Exchange, the core of marketing, involves obtaining a desired product from someone by offering something in return. For exchange potential to exist, five conditions must be satisfied:
1. There are at least two parties.
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.
Whether exchange actually takes place depends upon whether the two parties can agree on terms that will leave them both better off (or at least not worse off) than before. Exchange is a value-creating process because it normally leaves both parties better off.
Note that exchange is a process rather than an event. Two parties are engaged in exchange if they are negotiating—trying to arrive at mutually agreeable terms. When an agreement is reached, we say that a transaction takes place.
A transaction involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement. Usually a legal system exists to support and enforce compliance among transactors. However, transactions do not require money as one of the traded values.
A barter transaction, for example, involves trading goods or services for other goods or services. Note also that a transaction differs from a transfer. In a transfer, A gives a gift, a subsidy, or a charitable contribution to B but receives nothing tangible in return.
Transfer behavior can also be understood through the concept of exchange. Typically, the transferer expects something in exchange for his or her gift—for example, gratitude or seeing changed behavior in the recipient. Professional fund-raisers provide benefits to donors, such as thank-you notes. Contemporary marketers have broadened the concept of marketing to include the study of transfer behavior as well as transaction behavior.
Marketing consists of actions undertaken to elicit desired responses from a target audience. To effect successful exchanges, marketers analyze what each party expects from the transaction.
Suppose Caterpillar, the world’s largest manufacturer of earth-moving equipment, researches the benefits that a typical construction company wants when it buys such equipment. One of Caterpillar’s marketing tasks is to discover the relative importance of these different wants to the buyer.
As the marketer, Caterpillar also has a want list. If there is a sufficient match or overlap in the want lists, a basis for a transaction exists. Caterpillar’s task is to formulate an offer that motivates the construction company to buy Caterpillar equipment.
The construction company might, in turn, make a counteroffer. This process of negotiation
leads to mutually acceptable terms or a decision not to transact.
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