parents to get their requirements bought.
2. Removes ignorance: Selling requires transmission of information to the public. Unless
customers get adequate information about goods to be bought, they are not motivated to buy.
So, marketers convey several information concerning the product or service. So it helps to
remove the ignorance of the people.
3. Selling is both science and art: The systematized body of knowledge gathered by study,
observation and experiment is known as science. Selling is discipline developed through
contiouous study, observation and practice or experiment. It is not a pure science like physics
mathematics and chemestry with pure result. It is a behavioural science related with human
psychology. Art is a creative fusion of knowledge and skills to generate the desired results.
Salesperson uses various creative ideas,skills, knowledgge, and talents to achieve the objective
of making successful sales. So selling is both science and art.
4. Selling is profession: Profession is defined as an occupation, which involves the activities of
rendering servicee of a special or expert nature. Selling is a profession. Many people are earning
livelihood from selling.
5. Selling is discipline: Very few salesperson are born , but almost of the salespersons are made.
They are made by providing several training, coaching them and teaching them. Thus selling
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considered as the subject matter of study. It is nowadays, taught in school and universitis as a
distinct subject matter of study. Selling is a discipline.
6. Continuous Process: Selling is a continuous process. It is never ending. Selling continues till the
survival of earth and the creatures.
7. Exchange of owership : Selling is concerned with the transfer of ownership. In selling the
manufacturers find out the prospects, persuade them to buy and finally pass the ownership of
the product to the customers.
Elements of Selling:
Selling is a very important function. It is not only making sales but also identifying prospect, stimulating
demand and providing information and services to the buyers. The selling function involves the
following five elements or components. They are as follow:
1. Product Planning and Development

2. Contactual Function
3. Demand Creation
4. Negotiation Function
5. Contractual Function
1. Product Planning and Development:

Selling is always concerned with product. Selling requires something to offer to the customer.
Product is the central point of all marketing activities including selling. For the successful selling
product should be fine enough. Selling acitvities begin with goods or services. Therefore, careful
product planning and development should be done. There should be plenty of time spent in
product planning and development to make the product desirable by consumer. There should
be plannin og product production, brandingg, packaging , labeling , designing and so on.
2. Contactual Function:
Contactual Function is the next step in the process of selling. After the product planning and
development sellers need to establish contact with the buyers. Contactual function is related
with prospecting and locating the potential customers by the sellers. After the recognition of the
potential customers, they should be contacted. The contact can be made directly through
personal meeting, telephone, sales agents, internet, etc or indirectly through agents and
marketing intermediaries.
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3. Demand Creation:
Customers have normal tendency to buy the basic things that are essential to survive including
housing , food and lodging only and resist to buy other things. However, there are production of
several goods and services besides basically needed goods. So , in this case customers should be
stimulated to buy these things. The seller must create desire among customers and convert into
demand. Demand is created through promotional activities such as advertising, sales
promotion, personal selling, publicity and public relation.
4. Negotiation Function:
Buying and selling both requires negotiation . They have to bargain over various factors like
price, quality, quantity, date of delivery, discount allowed, mode of payment and shape and size
of the product. Negotiation may be oral or written. Generally, negotiation may take place
between producer and middlemen, wholesaler and retailers, retailers and consumers.
5. Contractual Function:
A contract is a legal form of negotiation. While selling, contract mentioning the rights and duties
of both parties should be made. Contractual function begins once the buyer and seller agreed
into the terms and conditions of buying and selling. The contract binds both buyer and seller to
work according to the agreement.
 Physical Distribution Function:
Physical distribution is the actual movement and storage of goods and services during the production,
after the production and before the consumption of the product. Physical distribution is the group of
activities associated with the supply of finished product from the production line to the cunsumers.
Physical distribution function include various activities related to storage in godowns and movement of
goods from place to place through various means of transportation. Mainly, Physical distribution consist
of transportation and warehousing function. They are:
1. Transportation
2. Warehousing
Transportation:
Transportation is an important element of physical distribution system, which links geographically
scattered markets and facilities. It links production centre and consumption place. Without the
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transportation , a distribution function cannot be completed. Transportation refers to the movement of
products from the manufacturer’s warehouses to the customer destinations.
Transportation means carrying goods from production centers to distribution centers and to places
where they are required for consumption. Through transportation, products are moved from
manufacturer to customers to meet the needs of widespread customers. There are several mode of
transportations such as rail, truck, air, water way, pipeline and repeway etc.
Features of Transport:
The features of transport can be explained as follow:
1. Creation of Utility:
Goods and services are not sold or consumed in the place of production or origin only. Goods
are of less use if they are not mobilized. Mobility in the product is brought by transportation.
Goods and services become more useful when they are transferred to required place.
Transportation adds place utility in the product. For example: Apples at Jumla have less
importance there but as they are shifted to city areas, they are sold for very good price.
2. Movement:
Transportation makes goods and services mobile from one place to another. Transportation
makes goods and services availble in every nook and corner of the world. For Example: Samsung
mobile phones manufactured in South Korea are availble in every country. It has became
possible because of transport.
3. Develop markets:
The worl today is a single big market. Transporation brings producer, distributor and consumer
into one place. Producers now have access to the global market and it is all because of
transportation.
4. Mode of transportation:
Transportation can take place several modes of transport. There are road transport, air
transport and water transport. Several means are used even in road transport and same in air
and water transport. Marketers can select any mode according to their suitability.
5. Specialization:
Because of transportation, there is a kind of harmony among the different countries. They
produce what they are good for and export them and import the goods and services in which
they do not have resources. This leads to specialization. If there is no transportations, people
need to produce those goods in which they are not capable aslo.
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6. Energy consuption;
All modes of transportation require energy for operation. The energy can be physical, biological,
solar or eclectrical.
7. Encourage industrialization:
Transportation expanded has the market for every product. They help to cross the regional and
national border. Therefore, mass sales are possible and mass production is required. So,
transportation encourages industrialization.
Functions of Transport:
The Functions of transport can be explained as follow:
1. Creation of Utilities:
2. Price stability
3. Expands market
4. Provides employment opportunity
5. Helps in mobility of resources
6. Industrial development
Explanations of above points:
1. Creation of utilities:
Some products have very less value in certain place whereas they are highly desired in other
place. If that product is delivered to the place of demand, its value and uses increases.
Transportation helps to transfer the goods and services from one place to another . it
creates place utility.
2. Price stability:
Transportations helps to supply demand of certain product by collecting from several places
of production. It does not create the situation of shortage and scarcity. So, there is no
frequent rise and fall of priice in the market. Price remains stable in the market.
3. Expands market:
Transportation has made accessible to the every nook and corner of the world. Through
transportation, the producers can sell their products elsewhere of the world. Transportation
helps in expanding market share.
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4. Provide employment opportunity:
Distribution has become the important function of marketing. Several people are engaged in
transportation or distribution function. Large numbers of skilled as well as semi-skilled work
force are required in transportation business.
5. Helps in mobility of resources:
Every coutries of this world have their own resources such as natural resources, human
resources etc. So transportation helps in the better mobilization of these resources.
6. Industrial development:
Industrial development is not possible without proper development of transportation. It is
an important infrastructure for industrialization.
Types/Modes of Transport : (concept and their relative Strengths &

