This book has been compiled by Vipin MK
Marketing is what connects producers and consumers. It brings about a mechanism where
there is an exchange of goods and services for money or money equivalent. It creates
consumer satisfaction and brings revenue to the manufacturers / producers.
Marketing involves all activities in creation of place, time, possession, and awareness
Marketing concept is the way of life in which all the resources of an organization are
mobilized to create, stimulate and satisfy customers at a profit. It is future oriented,
customer oriented, value oriented and profit oriented. It applies modern management
practices to all sales, distribution and other marketing functions. Marketing concept makes
a company manufacture only which it can it sell.
Evolution of Marketing Concept
1. Production Orientation Philosophy: till 1930s, it was believed that a good product,
provided the price was reasonable always means that there is an automatic
consumer response and leads to good sales. There were little or no promotion
requirements. The assumptions of this concept are:
i) Anything produced can be sold
ii) Cost of production should be low and must be maintained so by the
iii) The company must produce only basic products.
2. Sales Oriented Philosophy: the failure of the Product oriented philosophy in the
1930s led to the sales oriented philosophy in the 1940s. It said that even the best
product made by a firm requires some aggressive salesmanship. This philosophy
holds good even today. Effective promotions, advertising and public relations are
very important. The assumptions of this are as follows:
i) Producing best possible product
ii) Finding a buyer for the product
iii) Goal of the management is to convince the buyers.
Product Promotion Sales
3. Customer orientation philosophy: It was brought in during the 1950s and points out
that the fundamental task of a business is to study and understand the needs, wants,
desires and values of potential consumers and manufacture goods that satisfy the
needs of the consumers. This represented a move from ‘Caveat Emptor’ and ‘Caveat
Vendor’. The process starts with the consumer and ends with the requisite product.
The assumptions of the theory are:
i) The firm should produce the product desired by the consumer
ii) The management must integrate all its activities and direct them to develop
programs that satisfy consumer wants.
iii) Management is guided by long term profit goals rather than quick sales.
Customer Research Product Promotion Sales
4. Social Orientation Philosophy: This is a further refinement of the above concept that
came about in the 1970s and 1980s. The new concept goes beyond understanding
the consumer needs and matching products accordingly. This concept introduces the
idea of social welfare. Social welfare included improving the quality of human life
and the environment. The assumptions are:
i) The firm should produce the product desired by the consumer
ii) Management is guided by long term profit goals rather than quick sales.
iii) Management must integrate all its activities and direct them to develop
programs that satisfy consumer wants and social welfare as well.
Customer Research R&D Product Promotion Sales
Approaches to the study of marketing
1. Commodity Approach: focuses on the flow of a commodity from the producer to the
final customer. In such a study, we can locate the centre of production, people
engaged in buying and selling the product, problems in financing it and storage.
Through this approach we can find the differences in marketing producers, services
and problems. Marketing of agricultural products represents this commodity
2. Functional Approach: Here we focus on the attention on specialized services or
functions or activities performed by marketers. The study of marketing functions like
buying, selling, risk bearing, transport, financing and providing information
represents the functional approach.
3. Institutional Approach: In this we focus on the marketing institutions or agencies
such as wholesalers, retailers, transport undertakings, banks and insurance
companies. The study is to understand how these business institutions and agencies
4. Managerial or Decision Making Approach: It is of recent origin and combines the
above 3 approaches. Focus is on underlying concepts, decision influencing factors,
alternative strategies and techniques of problem solving.
5. The Systems Approach: A system is a set of interacting or interdependent groups that
are organized to accomplish a set of objectives.. This approach consists of:
a. Objective – Direct the process
b. Inputs – are processed into outputs
c. Processor – Refers to the unit that converts inputs into outputs
d. Outputs – finished products and services
e. Feedback – gives information on internal and external sources that bring future
1. Marketing is consumer oriented process: marketing satisfies the needs of the
consumer. It is important the organization finds the needs of the consumer and post
that it manufactures goods that satisfy the consumer’s requirements.
2. Marketing starts and ends with the consumer: marketing begins even before
production. In a consumer oriented marketing, one must understand what the
consumer wants; this is done by way of gathering information from the consumer
regarding their tastes, preferences and habits.
3. Marketing is the guiding element of a business: modern marketing is a function of
directing towards economic development. It involves various activities which are
integrated to reach the consumer fast and with minimum cost.
4. Marketing is a system: Marketing is a dynamic process involving a set of inter-related
and interacting activities that aim at reaching the consumer. Using information from
customer it aims at making desired products and services that satisfy the needs of
5. Marketing is a goal oriented system: marketing seeks to achieve a useful goal like all
other businesses. The basic aim of marketing is to achieve consumer satisfaction and
gain considerable amount of profit from the same. This has enabled many
organizations to direct their goals to social responsibilities to a very large extent.
6. Marketing process is an exchange: Goods and services are exchanged between
buyers and sellers. Customers are the buyers and organizations are the sellers. Off
late, the other exchange seen here is that information is also transferred between
buyers and sellers. Information is power and is the foundation on which the
organization’s success depends on.
7. Marketing is a process: Marketing is a function that involves various processes to be
performed in order. Each activity is related to the other in the cycle. The process
should also be flexible. Changes in social and environmental factors influence
marketing process and hence one must keep an eye out for such changes and adapt
The importance of marketing is as follows:
1. Helps in realization of the objectives for which the organization has been set up.
Marketing is essential for the survival and growth of the organization.
2. Helps the community satisfy their economic and social needs and thus raise their
standard of living. It ensures better standard of products and services for the
consumers and helps the enterprise to fulfil its social responsibilities.
3. Activates the production and consumption chain. It helps in an efficient and
productive utilization of resources both human and materials, eliminating wastages.
4. It helps the enterprise to adapt to the changing conditions and circumstances.
5. Provides guidance to the organization on the innovations to be adopted, and face
6. Helps enterprise in achieving maximum efficiency in production and profitability with
minimum effort and cost.
7. Ensures economic growth of the enterprises which results in growth and economic
development of the country.
Markets and Different Goods Available
A market is defined as a place which consists of an aggregate demand for products and
services. It is an area for potential exchanges, where groups of buyers and sellers are willing
to exchange goods or services for something of value.
These exchanges may take place in a specific location or through middlemen, telephone,
paper correspondence etc. There is an element of competition among sellers of these goods
and services. There is also market information, legal controls and regulation of fair trading.
These days, we have ‘Supermarkets’ which are large, low cost, low margin, high volume self
service businesses that are designed to serve the complete needs of a customer’s related to
food, laundry and household.
The different types of goods sold in the market are:
a. Convenience: Goods which are easily available to consumer, without any extra effort
are convenience goods. Mostly, convenience goods come in the category of
nondurable goods such as like fast foods, confectionaries, and cigarettes, with low
value. The goods are mostly sold by wholesalers to make them available to the
consumers in good volume.
b. Shopping goods: In shopping consumer goods, consumer do lot of selection and
comparison based on various parameters such as cost, brand, style, comfort etc,
before buying an item. They are costlier than convenience goods and are durable
nature. Consumer goods companies usually try to set up their shops and show rooms
in active shopping area to attract customer attention and their main focus is to do
lots of advertising and marketing to become popular.
c. Speciality goods: Goods which are very unique, unusual, and luxurious in nature are called
specialty goods. Specialty goods are mostly purchased by upper-class of society as they are
expensive in nature. Brand name and unique and special features of an item are major
attributes which attract customer attraction in buying them.
d. Durable goods: Goods which have long life span and usage period are called durable
goods. Examples: Furniture, Kitchenware, Consumer Electronics
e. Consumer goods: are final goods that are brought from retail stores to satisfy the
needs and wants of human being. The consumer goods come in wide variety of
product range. Examples: Foods, Stationary
Grading of Goods
Goods are standardized into different classes, and are referred to have been graded; grading
allows further standardization of goods. The goods are divided into products of varying
quality, size etc.
Importance of marketing in Economic Development
Marketing plays a vital role in economic growth in the present global world. It ensures the
planned economic growth in the developing economy where the scarcity of goods, services,
ideas and excessive unemployment, thereby marketing efforts are needed for mobilization
of economic resources for additional production of ideas, goods and services resulting in
greater employment. The following are the ways in which marketing fosters economic
a. Marketing stimulates the aggregate demand thereby enlarges the size of market.
b. Marketing in basic industries, agriculture, mining and plantation industries helps in
distribution of output without which there is no possibility of mobilization of goods
and services which is the key point for economic growth. These industries are the
back bone of economic growth.
c. It also accelerates the process of monetizing the economy which in turn facilitates
the transfer of investible resources.
d. It helps in discovery of entrepreneurial talent.
e. Intermediate industrial goods and Semi-industrial products etc. essentially marketed
for industrial purpose in order to develop the industrial sector with a view to
f. In Export trade and services like tourism and baking marketing plays eminent role in
order to grow the economy.
Now days economic and social changes are necessary for bring about the development of a
nation. Social changes are brought about in a planned manner through social marketing
Social marketing can be defined as the design, implementation and control of programmers
calculated to influences the acceptability of social ideas and involving consideration of
product planning, pricing, communication, distribution and marketing research.
a. Difference between selling and marketing
Focuses on the needs of the seller Focuses on the needs of the buyer
Preoccupied with seller’s need to Preoccupied with idea of need to
sell the product and obtain cash satisfy the needs of the customer
The main aim of selling is to earn Aims at earning profit through
profit by maximizing sales customer satisfaction.
Management is sales volume Management is focused on retaining
oriented customers for long term profit.
Views business as a goods Views business as consumer satisfying
producing process process.
b. Difference in traditional concept and modern concept
It is one of the oldest concepts of Also known as customer oriented
marketing focusing on guiding concept. It is a business philosophy
sellers that challenges previous concepts.
Consumer will favor products that The key to achieving the
are good in quality, performance organizational goals is to determine
and innovative features. That is needs and wants of target markets
good products always result in good and deliver the desired satisfactions
sales. more effectively and efficiently
Starts with goods being made in the Starts with a well defined market,
factory, focuses on aggressive focuses on customer needs, and
promotion strategies and produces coordinates all the activities that will
profitable sales affect customers and produces profits
through customer satisfaction.
Caveat Emptor [Buyer Beware] Caveat Vendor [Seller Beware]
Functions of Marketing
In order for the marketing bridge to work correctly -- providing consumers with
opportunities to purchase the products and services they need -- the marketing process
must accomplish nine important functions.
The functions are:
a. Buying: people have the opportunity to buy products that they want.
b. Selling: producers function within a free market to sell products to consumers.
c. Financing: banks and other financial institutions provide money for the production
and marketing of products.
d. Storage: products must be stored and protected until they are needed. This function
is especially important for perishable products such as fruits and vegetables.
e. Transportation: products must be physically relocated to the locations where
consumers can buy them. This is a very important function. Transportation includes
rail road, ship, airplane, truck, and telecommunications for non-tangible products
such as market information.
f. Processing: processing involves turning a raw product, like wheat; into something
the consumer can use -- for example, bread.
g. Risk-Taking: insurance companies provide coverage to protect producers and
marketers from loss due to fire, theft, or natural disasters.
h. Market Information: information from around the world about market conditions,
weather, price movements, and political changes, can affect the marketing process.
Market information is provided by all forms of telecommunication, such as
television, the internet, and phone.
i. Grading and Standardizing: Many products are graded in order to conform to
previously determined standards of quality. For example, when you purchase US No.
1 Potatoes, you know you are buying the best potatoes on the market.
To understand the various components of marketing environment, it may be classified into
a. Macro Environment (External, uncontrollable)
b. Micro Environment (Internal, controllable)
To succeed in marketing, we must learn to accommodate the external uncontrollable
factors. These factors act as constraints at all levels. In other words they limitation on
freedom of action.
1. Demography: market means people with money and with a will to spend their
money to satisfy their demand. Demography is a scientific study of human
population and its distribution structure. For example, studying population growth
can help a company arrive at understanding the type of products that will be
required over a decade. It helps understand the profile of consumers which is
important for market segmentation and determining target markets. The
quantitative aspect of consumer demand (census) and qualitative aspect such as
personality, attitudes, motivation etc is provided from demography. Good
demography analysis combines several factors such as population growth, income or
economic power, life cycle analysis of the consumer, occupation, education and
geographic segmentation. It can also help marketing agencies understand how
consumers will react to a new product or marketing campaign.
2. Economic Environment: People constitute one element of the market, and their
purchasing power constitutes the other. When there is willingness to spend there is
effective demand. A higher economic growth means higher employment and income
and this leads to economic boom in many industries. Marketing plans and programs
influence interest rates, money supply, price level and consumer credit. The other
economic factors such as changes in foreign exchange, currency devaluation, trade
tariffs can affect demand and profits on international and domestic products. The
level of personal income may also affect the changes in the marketing programs.
Economy situations such as recession can affect the quality of products being
launched in the market and the even the promotion policies of the business.
3. Social and Cultural Environment: these factors affect the business in the long run.
New demands are created and old ones are lost. There are 3 aspects in the social
a. Changes in lifestyle
b. Social problems such as concern over the promotion and product’s impact on the
c. Growing consumerism indicating consumer dissatisfaction since 1960.
Consumerism has become important to marketing decision process.
Social environment importance has made companies focus not only on the
consumer’s welfare but also the social / citizen welfare as well. Marketers are now
called upon not only to deliver higher material standard of living but also assure
quality of life such as pollution free environment, eco-friendly products and easy
4. Political and Legal Forces: these factors are gaining considerable importance on the
marketing activities and operations of a business. The government’s monetary,
fiscal; import and export policies have a significant impact on marketing activities. In
many countries there is specific legislation to control marketing. This is seen in the
products and services being sold in the Securities Market. Another impact of legal
forces is on practices such as monopoly, restrictive and unfair trade practices. Such
factors can lead to changes in prices of the products, quality of advertisements,
agreements with distributors, promotion devices, and division of new markets and
exclusion of new competitors.