Weaknesses)
There are several types or modes of transport. The main are as follows:
1. Land Transport:
A. Road Transport
B. Rail Transport
C. Pipeline Transport
2. Water Transpot:
3. Air Transport:
1. Land Transport:
Land is the most common route used for transportationl if the surface of earth is used as the
route for moving goods and services, it is called land transport. Truck, car,van , jeep , cart,
porter, animals, etc are themain medium/vehicles used in land transport. It involves road
transport, rail transport and pipeline transport.
A. Road Transport:
Road transport consists of those small and flexible means like animals, porters, carts,
automobiles etc that move on the surface of earth. Among land transport, road transport is
mostly used. It can deliver goods and servies to the door of end consumers. Portars , carts
and animals are the means of transport in hilly and rural areas where ther are no adequate
development of roads, whereas automobiles, especially trucks are the main means of
transport in urban areas.
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Strengths/ Advantages of road transport:
The strengths or advantages of road transportation are explained as follow:
i. Safety:
ii. Economy
iii. Less investment
iv. Easy accessibllity
v. Flexiblility
vi. Easy availability
vii. Suitability
i. Safety: Road transport are safe. They are directly taken and unloaded to the
door of buyers rather than at the mid of road. So there is less chance of loss of
goods and servies. Besides, roads are fixed and stable. Therefore, there is no
frequent risk of storm, sinking, etc like sea routes.
ii. Economy: Road transport is economical since it provides door-to-door services.
It saves labour, cost and time. Road transport charges very nominal fare. It is
very less in comparison to other means of transport.
iii. Less investment: In the preliminary phase of road construction, road
transportation requires heavy investment. Road transport requires less capital
in comparison to other transport because the means ot road transport are small
and require less investment in safety related matters.
iv. Easy accessiblity: Road transport are the general means of transportation. It is
accessible to all level of people. People can enjoy the services of road
transportation with very small amount of budget. It is popular both at rural and
urban part of the nation.
v. Flexibility: Since the means of road transport are small, they can be taken to
any part, street and corner. It is comparatively flexible. Door to door services is
possible due to the flexibility of the means of transportation.
vi. Easy availability: The means of road transporation can be made available
whenever and wherever we require the services.
vii. Suitability: Road transport is suitable for short distances, which are short but
cannot be travelled or delivered by solely human efforts. Road transport covers
short distances in very short time effectively.
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Weaknesses/Disadvantages of road transport:
The weaknesses/ disadvantages of road transports are explained as follow:
i. Risky
ii. Less Capacity
iii. Slow
iv. Irregular schedules
v. Random function and fares
i. Risky: Road transport consist the risk of accident. The road of our country is not
so managed and wide. The roads of hills are very risky. Road accidents are the
daily news in our country.
ii. Less Capacity: The means of road transport are small , so they are not
appropriate to deliver heavy and huge goods and services. For heavy and huge
goods, road transportation becomes more costly and unsuitable.
iii. Slow: The road transports are comparatively slow. They take long time to travel
distance compared to air routes and water routes. So road transport are not
suitable to travel lon distance carrying perishable goods.
iv. Irregular schedules: Generally, road transport does not operate with the regular
schedule. They do not operate routinely.
v. Random function and fares: The fare of road transport is not fixed by the
government . it is determined by the mutual agreement of transporter and the
sender. The fare varies according to the nature of goods , time and transport
operators.
B. Rail Transport:
Rail is the swift,uniform, regular and popular means of land transport. Rail transports are big
and has capacity to carry large,heavy goods in huge quantity. Rail transports are used to
transport coal , chemicals, machiner, petroleum, steel, automobiles, minerals, sand farm
products,etc. Railway transport is widely known for its speed today’s business world. It is
widely used and very popular mode of transportation.
Strengths/Advantages of rail transport:
The strenths or advantages of rail transport are explained as follow:
i. Dependable:
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Rail transport is highly dependable. The greatest advantage of the railway transport
is it operates in its track only. Rail transport is least affected by weather condition
such as rain, fog, etc compared to other mode of transport.
ii. Better organized :