5. Science and Technology: These factors have led to radical changes in lifestyles,
consumption patterns and economic welfare. Development of science and
technology has transformed living conditions in both developed and developing
countries. Technology has changed methods, materials and techniques used to
achieve commercial and industrial objectives. Technology has also lead to economic
growth. The development of the electronics market over the last 50 years has seen
massive changes in products, leading to innovations in products such as telephones,
televisions, cameras, computers among others. Technology and science have
brought changes in the quality of food that is available in the market.
6. Competition: Price competition is largely seen in the retail markets. All marketing
decisions are made by assessing the competition in the free market. Competition
affects the company’s product mix, price mix and promotion mix. Marketing
strategies are developed to fight competition. The activities of the competitors are
carefully evaluated to formulate these strategies. These strategies ensure the
company’s survival in the market. The conditions for competition are ever changing
and firms must be able to adapt to these changes. There can always be a chance of a
new competitor entering into the markets.
7. Ecology: It has assumed unique importance in production and marketing in
developed economies. Environmental experts are regularly showcasing the
importance of the preservation and survival of ecological systems. Pollution is a
product of economies where there is high consumption. Today’s companies want to
satisfy their consumers and also look into the welfare of the society as well.
Marketing executives are now giving importance to the quality of life and
environmental protection. Companies have started to make products that do not
pollute environment and deplete the scarce resources and also restore balance to
the ecological environment.
8. International Environment: consists of factors that have an impact on foreign trade
of a country; factors such as foreign policies, international treaties, investment
polices and trade tariffs. The formation of the WTO has lead to massive changes in
how international trading environment affects a business.
9. Consumer Demand: consumer demand is ever changing, unpredictable, and
immeasurable with accuracy. Today’s marketing strategies involve responding to a
consumer’s needs, and developing policies and products that aim at consumer
satisfaction and quality of service. By trying to satisfy a customer’s demands, there
has been product innovation and efficient production of goods and services.
Repeated sales are due to customer satisfaction. And this is a direct link to the
profits of the company.
Some of the internal controllable factors are:
1. Organization: An organization consists of many departments such as finance,
marketing, production and personnel. Each department is placed under a manager.
All managers’ work together to achieve common objective. The marketing
department plays an important role in achieving these objectives.
2. Corporate Resources: this includes, men, materials, money, machinery and
management. All can be controlled and adjusted to the marketing policy and all
influence the marketing environment. Utilization of resources and manufacturing
activity depends on the company’s external environment.
3. Marketing Mix: This includes 4Ps of marketing; product, place, promotion and price.
Each of these factors can vary according to the external environment factors like
competition, consumer satisfaction and cost effectiveness.
4. Markets: A market consists of different types of purchasers (those who purchase for
household consumption, for manufacturing, wholesalers, retailers etc). Depending
on the policy of the company and market conditions, the company exercises control
over the market. If balanced sales are required, the company can divide the market
5. Supplies: even regarding suppliers, the company can get its required raw materials
depending on its manufacturing programme. Generally companies adopt a purchase
policy which gives them a bargaining power. Hence controlling supplies.
6. Marketing Intermediaries: intermediaries (distributors) depending on the sales
policies of the company. Companies can reach consumers either through
wholesalers or retailers. Hence intermediaries can be controlled.
7. Employees: employees include executives, supervisors, managers etc. Their loyalty,
sincerity productivity and attitude towards their jobs and the company can be
controlled by following sound and employee-oriented policies.
Marketing Mix – The Choice of Marketing Methods
A marketing mix is a combination of product offerings used to reach the target market for
the organization.. The elements or variables that make up the marketing mix are:
a. Decision on product or service
b. Decisions on price
c. Decisions on promotion
d. Decisions on distribution
Essential features of a marketing mix are:
a. It should match consumer needs.
b. It should give competitive edge to the company
c. It should match corporate resources
d. All elements of the marketing mix must reinforce each other to support the
positioning of the product.
The simplest way in which the marketing mix is created is by using 4 inputs which form the
core of the marketing system approach. These include:
a. Product mix
b. Price Mix
c. Promotion mix
d. Distribution mix
Four more Ps has been added to the horizon of marketing:
a. Packaging: refers to the wrapping and carting of the goods before they delivered to
the customer. Before goods are delivered to a customer they are placed in small
Advantages of Packing:
i) It protects goods against possible damages
ii) It helps in keeping goods pure and clean
iii) Enables the uniformity in the size of the goods
iv) Assists in the promotion of brands. E.g.: Tea brands cannot be promoted
unless they in suitable packages.
v) Packaged goods can be handled easily
vi) Creates faith in the mind of people on the quality and quantity
vii) Good packaging attracts customers and helps boost sales.
b. Process: It refers to the system by which customer receives its services delivery of
services. In service, the process mainly involves adding value or utility to the
customer. Activities should be arranged in a logical and sequential form.
Following are the steps involved in process:
i) Identify the steps involved in delivering service to the customer
ii) Arrange the steps in the most logical and proper sequence
iii) Minimize the customer’s contact in the process
iv) Use automation to speed up the process.
c. People: The people rendering service play a vital role in the marketing of these
services. Their attitudes and belief have a strong influence on the customer’s
perception of the service of the company. Automation and computerization is used
to reduce the personal contact. There should be proper training of the service
personnel. Rules must be laid down for the behaviour of these personnel.
d. Physical Evidence: Tangible elements play an important role in influencing the image
of the service on the minds of the consumer. The seating arrangements in a theatre
and the interior decoration are an example of physical evidence. Physical evidence
can be used to build a strong image and differentiate one firm’s services with
It is the process of subdividing a market into distinct groups of customers with similar needs.
Each subset of the market is selected as a target market and can be reached with a distinct
marketing mix. Each sub group is characterized by particular tastes and requiring specific
Segmentation is done to prioritize the market and improve profitability and to provide a
means to choose the most appropriate communication media and messages for each
unique market segment.
Benefits of marketing segmentation
Market segmentation is a consumer oriented philosophy which has the following benefits:
1. Marketers are in a better position to locate and compare their opportunities. Market
can be defined more accurately in terms of the consumer needs.
2. When consumer needs are analyzed the marketers can formulate effective
marketing programmes which will be tuned to the demands of the market.
3. Marketers can make finer adjustments in their products and marketing
communications. They can use the rifle approach rather than the shotgun approach.
4. Competitors’ strengths and weaknesses can be understood effectively to avoid
strong competition and use resources more profitability by catering to the demands
of the customers.
5. Segmentation leads to effective usage of resources because the customer is focused
on in the marketing efforts and only target markets are served. There can be precise
marketing objectives and the marketing programme can be tailored specifically. The
product, price and promotion can be in best coordination.