Rail transport has fixed routes and schedules. Its service is more certain, uniform
and regular as compared to other modes of transport.
iii. High speed over long distances:
The speed of rail transport over long distances is more than any other mode of
transport,except airways. Recently developed Bullet train can travel at the speed of
350 km per hour in a very comfortable manner.
iv. Suitable for Bulky and heavy goods:
Railway transport is economical, quicker and best suited for carrying heavy and
bulky goods over long distances.
v. Cheaper Transport:
It is a cheaper mode of transport as compared to other modes of transport. Rail
transport is economical in the use of labour also . Most of the working expenses of
railways are in the nature of fixed costs.
vi. Safety:
Railway is the safest form of transport. The chances of accidents and breakdowns of
railways are minimum as compared to other modes of transport.
vii. Larger capacity:

The carrying capacity of the railways is extremely large. Moreover, its capacity is
elastic which can easily be increased by adding more wagons.
viii. Public welfare:

It is the largest publicc undertaking in the country. Railways perform many public
tility services.
ix. Employment of opportunities:

The railways provide greater employment opportunities for both skilled and
unskilled labour. Railways requires large number of technical and non-technical
sectors for the efficient operation.
Weakness/ Disadvantages of rail tranport:
The disadvantages of rail transports are as follows:
i. Huge capacity outlay:
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The railway requires large investment of capital for land, stations, buildings, railways
tracks etc. The cost of construction, maintenance and overhead expenses are very high
as compared to other modes of transport.
ii. Lack of flexibility:

Another disadvantages of railway transport is its inflexibility. Its routes and timings
connot be adjusted to individual requirements. Travel is limited to its track only.
iii. Lack of Door-to- Door Service:
Rail transport are not linked to the peoples or traders’ home street. It cannot provide
door-to-door service as it is tied to a particular track.
iv. Monopoly:
As railways require huge capital outlay, they may give rise to monopolies and work
against public interest at large.
v. Unsuitable for short distances and small loads:

Railways transport is unsuitable and uneconomical for short distance and small traffic of
goods.
vi. Booking formalities:

It involves much time and labour in booking and taking delivery of goods through
railways as compared to motor transport.
vii. No rural services:

Because of huge capital requirements and traffic, railways cannot be operated
economically in rural areas.
viii. Under- utilized capacity:

The railway must have full load for its ideal and economic operation. As it has a very
large carrying capacity, under-utilization of its capacity, in most of the regions , is a
great financial problem and loss to the economy.
C. Pipeline Transport:
Pipeline transport is a method of transportation in which liquid, gaseous, or solid products
are moved over long distances through pipelines. Water , petrol, oil, gas , chemicals and
other fluids including slurry and beer are transported through pipeline transport. It is useful
fro transporting drinking or irrigation over long distances .
Strengths/Advantages of pipeline transport:
The advantages of pipeline transport are as follows:

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i. Best suited for liquid and gas:
Pipelines are best suited to transport liquid and gases from the point of origin to
point of consumption. These matters can be flowed through pipes easily.
ii. Less obstacles:

Pipelines can be laid almost everywhere through terrains as well as under
water.
iii. Less operating cost:
It involves very low energy consumption. Liquid materials like- water, oil ,
gas,etc can be transported at a lower cost through pipeline.
iv. Less noise and pollution:
Pipelines do not need to operation of engines. So, transportation of liquid
through pipeline is not noisy and does not cause pollution.
v. Safety:
Pipelines are safe. There is no chance of accident due to pipelines. They are safe
from the point of environment also.
Weaknesses/ Disadvantages of pipeline transport:
The disadvantages of pipeline transport are explained as follow:
i. Not flexible:
Pipelines are not flexible. They can deliver the goods only to the place where the
pipes are fixed. They cannot deliver the goods to the door steps of customers.
ii. Risky:
Pipeline transportation is risky from several aspects such as there is leakage
problems of petroleum in sea and lake area causing damages of health and
wealth of the people surrounding.
iii. Inconvenient:
Underground pipelines are inconvenient to conduct future necessary
maintenance. They cannot be easily repaired and detection of leakage is also
difficult.
iv. Limited delivery:

Pipeline transport is applicable to deliver liquid products and some gaseous
products. It is not suitable for products in solid forms.
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2. Water Transport:
Water transport denotes to movement of goods and services from one place to another through
water or aquatik route rather than land and air route. Water transport is the process of moving
people, goods etc.by boat, ship or sailboat over a sea, ocean, lake, canal, river etc. Water
transport is cheapest and oldest mode of transport. Water transport is operated in river, canal
and sea areas.
Strengths/ Advantages of Water Transport:

The main advantages of water transport are as follows:
i. Low cost:
Rivers, seas and canals are natural paths which do not require any cost of construction
and maintenance. There is a very little cost of construction and maintenance of cannals.
ii. Larger Capacity:
Larger transport has greater capacity. It can carry much larger quantities of heavy and
bulky goods such as coal, business products, etc.
iii. Flexible Service:
Water transport has no fixed routes. It provides much more flexible service than
railways and can be adjusted to individual requirements.
iv. Safety:
There is very less chances of accident in water transport except in case of natural
disaster. It is just like travelling in Terai part of nepal.
v. Bilateral Relation:
Water transport has played a very significant role in bringing different parts of the world
closer and is indispensable to foreign trade.
Weaknesses/ Disadvantages of water transport:

The main disadvantages of water transport are as follows:
i. Slow:
Water transports are comparatively slower than other means of transports.
Speed of water transport is very slow and therefore this mode of transport is
unsuitable where time is an important factor.
ii. Limited Area of Operation:
Water transport are can be used only in a limited area which is served by deep
canals and rivers. There is very limited use of water transport in countries like
Nepal which is not linkedd by sea.
iii. Seasonal Character:
Rivers and canals cannot be operated for transportation thoughout the year as
water may freeze during winter or water level may go very much down during
summer .
iv. Unreliable:
20
The water transport by rivers is unreliable. Sometimes the river changes its
course which causes dislocation in the normal route of the trade. Because of
natural resistance, journeys are postponed .
v. Risk:
Water transport is risky from natural disasters like typhoons, hurricane, tides,
seastorm etc. Besides , there is the fear of sea pirated also.
3. Air Transport:
Air transport is the fastest means of transport. Air transport is a method of transportation by
which passengers, mail and cargo are conveyed by air. Air transport has transfigured the world
into a small town with the accessibility of every nood and corner at any time. It provides very
comfortable travelling. It is the most expensive form of transportation. This means of transport
is suitable to valuable, light and perishale goods.
Strengths/Advantages of air transportation:

i. Speed:
The advanced means of air transport can make a round of earth in 24 hours. It is very
useful to make an emergency and long distance in short time.
ii. Short route:
Straight line is the shortest to join two points. Planes travel straightly. It does not need
to make turn and twist according to the form of roads.
iii. Natural way:
Air transport requires constructing runways and airports. Air Transport does not need
to construct any route. It does not need to construct any path in air. Sky is the natural
path for air transport.
iv. International relationship:
Air transport has made different countries from different part closer and their
relationship harmonized. Air transport has played a very significant role in unifying the
countries in the world.
v. Tourism promotion:
People from different countries find tour and visit very easy and comfortable because of
air transport. Tourism has developed as an industry in several countries as the number
of tourists has increased.
Weaknesses/Disadvantages of air transportation:

The main disadvantages of air transport are as follows:
21
i. Seasonal effect:
Air transport is very sensitive towards weather. Opeation of air transport is affected by
storm, heavy rain, fog etc.
ii. Costly:
Air transport is very costly. It is not accessible to the people of all level and class. High
construction and operation cost makes the air transport expensive.
iii. Depends on other means of transport:
Air transport cannot be operated in general road excepts in sky or runways. So their
operation is limited from one airport to another. They cannot transport service from
door to door of the customers. Goods from seller’s warehouse need to be taken by
other means of transport to the airport and from airport to buyer’s warehouse.
iv. Limited capacity:
Air transport has limited capacity. If the luggage is overloaded it can lead to accident or
air transport becomes uncontrolled. Air transport has lesser capacity than rail or ship
transport. So it is not suitable for huge and heavy goods such as machine, automobiles,
steel etc.
Factors affecting in Selecting Mode of Transport:
There are several means of transport. Marketers have a wide choice in the selection of a mode of
transport. Each mode of transport has its own merits and demerits. In some circumstances, water
transport may be preferable rather to road transport and vice versa. So right means of transport should
be chosen in right situation with rational judgement. Marketers have to consider carefully the following
points to choose the right mode of transport for right product: speed , cost, flexibility, suitability,
regularity, safety and availability.
a. Speed:
At the time of emergency and in the case of perishable product speed should be considered
while selecting the mode of transport. Air transportation if the fastest means, whereas ships are
slow. Modern railways also possess higher speed.
b. Costs:
Cost for transportations make any goods and services expensive. Transportation cost plays an
important role in commerce. If the business organization desires to reduce the distribution cost
22
cheap and economical means of transportation like road transport, railways etc can be used. Air
transport is the most expensive and ship/railways is the cheapest in view of cost.
c. Capacity:
Capacity is a great concern while selecting the mode of transportation. Before selecting any
means the quantity of the goods shoud be considered.Rail and ship are better modes of
transportation for carrying large amount of quantity.
d. Flexibility:
Transport should be flexible. Road transportation consists of higher flexibility. It can reach every
nood and corner of the world. It can provide door to door service. Other means of
transportation has bounded by fixed routes and schedules.
e. Suitability:
Means of transport should be suitable to the organizatoin and goods and services. If the goods
are of perishable nature, air transport is suitable. It the goods are heavy and of bulk quantity
ship and railways are appropriate.
f. Regularity/ Frequency:
The mode of tranport should be regular. Rail transport is comparatively dependable than others,
whereas air transport has inerrupted schedule.
g. Safety:
Safety is also a predominant concern while selecting the mode of transportation. Road
transportation in the road like our country is considered risky. Means of transport should be
safe and dependable.
h. Availability:
Availability is the next factor which affects the selection of the mode of transportation. In
Nepal ,ship and railways are not available.
Warehousing
Concept of warehousing:
A warehouse is a commercial builidng for storage of goods. Wareshouses are used by manufacturers,
importers,exporters, wholesalers, transport businesses, customs ,etc. There are large plain buildings
where goods are stored, for a certain period until the delivery of market for the timely supply to the
customers. Warehousing is the performance of administrative and physical functions associated with
storage and assortment of goods and materials. It creates time utility in the product. It is a important
function of physical distribution. It protects goods safe until it is not distributed to the final consumers.
So warehousing protects the product from the production place until the consumption place and also
23
helps demand assessment. Similarly, it performs others important fucntions such as assembling, bulk
breaking, storing, packaging and shipping.
Wareshouse performs not only storage function but also it emphasizes on the different activities which
are taking the orders, filling the order through the help of packaging and shipping and quickly deliver the
product to the consumers.
Functions /Importance of Warehousing:
Warehousing is a very important distribution function. The importance or functions of

warehousing can be explaines as follows:
1. Regular production:
Warehouse help to store produced goods. Produced goods are not immediately
consumed by the consumers. Those goods should be properly arranged at certain
reliable palce. It they are not managed, it will interrupt the production function. So ,
for the regularity of the production appropriate wareshouse is required.
2. Regualar supply:
Some products have seasonal effects. Their production is possible in large volume in
that season only. Products scuh as agricultural product, bicks, etc are produced in
one season and they have demands in every time. Warehouse helps these products
to store safely to supply them when they are demanded.
3. Price stability:
Unbalanced distributiion of goods fluctuate the price. If the demand is higher than
supply, price goes up and if the supply is higher than demand price goes down.
Warehouse stores the goods when there is less demand for the product and balance
the demand and supply. This helps to stabilize the price of the product in the
market.
4. Creation of utility:
Goods have lesser value at the time when they are produced and available in
abundant quantity. Some products are produced in certain seasons only but they are
demanded for whole year. If goods are stored safely, it can be distributed any time
with higher value. So warehouse adds time utility in business products.
5. Protection:
Goods produced are affected by several factors such as pest, seasons, rodents, theft,
fire,etc. They should be stored in fine place to protect against these factors.
Warehouse protects goods from these factors.
6. Storage:
24
Storage is the basic function of warehousing. Surplus or exceeded product or
commodities which are not immediately needed can be stored in warehouse. They
can be stored until they are needed by the customers.
7. Risk bearing:
When the goods are stored in warehouses they are exposed to many risk in the form
of theft, deterioration, exploration, fire, etc. Warehouses are constructed in such a
way as to minimize these risks.
8. Financing:
Loan can be raised from the warehouse keeper against the goods stored by the
owner. Goods act as security for the warehouse keeper. Similary , banks and other
financial institutions also advance loans against warehouse receips.
Types of Wareshouse:
There are three types of warehouse. They are as follows:
1. Private warehouse
2. Public warehouse
3. Bonded warehouse
1. Private Warehouse: Privated warehouses are owned , managed and controlled by a single
person or the big business organizations for their sole use purpose. Several marketing
figures such as producers, wholesalers and agents have their own warehouses. They build
thes warehouse at their convenient place which is easily accessible too.
The private warehouse are owned and operated by big manufacturers and merchants to
fulfill their own storage needs. Warehouse construction requires heavy investment.
2. Public warehouse: A public warehouse is a specialized business establishment that provides

storage facilitis to the general publice for a certain charge. Public warehouses are the
commercial warehouse which is managed by several members or public such as individuals,
organizations or public bodies such as VDC, municipalities, Transport authorities or
government according to the relevant rules and laws of the country.
Public warehouses are very important in the marketing of agriculture poducts. A public
wareshouse is also knowns as duty-paid warehouse. Public warehouses provide storage
facilities to small manufacturers and traders at low cost. Public warehouses generally
located near the junctions of railways, highways and waterways.
25
There are three types of public warehouses as follows:
a. General commodity warehouse: Gneral commodity warehouse is built for genral
durable goods, such as rawmaterials , finished and semi-finished goods. It is used by all
kinds of people like general people, wholesalers, producers, agents , retailers etc.
b. Special commodity warehouse: it facilitats special place or room for each kind of
pruducts according to their nature. They are for special kinds of commodities like
chemicals, fertilizers, pesticides and insecticides, petroleum, fuel, gas, tea and coffee,
tobacco, sugar, jute, grains, wool, cotton, etc require seperate and exclusive kinds with
special facilities.
c. Cold- storage warehouse: This is the warehouse with freezing facilities. These kind of
warehouses are required for perishable items like vegetables, fruits, meat products,
deiries etc.
3. Bonded Warehouse:
Bonded warehouses are use to store imported goods, before the payment of duties. They
are genrally situated at the border, airport and harbor . Custom authorities usually own thes
warehouses and their opeartion and supervision is organized under the government.
Bonded warehouses are licensed by the government to accept imprted goods for storage
until the payment of custom duty. Bonded warehouses are very helpful to importers and
exporters.
 Facilitating Functions:
Grading:
Grading refers to the process of separating the products according to established standards. Eah grade
has uniformity in all attributes. In other words, grading is the process of dividing products into lots which
have same or similar characteristics as to types, size, shape, weight, quality, perforamance, etc. It is very
common in spices, food grains, fruits, milk products, petroleum producst and other agriculture products
according to their size, quality, colour, taste, strength, contents.
Duddy and Revzan: “ Grading is the use of standard for sorting upgraded products into lots that are
similar in variety, size and quality, etc.”
Clark and Clark: “ Grading means the division of product into classes made up of units processing similar
characteristics of size and quality.”
26
Thus, grading is the act of sorting out products into lots of uniform shape, size, texture, colour and
weight. Each unit in the grade is of similar nature, characteristics and quality. Grading is based on
standardization. So grading is the task of dividing goods on the basis of standardization. It is the act of
separating or inspecting the goods according to the established specifications.
Standardization:
Standardization is the process of setting generally uniform characteristics for a particular goods or
services. Standardization is conformity to certain specification. Standardization denotes that products
are identical in terms of quality and description and conform to predetermined level.
To produce or manufacture products according to the standard fixed through various scientific
experiment is called standardization. It assures quality and promotes uniformity of products. Standard is
a measure that is generally accepted as having a fixed value. All the products either agriculture or
finished nedd standardization for entering into the market.
Duddy and Revzan: “ standard is a measure that is generally accepted as having a fixed value.”
Touslay, Clark and Clark: “ Standardization is the general term which includes the establishment of
standards for products, the inspection of products in order to determine the standards to which they
conform, and wher necessary the loting of products into lots conforming to establish standards.”
Thus, standardization means setting standard of quality. It assures quality and promotes uniformity of
produts. It also widens the market of the product. In actual practice various standar forms are used by
the marketers for their products such as ISO, NS marks, Eco-labels etc.
Elements of standardization;
Standardization as a marketing function contains various elements:
1. Fixing standard
2. Grading
3. Inspection
4. Labeling
Explantions of above
1. Fixing standard:
Standard is a measure that is generalyy accepted as having a fixed value. Anything serving as
a basis of comparision is called a standar. A standard is fixed through various sccientific
experiments. The standard may be based on number of facotors i.e. predetermined
27
characteristics, such as color, quality, weight, shape, sweetness, strength etc. So a standard
conveys the idea of uniform quality or measuremeng. While fixing standards, proper care
should be taken.
2. Grading:
Grading is the act of separating or inspecting the goods according to the established
specifications. It is the process of dividing products into lots, which havve same or similar
characteristics to type, size , shape,weight, quality and performance.
3. Inspection:
Inspection is a formal or official examination . inspection aims to check the products in order
to determine the ccharacteristics. Inspection is necesary to find our the effectiveness of
grading. In case of manufactured products, a sample of finished product is inspected.
4. Labeling:
A label is he part of a product mix that carries information about the product. Labeling is
used on package to provide instruction, contents, certifications or manufacturer
identification. Laels can perform both informative and promotional functions. Label
describes the specialties of the product. It helps a buyer to get what he needs.
Bases of Standardization:
The bases for standardization are as follows:
1. Basis of quantity
2. Basis of quality
3. Basis of size
4. Basis of color
5. Basis of service
6. Basis of price