Segmentation Success Criteria
The following represents the success criteria of segmentation:
a. Measurability: factors like motivation, perception, attitude, personality. Life-styles
and psychological factors governing the buyer behaviour cannot be measured and
are subjective. These factors / variables can only be inferred. This makes it difficult to
measure the size of the market segment. An approximate number of buyers can be
identified on the basis of some common characteristics or behaviour patterns.
However, obtaining data is not easy.
b. Accessibility: Even if the segment is identified, it should be in means of suitable
means of communication and distribution. If marketers are unable to communicate
effectively with prospective buyers, efforts for promotion will remain worthless.
c. Market Responsiveness: the identified segment must respond positively for the
marketing efforts. Assuming that a company reduces the prices of its products to
boost sales, there is a possibility that one segment of the market may react
negatively by assuming that the fall in price is due to supply of inferior quality of
d. Effective demand: If the segment responds positively, it must have sufficient buying
power to make the efforts worthwhile. The demand of the segment being targeted
must be profitable. Even if the number of buyers is small, their buying power must
be adequate. Needs and buying power create demand. A segment that is targeted
must possess effective demand.
Requisites for Effective Segmentation
Following are the requisites for effective segmentation
1. Definable: a company must be able to describe its marketing segment and for this
the key characteristics of the segment should show homogeneity. This would help in
measuring the market size and define the boundaries of the segment.
2. Measurable: Segment must be measurable; it should be possible to quantify the
segment. This will help in knowing the potential customers in each segment.
3. Viable: segmentation must be cost effective and profitable for the marketers. Hence
there is a requisite for a large segment that can produce the required turnover and
4. Reachable: marketers must be able to reach their customers effectively and
efficiently in each segment. This can be done by having good physical distribution
and communication systems.
5. Relevant: market must for segments on a relevant basis. Proper analysis of the total
market and classification are the two important aspects of market segmentation.
6. Intensity in competition: this is a parameter that determines inter firm rivalry. The
greater the competition, the more unattractive it will be for the market.
The Bases for Market Segmentation
and Socio Usage
Consumer Characteristics Approach
The variables of this approach are:
1. Geographic characteristics: The following are the geographic characteristics;
i. Historically this has been a way of segmenting markets
ii. Regional differences in product tastes are well known.
iii. Sellers distinguish areas and decide where they have competitive advantage.
iv. They may group markets such as ‘urban and rural’ or on the basis of regions
such as ‘north, south, east and west’
v. Geographic segmentation helps marketers concentrate their efforts on
effective utilization of organization resources.
vi. Geographic mobility changes consumer habits and cancels the organization
2. Demographic and Socio-Economic characteristics: The features are
i. It involves identifying buyers based on:.
a. Sex and Age: male and female consumers show remarkable differences.
The recent interest with children, the teenage and youth market shows
the importance of age as the variable characteristic. Different age groups
have different age patterns.
b. Family Life-Cycle: it is defined in terms of age, marital status, age of
housewife and present age of children. A family life cycle has a significant
impact on the consumer behaviour regards to purchase of durable and
non durable goods.
c. Social Class: Social class is used to describe the differences in a
consumer’s purchasing power, knowledge and skills. It also considers
income, occupation, education and place of residence. There are 3 social
classes; upper class, middle class and lower class.
d. Religion, Race and Culture: these explain the regularities and diversities in
ii. A marketing manager will segment his market based on these parameters
and tabulate them to understand the variable he will face.
iii. However it does not disclose which brand the consumer is likely to buy.
3. Psychographics segmentation can be broken down into lifestyle and personality
i) Personality: It refers to the individual’s consistent reactions to the world
about him. Personality tests attempt to measure such characteristics like
dominance, attitude, aggressiveness, objectivity, achievement, motivation
etc influence buyer behaviour. Individuals who have achieved their
physiological needs, they would be highly motivated to buy products like Life
insurance, investments in mutual funds IPOs etc in order to secure their
present and future
ii) Lifestyle: Different people have different lifestyle patterns and behaviour
may change as we pass through different stages of life. For example, a family
with young children is likely to have a different lifestyle to a much older
couple whose children have left home, and there are, therefore, likely to be
significant differences in consumption patterns between the two groups.
Virgin Mobiles ads are targeted on fun loving youngsters having a lifestyle
which includes long hours of telephonic conversations.
Case Study on Titan Fast Track
Titan watches, the major Indian watchmaker embarked on the fashion watches category
with the launch of the Titan Fastrack watches in the year 1998. As the ever changing fashion
industry influenced the watch industry during this era, Titan watches came up with the
stylish and trendy Titan Fastrack watches collection. Extraordinarily innovative technology
coupled with a fresh sense of style in the Titan Fastrack watches became an instant rage
especially with youths. In the Titan portfolio it is believed to contribute a 4% value.
Significant rise in Titan Fastrack watches sales has subsequently compelled Titan to establish
it as a separate brand
The following is the Segmentation Strategy used by Titan and some details about their
Fastrack watches are the pioneers in the youth watches segment
Initially targeted age group of 22-32 (Early Jobseekers)
Started with commercials:
i. “Cool watches from TITAN”
ii. “Too sexy for your wrist”
Initial years, marketing strategies showed positive growth in sales.
However by 2002-2003 the growth was stagnant, since its marketing strategies were
unable to appeal its target audience.
Fastrack thus re-launched itself in a new “Avtaar” in 2005 by using the below
i. Launched more stylish, low priced watches
ii. Diversified into eye gears, belts and other accessories.
iii. Target segment lowered down to 16- 25 years, mainly college going
iv. Commercials like:“How many you have” & their latest campaign “Move On”
Consumer Response Approach
This approach discusses why consumers buy a products or brands. The approach has
segmentation based on buyer behaviour.
a. Usage: total usage of a family unit for a given product may act as a basis for
segmentation. A buyer may be classified as heavy, medium and light users and non
users. Marketer is usually interested in these heavy users.
b. Benefit: consumers are divided into various smaller segments each seeking a
different type of benefit from the product. The table below explains this:
Benefits sought Major brands % of market share
Cosmetic Colgate. Close-up 65%
Therapeutic Cibaca 25%
Ayurvedic Vicco 0.5%
Others Dentobac 0.5%
c. Loyalty: it works on the fact that consumers can differentiate between the products.
They can create product preference scale. Buyers compare existing products based
on their liking. That way seller can understand consumers who are loyal, moderately
loyal and fickle minded.
d. Occasion: This determines which situations produce optimal consumption patterns
for a given product. This sense of occasion is important in designing the marketing
mix. A traditional breakfast drink can be made into a refreshing drink for anytime of
A target market or target audience is a group of customers that the business has decided to
aim its marketing efforts and ultimately its merchandise.  A well-defined target market is
the first element to a marketing strategy. The target market and the marketing mix variables
of product, place, promotion and price are the two elements of a marketing mix strategy
that determine the success of a product in the marketplace.