1. Basis of quantity:
Products can be standarized on the basis of quantity or measuring units such as unit, kg,
liter, meter,feet, acre,etc.
2. Basis of quality:
Product standards are generally based on quality of the product. Different standard of
quality can be determined for the same purpose according to the class and level of product.
Product can be categorized as best quality, medium quality and lower quality on the basis of
quality.
3. Basis of size:
28
Products standard can be determined on the basis of size also. Clothes, nails, television,
shoes, bangles are standardized on the basis of size. Small size, medium size, large size,
extra size, etc. are the basis of size standard.
4. Basis of color:
Some products can be standardized on the basis of color. The standard of products like yarn,
fruits,vegetables, etc are determined on the basis of color.
5. Basis of service:
Some times service provided by the products can be taken as a basis for standarization.
6. Basis of price:
Standardization can be done based on prices. For example high priced, medium prices and
low prices products.
Importance of Standardization:
Standardization simplifies and enhances the marketing efficiency. It secures consumers by assuring
product quality and performance in uniform manner. Standardization provides basis for comparison.
The importance of standardization can be discussed from following points:
1. Simplified buying and selling

2. Protection
3. Fair price
4. Consumer satisfaction
5. Product information
6. Loan facility
7. Reduces cost of marketing
8. Increases goodwill
1. Simplified buying and selling:

Standardized products can be bought and sold by the study of sample, description or by
grade name. There is no waste of time in inspecting the whole products by the consumers.
2. Protection:
Consumers can purchase the standardized products without any skepticism since
standardization assures quality and uniformity in a product.
3. Fair price:
The price of standardized products is determined on the basis of quality, measurement and
quantity of the products. As such products have uniformity in price in the market and
consumers can purchase required products comparing the prices. Thus, standardization
assures products of standard quality to consumers at a fair price.
4. Consumer satisfaction:
29
Standardized products meet several expectations of consumers. They consist a basic
requirement a consumer expects in a product. So, standardization helps in satisfying
consumers.
5. Product information:
Standardized products are heavily promoted in media, which help in transferring messages
of the product to the general consumers. Standardized products convey messages regarding
prices, quality, product features, durability, comparative advantages of competitive prodcts
and so on.
6. Loan Facility:
Standardization helps product to do valuation of the product and the organization.
Standardized products and the organizations are easily accepted in the financial
organization. Standardized products are trustoworthy products. They are easily accepted by
financial institutions as collateral.
7. Reduces Cost of Marketing:
Standardized products are accepted by consumers easily. They do not require too much
promotional cost. Since, standardized products are sold easily they do not require high
warehouse cost.
8. Increases Goodwill:
Standardized product delivers pure satisfaction without any complaint. This increases the
loyalty of consumers toward product and producer. Thus, the goodwill of seller and
manufacturer of such standard product increases.
Financing:
Financing is the act of providing or raising funds or capital for business activities, making purchases or
investing. For the operation of marketing activities, marketers own resources often prove inadequate.
Therefore, for the successful operation of business, marketers need to raise or borrow on long term,
medium term and short term in order to finance their business activities. Finance should be in
accordance to the objectives of the business. Both over and under finance are risky for the business
organization. Under finance causes loss of opportunities and over finance makes the fund idle. Financial
institutions and banks are in the business of financing as they provide capital to businesses, consumers
and investors to help them achieve their goals.
Finance is required at every phase of marketing. So, it is considered as the life blood of
marketing. Finance is required from the initial stage of establishment to the stage of production and
distribution. Sufficient finance is the key to business success.
Financing is an important facilitating function of marketing. Several organizations are involved in

the business of financing. Banks, finance companies, micro-finance, co-operative organizations, etc are
the major sources of financing.
30
Risk Bearing:
Business consists of several risks like change in technology, change in demand, increase in competition,
price fall, change in consumer preferences, threats of natural calamities, theft, accidents, fire, etc. To
overcome these risks leads to business success. Risk is uncertain concerning the occurrence of possible
loss.
Risk is indispensible factor of business. So, they cannot be eradicated totally from the business but they
can be managed or minimized through proper marketing management. In business, there are
organizations like insurance companies involved in facilitating risk bearing marketing function. Insurance
companies take the responsibilities of some of the risk on the payment of certain premium on regular
time interval.
Some of the risks likes fall in price, change in demand and buyers preferences are not transferable to
insurance companies. Those risk should be properly handled and managed or minimized by the
marketers themselves and some risks in business are unavoidable.
Market Information:
Market information is very important source in marketing management. It is necessary to ascertain
specific items that are feasible and possible to be produced and marketed. Taste and preferences of
existing and potential consumers are also necessary to be ascertained. Market should be assessed on
quantitative and qualitative basis for various areas not only within the country but also outside the
country. Reasonable prices should be fixed. Distribution network has to be planned and built up.
Warehousing requirements should be estimated. Decisions are necessary to be made on all these
matters. Research and market information is the basis for such decision making. Proper decision on
these matters can be made only on the basis of market information. Hence, marketing information is
also an important facilitating function of marketing.
Marketers are growing and expanding every time. They need more information more quickly to make
better decisions. Any numerical facts, records, documents related to past and present which can be used
in future decision making that is related to market is known as market information.
There are various sources of market information such as internal record, bulletins published by various
business related organizations, periodic publications of Nepal Rastra Bank, business journals, trade
associations, consumers’ associations, government report, etc .
The importances or needs of market information are for planning, implementation of planning,
controlling of performances of marketing programs, environmental adaptation, helps in segmentation,
increase efficiency and decision making etc.
31
End of the Chapter- 3
32

Chapter-3 Marketing Functions

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Chapter-3 Marketing Functions

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Chapter-3

This Chapter consists of :

 Introduction to Marketing Functions

Nature of Buying Basis of organizational

Figure: Nature of buying

3. Basis of orgainazational operation:

2. Involving expenditure or cost:

Conservative buying Concentrated buying Buying by inspection

Speculative Buying Diversified buying Buying by sample

Buying by tender Reciprocal buying Buying by description

Figure: Methods/ Types of Buying

1. Based on Quantity of goods:

2. Based on Number of Suppliers:

b) Diversified or Scattered Buying:

The nature of selling can be explained in following points:

1. Product Planning and Development

1. Product Planning and Development:

 Physical Distribution Function:

The Functions of transport can be explained as follow:

Explanations of above points:

Types/Modes of Transport : (concept and their relative Strengths &

The weaknesses/ disadvantages of road transports are explained as follow:

Explanations of above points:

ii. Better organized :

vii. Larger capacity:

viii. Public welfare:

ix. Employment of opportunities:

The disadvantages of rail transports are as follows:

i. Huge capacity outlay:

ii. Lack of flexibility:

v. Unsuitable for short distances and small loads:

vi. Booking formalities:

vii. No rural services:

viii. Under- utilized capacity:

Strengths/Advantages of pipeline transport:

The advantages of pipeline transport are as follows:

ii. Less obstacles:

Weaknesses/ Disadvantages of pipeline transport:

The disadvantages of pipeline transport are explained as follow:

iv. Limited delivery:

Strengths/ Advantages of Water Transport:

Weaknesses/ Disadvantages of water transport:

Strengths/Advantages of air transportation:

Weaknesses/Disadvantages of air transportation:

Factors affecting in Selecting Mode of Transport:

Functions /Importance of Warehousing:

Warehousing is a very important distribution function. The importance or functions of

2. Public warehouse: A public warehouse is a specialized business establishment that provides

Explanations of above points:

1. Simplified buying and selling

Explanations of above points:

1. Simplified buying and selling:

Financing is an important facilitating function of marketing. Several organizations are involved in

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