Target Marketing Strategies
There are several different target market strategies that may be followed. Targeting
strategies usually can be categorized as one of the following:
a. Single-segment strategy – It is also known as a concentrated strategy. One market
segment (not the entire market) is served with one marketing mix. A single-segment
approach often is the strategy of choice for smaller companies with limited
b. Selective specialization- this is a multiple-segment strategy, also known as a
differentiated strategy. Different marketing mixes are offered to different segments.
The product itself may or may not be different - in many cases only the promotional
message or distribution channels vary.
c. Product specialization- the firm specializes in a particular product and tailors it to
different market segments.
d. Market specialization- the firm specializes in serving a particular market segment
and offers that segment an array of different products.
e. Full market coverage - the firm attempts to serve the entire market. This coverage
can be achieved by means of either a mass market strategy in which a single
undifferentiated marketing mix is offered to the entire market, or by a differentiated
strategy in which a separate marketing mix is offered to each segment.
The following diagrams show examples of the five market selection patterns given three
market segments S1, S2, and S3, and three products P1, P2, and P3.
S1 S2 S3 S1 S2 S3 S1 S2 S3 S1 S2 S3 S1 S2 S3
P1 P1 P1 P1 P1
P2 P2 P2 P2 P2
P3 P3 P3 P3 P3
A product is a mix of material and non material kinds ranging from economic utilities to total
satisfaction of social and technological in nature.
A product is all things offered to a market. Those things include physical objects, design,
brand, package, label, price, services, supportive literature and satisfaction not only from
physical product and services but also from ideas, personalities and organizations.
It is a sum total of physical, economic, social and psychological benefits
Features of a Good Product
The features of a good product are:
a. It should have its own life
b. Show the status and quality in the market
c. It should symbolize something for each individual
d. Indirectly act as a communication media
e. Product perception in physio-psychological process
It is the process of distinguishing a product or offering from others, to make it more
attractive to a particular target market. This involves differentiating it from competitors'
products as well as a firm's own product offerings.
The advantages of product differentiation are:
a. Performance Quality: refers to the levels at which the product’s primary
characteristics operate. Buyers of expensive products normally compare the
performance characteristics of different brands. They will pay more for better
performance as long as the higher price does not exceed the higher perceived value.
The manufacturer must design a performance level appropriate to the target market
and competitor’s performance level. A company must also decide how to manage
performance quality through time.
b. Conformance Quality: it is the degree to which a product’s design and operating
characteristics come close to the target standard. It reflects whether the various
produced units are identically made and meet the specifications.
c. Durability: it is a measure of the product’s expected operating life. Buyers will pay
more for a more durable product. However, this is subject to some qualifications.
The extra price must not be excessive. Furthermore, the product must not be subject
to high fashion or technological obsolesce in which case the buyer may not pay more
for longer lived products.
d. Reliability: it is a measure of the probability that a product will not malfunction or
fail within a specified time period. Buyers are willing to pay a premium for more
reliable products. They want to avoid high costs of breakdowns and repair time.
e. Reparability: is a measure of the ease of fixing a product malfunctions or failures.
Ideal reparability would exist if users could fix the product themselves with little or
no cost or time lost. The buyer might simply remove the defective part and insert a
f. Style: it describes how well the product looks and feels to the buyer. Style has the
advantage of creating product defectiveness that is difficult to copy.
g. Design: design parameters suggest how difficult the product design task is, given all
the tradeoffs that can be made. From the company’s point of view, a well designed
product would be easy to manufacture and distribute. From the customer’s point of
view, a well designed product would be pleasant to look at, and also easy to open,
install and learn how to use, repair and dispose off. As competition intensifies,
design will offer one of the most potent ways to differentiate and position a
company’s products and services.
Classification of Products
The different types of goods sold in the market are:
f. Durable goods: Goods which have long life span and usage period are called durable
goods. Examples: Furniture, Kitchenware, Consumer Electronics
g. Consumer goods: are final goods that are brought from retail stores to satisfy the
needs and wants of human being. The consumer goods come in wide variety of
product range. Examples: Foods, Stationary. This is further classified into:
i. Convenience: Goods which are easily available to consumer, without any
extra effort are convenience goods. Mostly, convenience goods come in the
category of nondurable goods such as like fast foods, confectionaries, and
cigarettes, with low value. The goods are mostly sold by wholesalers to make
them available to the consumers in good volume.
ii. Shopping goods: In shopping consumer goods, consumer do lot of selection
and comparison based on various parameters such as cost, brand, style,
comfort etc, before buying an item. They are costlier than convenience goods
and are durable nature. Consumer goods companies usually try to set up
their shops and show rooms in active shopping area to attract customer
attention and their main focus is to do lots of advertising and marketing to
iii. Speciality goods: Goods which are very unique, unusual, and luxurious in
nature are called specialty goods. Specialty goods are mostly purchased by
upper-class of society as they are expensive in nature. Brand name and
unique and special features of an item are major attributes which attract
customer attraction in buying them.
iv. Unsought goods: They are goods which the consumer does not know about
or does not normally think of buying. This includes life insurance,
encyclopaedia etc. They require advertising and personal selling support.
h. Industrial Goods: They are used by buyers as inputs for production. This includes:
i. Raw Materials: they are required to be processed or assembled to create a
product. Only after processing they become consumer goods. They include
agricultural products, semi finished products and assembly parts.
ii. Capital Goods: they are used for creating finished goods. They create form
utility to a product. They are long lasting in nature. These include, plant and
machinery, installations, building. They are made according to the
specifications of the buyer. Personal selling plays an important role in
selling these goods.
iii. Fabricated Material: They reach the consumer only when they are
assembled with other parts.
iv. Supplies and Services: They do not form a part of the finished product or
service and are short lasting in nature. They are marketed through
intermediaries because of their low unit value and more consumers
Supplies include coal, lubricants, paper etc. Services include maintenance
and repair services.
It addresses the following issues:
a. Product Line
b. Product mix
f. Service after sale
g. Organizing for product planning and development
h. Product research and improvement
The product mix of a company, which is generally defined as the total composite of products
offered by a particular organization, consists of both product lines and individual products.
A product line is a group of products within the product mix that are closely related, either
because they function in a similar manner, are sold to the same customer groups, are
marketed through the same types of outlets, or fall within given price ranges.
A product is a distinct unit within the product line that is distinguishable by size, price,
appearance, or some other attribute. The following is an example of Renault Product Line.
Product mix consists of 3 main characteristics:
a. Length / Depth: It refers to the number of products in each product line.
b. Width: Refers to the number of distinct product lines offered by an organization.
c. Consistency: refers to the whether or not the products have production, marketing
or research affinity.
Product Addition and Deletion
The producer is to regularly strive for modifying and improving products to cater to the
varying needs and habits of the customers. There is addition of some distinct features and
benefits to the existing product. Development and launching of new products are also
necessary to earn more profits and hence for the survival and growth of the company.
A new product may be classified into:
a. Horizontal Addition: Company introduces a product which is similar to the industry
b. Vertical Addition: Company introduces new products such as components, parts and
materials in the current product portfolio of the company.
c. Lateral Addition: is where the company may include any kind of product which may
be possible by manufactured.
d. Product Deletion: Some products cannot be improved or modified to suit the market
needs. These products will be withdrawn from the market or else they will bring
losses to the firm. This process of withdrawal is called ‘product deletion’. In order to
find when and where to drop a product, management must make periodical renews
of its products and follow them through various stages of their life. By removing such
products, a firm can simplify its product mix and reduce costs in operations.
Packaging & Labelling
Packaging is the science, art and technology of enclosing or protecting products for
distribution, storage, sale, and use. Packaging also refers to the process of design,
evaluation, and production of packages. Packaging can be described as a coordinated
system of preparing goods for transport, warehousing, logistics, sale, and end use.
The term "product label" is a general term used to refer to printed information affixed to a
product (typically retail products) communicated from the manufacturer to consumers or
Importance of Packaging and Labelling
Packaging and package labelling have several objectives
a) Physical protection: The objects enclosed in the package may require protection
from, among other things, shock, vibration, compression, temperature. .
b) Barrier protection: A barrier from oxygen, water vapour, dust, etc., is often required.
Permeation is a critical factor in design. Modified atmospheres or controlled
atmospheres are also maintained in some food packages. Keeping the contents
clean, fresh, sterile and safe for the intended shelf life is a primary function.
c) Containment or agglomeration: Small objects are typically grouped together in one
package for reasons of efficiency. For example, a single box of 1000 pencils requires
less physical handling than 1000 single pencils. Liquids, powders, and granular
materials need containment.
d) Information transmission: Packages and labels communicate how to use, transport,
recycle, or dispose of the package or product. With pharmaceuticals, food, medical,
and chemical products, some types of information are required by governments.
Some packages and labels also are used for track and trace purposes.
e) Marketing: The packaging and labels can be used by marketers to encourage
potential buyers to purchase the product. Package graphic design and physical
design have been important and constantly evolving phenomenon for several
decades. Marketing communications and graphic design are applied to the surface of
the package and (in many cases) the point of sale display.
f) Security: Packaging can play an important role in reducing the security risks of
shipment. Packages can be made with improved tamper resistance to deter
tampering and also can have tamper-evident features to help indicate tampering.
Packages can be engineered to help reduce the risks of package pilferage: Packages
also can include anti-theft devices.
g) Convenience: Packages can have features that add convenience in distribution,
handling, stacking, display, sale, opening, reclosing, use, dispensing, and reuse.
h) Portion control: Single serving or single dosage packaging has a precise amount of
contents to control usage. Bulk commodities (such as salt) can be divided into
packages that are a more suitable size for individual households. It is also aids the
control of inventory: selling sealed one-litre-bottles of milk, rather than having
people bring their own bottles to fill themselves.
A brand is a name, term, sign, symbol, design or a combination of the above to identify the
goods or service of a seller and differentiate it from the rest of the competitors. It must
Names easy to remember, recognize, pronounce
Distinctiveness from competition and protection under law.
Should not indicate poor meanings in other markets or languages
The essentials of a good brand are:
a. A brand would suggest something about a product’s benefits
b. The name should be short, simple, and easy to pronounce and remember.
c. It must lend a visual interpretation.
d. It should be capable of being registered and protected legally
e. It should have a stable life and be unaffected by time. It should not depend on
trends and styles as they have a short life.
f. It should be unique, attractive and distinctive.
Types of Brands
1. Individual Brand Name: Each product has a special and unique brand name. The
manufacturer has to promote each individual brand in the market separately. This
creates a practical difficulty in promotion. Else it is the best marketing strategy. E.g.:
2. Family Brand Name: Family name is limited to one line of a product, which complete
the sales cycles. E.g.: Amul for milk products. However if one member of the family
brand is rejected by consumers, the prestige of all the other products under the
family brand is adversely affected. The manufacturers have to take care against this
danger. This method of branding assumes that end users of all products under a
family brand are similar and the products are not dissimilar.
3. Umbrella Brand: All the products use the name of the company or the
manufacturer’s. All products such as soaps, chemicals, textiles made by Tata are an
example of an umbrella brand. There are often economies of scope associated with
umbrella branding since multiple products can be efficiently promoted with a single
advertisement or campaign. Umbrella branding facilitates new product introductions
by providing by evoking a familiar brand name, which can lead to trial purchase,
product acceptance, or other advantages.
4. Corporate Branding: Corporate branding is the practice of using a company's name
as a product brand name. It is an attempt to leverage corporate brand equity to
create product brand recognition. It is a type of family branding or umbrella brand.
Disney, for example, includes the word "Disney" in the name of many of its products;
other examples include IBM and Heinz.
This strategy contrasts with individual product branding, where each product has a
unique brand name and the corporate name is not promoted to the consumer.
5. Private Brand: Private branding is when a large distribution channel member (usually
a retailer), buys from a manufacturer in bulk and puts its own name on the product.
This strategy is only practical when the retailer does very high levels of volume. The
advantages to the retailer are:
a. More freedom and flexibility in pricing
b. More control over product attributes and quality
c. Higher margins (or lower selling price)
d. Eliminates much of the manufacturer's promotional costs
In marketing, consists of a consumer's commitment to repurchase or otherwise continue
using the brand and can be demonstrated by repeated buying of a product or service or
other positive behaviours such as word of mouth advertising.
An example of a major brand loyalty program that extended for several years and spread
worldwide is the dedication that many Mac users show to the Apple and its products.
The existing strong brand name can be used as a vehicle for new or modified products; for
example, many fashion and designer companies extended brands into fragrances, shoes and
accessories, home textile, home decor, luggage, sunglasses, furniture, hotels, etc.
Mars extended its brand to ice cream, Caterpillar to shoes and watches, Michelin to a
restaurant guide, Adidas and Puma to personal hygiene. Dunlop extended its brand from
tires to other rubber products such as shoes, golf balls, tennis racquets and adhesives.
There is a difference between brand extension and line extension. A line extension is when a
current brand name is used to enter a new market segment in the existing product class,
with new varieties or flavours or sizes. When Coca-Cola launched "Diet Coke" and "Cherry
Coke" they stayed within the originating product category: non-alcoholic carbonated
beverages. Procter & Gamble (P&G) did likewise extending its strong lines (such as Fairy
Soap) into neighbouring products (Fairy Liquid and Fairy Automatic) within the same
Brand Equity refers to the marketing effects or outcomes that accrue to a product with its
brand name compared with those that would accrue if the same product did not have the
And, at the root of these marketing effects is consumers' knowledge. In other words,
consumers' knowledge about a brand makes manufacturers/advertisers respond differently
or adopt appropriately adept measures for the marketing of the brand.
The study of brand equity is increasingly popular as some marketing researchers have
concluded that brands are one of the most valuable assets that a company has. Brand equity
is one of the factors which can increase the financial value of a brand to the brand owner,
although not the only one
Product Life Cycle Theory
a. Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a
market for the product. The impact on the marketing mix is as follows:
Product branding and quality level is established and intellectual property
protection such as patents and trademarks are obtained.
Pricing may be low penetration pricing to build market share rapidly, or high skim
pricing to recover development costs.
Distribution is selective until consumers show acceptance of the product.
Promotion is aimed at innovators and early adopters. Marketing communications
seeks to build product awareness and to educate potential consumers about the
b. Growth Stage
In the growth stage, the firm seeks to build brand preference and increase market
Product quality is maintained and additional features and support services may
Pricing is maintained as the firm enjoys increasing demand with little
Distribution channels are added as demand increases and customers accept the
Promotion is aimed at a broader audience.
c. Maturity Stage
At maturity, the strong growth in sales diminishes. Competition may appear with
similar products. The primary objective at this point is to defend market share while
Product features may be enhanced to differentiate the product from that of
Pricing may be lower because of the new competition.
Distribution becomes more intensive and incentives may be offered to
encourage preference over competing products.
Promotion emphasizes product differentiation.
d. Decline Stage
As sales decline, the firm has several options:
Maintain the product, possibly rejuvenating it by adding new features and
finding new uses.
Harvest the product - reduce costs and continue to offer it, possibly to a loyal
Discontinue the product, liquidating remaining inventory or selling it to another
firm that is willing to continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. For
example, the product may be changed if it is being rejuvenated, or left unchanged if it is
being harvested or liquidated. The price may be maintained if the product is harvested, or
reduced drastically if liquidated.
Product Diffusion Curve
Consumers can be grouped according to how quickly they adopt a new product. On the one
extreme, some consumers adopt the product as soon as it becomes available. On the other
extreme, some consumers are among the last to purchase a new product.
Defining bins one standard deviation wide about the mean, five different product adoption
groups can be defined:
a) Innovators - well-informed risk-takers who are willing to try an unproven product.
Innovators represent the first 2.5% to adopt the product.
b) Early adopters - based on the positive response of innovators, early adopters then
begin to purchase the product. Early adopters tend to be educated opinion leaders
and represent about 13.5% of consumers.
c) Early majority - careful consumers who tend to avoid risk, the early majority adopts
the product once it has been proven by the early adopters. They rely on
recommendations from others who have experience with the product. The early
majority represents 34% of consumers.
d) Late majority - somewhat sceptical consumers who acquire a product only after it
has become commonplace. The late majority represents about 34% of consumers.
e) Laggards - those who avoid change and may not adopt a new product until
traditional alternatives are no longer. Laggards represent about 16% of consumers.
For this discussion, the term "consumers" represents both individuals and organizations.
The rate of adoption depends on many factors, including:
Perceived benefits over alternative products
Communicability of the product benefits
Price and ongoing costs
Ease of use
Compatibility with existing standards and values
Divisibility (the extent to which a new product can be tested on a limited basis)
Even if a product offers high value to the customer, the firm nonetheless faces the challenge
of convincing potential customers to try the product and eventually adopt it. The product
diffusion curve is partly responsible for the product life cycle, which calls for different
management strategies that depend on the product's stage in the life cycle.
New Product Development
1. Idea Generation:
Ideas for new products can be obtained from basic research using a SWOT
analysis (Strengths, Weaknesses, Opportunities & Threats), Market and
consumer trends, company's R&D department, competitors, focus groups,
employees, salespeople, corporate spies, trade shows, or Ethnographic
discovery methods (searching for user patterns and habits) may also be used
to get an insight into new product lines or product features.
Idea Generation or Brainstorming of new product, service, or store concepts -
idea generation techniques can begin when you have done your
OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase
(shown in the next development step).
2. Idea Screening
The object is to eliminate unsound concepts prior to devoting resources to
The screeners should ask several questions:
a) Will the customer in the target market benefit from the product?
b) What is the size and growth forecasts of the market segment/target
c) What is the current or expected competitive pressure for the product
d) What are the industry sales and market trends the product idea is
e) Is it technically feasible to manufacture the product?
f) Will the product be profitable when manufactured and delivered to
the customer at the target price?
3. Concept Development and Testing
Concept testing is the process of using quantitative methods and qualitative
methods to evaluate consumer response to a product idea prior to the introduction
of a product to the market. It can also be used to generate communication designed
to alter consumer attitudes toward existing products. These methods involve the
evaluation by consumers of product concepts having certain rational benefits, such
as "a detergent that removes stains but is gentle on fabrics," or non-rational
benefits, such as "a shampoo that lets you be yourself." Such methods are commonly
referred to as concept testing and have been performed using field surveys, personal
interviews and focus groups, in combination with various quantitative methods, to
generate and evaluate product concepts.
The concept generation portions of concept testing have been predominantly
qualitative. Advertising professionals have generally created concepts and
communications of these concepts for evaluation by consumers, on the basis of
consumer surveys and other market research, or on the basis of their own
experience as to which concepts they believe represent product ideas that are
worthwhile in the consumer market.
The quantitative portions of concept testing procedures have generally been placed
in three categories:
a. Concept evaluations, where concepts representing product ideas are presented
to consumers in verbal or visual form and then quantitatively evaluated by
consumers by indicating degrees of purchase intent, likelihood of trial, etc.,
b. Positioning, which is concept evaluation wherein concepts positioned in the
same functional product class are evaluated together, and
c. Product/concept tests, where consumers first evaluate a concept, then the
corresponding product, and the results are compared.
4. Business Analysis
Estimate likely selling price based upon competition and customer feedback
Estimate sales volume based upon size of market
Estimate profitability and breakeven point
5. Beta Testing and Market Testing
Produce a physical prototype or mock-up
Test the product (and its packaging) in typical usage situations
Conduct focus group customer interviews or introduce at trade show
Make adjustments where necessary
Produce an initial run of the product and sell it in a test market area to
determine customer acceptance
6. Technical Implementation
New program initiation
Finalize Quality management system
7. Commercialization (often considered post-NPD)
Launch the product
Produce and place advertisements and other promotions
Fill the distribution pipeline with product
Critical path analysis is most useful at this stage
1. Profit Oriented - On this basis a company may adopt a pricing policy, either to
achieve the targeted R.O.I. (Return on Investment) or to maximise profits
a. Return on Investment - Return on Investment indicates the percentage of return
on the total capital employed in the business. When this is a pricing objective, we
aim at earning a pre-determined R.O.I. over a period of time, usually a financial
year: In this method, the required amount to achieve the expected R. 0.1., is
added to the cost of the product, called the mark up
b. Maximising Profits - As per this objective, the pricing policy aims at maximising
the profits of the firm. Growing firms may try to reduce the price as much as
possible, to create demand for their product. Traditionally, profit maximisation
was considered to be the objective of pricing. But now, business firms are
conscious about social responsibilities, Moreover, if profit maximisation is used
as the objective for pricing, it may attract public criticism and government
2. Sales Oriented Objective - For some companies, the pricing policy may be based on
sales volume, i.e., the pricing objective may be to increase sales volume, or to
maintain or increase the firms' market share
a. Increase Sales Volume - In order to increase sales volume, the management may
have to give some discounts, allowances or employ some other aggressive
pricing Strategy. This policy is usually adopted to achieve rapid growth, or to
discourage potential competitors from entering tile market
b. To Maintain or Increase Market Share - Market share is a yardstick with which to
measure the market position or success. As per this pricing policy, a company
aims to secure a target market share; it is usually expressed as a percentage. The
market share as a pricing objective is particularly relevant for companies in
developing countries, where market expansion is needed for economic growth.
For example, Daewoo Motors reduced the price of its Cielo cars by Rs. 1.5 lakhs,
to capture a larger share of the growing demand for luxury cars.
3. Status Quo Oriented - As per this objective, companies intend to maintain the
current situation, a status quo. Price stabilisation and meeting competition are the
tools used for maintaining the status quo. With either of these goals, a firm seeks to
avoid price competition.
a. Price Stabilisation - As per this objective, a firm seeks to cut or eliminate cyclical
price fluctuations and avoid price wars. The aim is to live and let live. This type of
pricing policy is followed in the case highly standardised product like steel and
chemicals. A specific feature of these types of industries is that one large firm
acts as the leader in setting prices. Smaller firms in the same business activity
tend to, "follow the leader" in setting price
b. To meet or prevent competition – In an era of cut-throat competition, firms may
sometimes drastically reduce prices to prevent competitors from entering the
market. Some firms may even sell products at a price lesser than the cost of
production to fight competition; but it is a risky step considering the long term
objectives of the firm.
Methods of Pricing
The following are the methods of pricing
1. Price based on cost
a. Mark Up Pricing - the selling price of a product includes the cost of the product
and an estimated amount' of profit. The underlying principle is that the selling
price of a product must cover its full cost along with a reasonable margin of
profit. The formula for calculating the selling price as per this method is: Total
Cost Per Unit + Desired Profit Per Unit
b. Rate of Return Pricing - If a firm desires to achieve a certain rate of return on
capital, it may adopt rate of return pricing. As per this method the management
fixes the selling price required to produce a given rate of return on capital
c. Break Even Analysis and Target Profit Pricing - A Break Even chart is a graph that
shows the amount of fixed and variable costs, and the sales revenues, at
different volumes of output. In Break Even Analysis tables or graphs are
developed at different selling prices, for different volumes of production. So the
expected profit or loss for each level of sales and level of production is known.
The volume of sales at which the total cost is equal to total revenue is known as
the breakeven point, or the point of no profit and no loss. A sales level below this
point will result in a loss, while a sales volume above this point is profitable. So
Break Even Analysis is helpful in finding out the most profitable combination of
cost and revenue
2. Prices Based on Marginal Analysis - Sometimes a firm may be forced to sell below
the total cost. In such a situation, marginal pricing is useful, because this method
gives us the additional cost required for producing an additional unit. It is helpful in
quoting the price of the product for special orders. This method also helps in taking
the decision of selling below the total cost, or stopping production during a
depression. It is especially useful in fixing prices in such adverse situations.
3. Price Based on Buyer - Many firms are basing their prices on the product's perceived
value. In other words, pricing is based on what the buyer is willing to pay and not the
seller's cost, which usually the key to pricing. In this method, non-price variables in
the marketing mix are used to build up a perceived value in the buyers' minds.
Accordingly, the price is set to capture the perceived value.
4. Prices Based on Competitive - Market Conditions These methods of pricing are based
on competitive market conditions and include the following:
a. Pricing to Meet Competition - This method is adopted when the market is highly
competitive, products are' homogeneous and not capable of differentiation.
Then the company has to price at a rate .identical to what competitors are
charging for similar products. A company maintains its prices according to the
prices charged by its competitors.
b. Pricing Below Competition - This is a method in which prices are kept below the
level of one's competitors. It is done by giving discounts at the retail level. If this
method is accepted by the consumer, then the brand with the lowest price is
c. Pricing above Competition - This method can be adopted when the product is
distinctive, and has a prestige or status value in the market. For example,
Mercedes Benz cars are sold for Rs. 27 lakhs due to their reputation. Only
reputed manufacturers can resort to above- market pricing. It is to be
remembered that pricing is not simply a process of setting figures, at which a
company's products are to be offered to the customer, but it is rather a broad
and complex field, embracing problems of determining the characteristics of
products to be sold, selecting customers, choosing sales promotion methods,
determining channels of distribution and obtaining a satisfactory volume of
Pricing policies and strategies
1. Skim the Cream Price (High Policy) Policy - Under skim the cream price policy, the
product is priced at a very high price in the initial stage. A manufacturer introducing
a new product may adopt this pricing strategy, so that the demand for the product is
immediately known, and investments made in the product are quickly realised. Its
aim is to sell to the "rich customer" who is not bothered much about how much he
pays for a novel product.
2. Penetrative Pricing (Low Pricing) - This policy is the opposite of skim the cream
pricing; the product is priced at a very low price in the initial stage to make the
product popular. This policy is advisable when the product has a long life cycle and
mass production provides for a substantial reduction in the unit cost of production.
The 'Nirma' detergent powder company used this policy when it was introduced, and
still continues with this policy. This policy results in a high sales volume and demand
in the initial stages of the product life cycle itself. The disadvantage of this policy is
that, some consumers may have the feeling that low priced products are of poor
3. Follow the Leader Pricing or Price Leadership - This may be defined as "the pricing
pattern in which one firm in the industry initiates price changes, and other firms
follow suit, approximating their prices to that of the initiating firm". The firm
initiating the price changes is called the price leader, and those following it are called
price followers. This type of pricing is followed in the case of steel, cement, fertilizers
and consumer durables. As per this policy, non-leading firms have no other practical
alternative but to follow the leader in their price fixing.
4. Psychological Pricing - This pricing policy may be referred to as the one in which an
attempt is made to fix prices in such a way, that the product price influences the
psyche of buyer. For example, Bata India Ltd. is following this policy, wherein instead
of putting Rs. 100 for a pair of shoes, it puts Rs. 99 to make the prospective buyer
think that it is relatively cheaper as it is a bargain offer. Similarly, in Teleshopping, all
the products are priced at Rs. 99 instead of Rs. 100.
5. One Price Policy - This policy may be defined as; "one in which all buyers, regardless
of their class, size, or condition of purchase, are charged a similar price". As per this
policy there is no question of negotiation, bargaining or haggling. If any discount or
allowance is allowed, it is on equal items to all buyers. This is a fair trade practice.
Some examples are news papers, magazines, milk and bread which are sold less than
one price policy.
6. Variable Price Policy - As per this policy, the same quantities of a product are sold to
similar buyers at different prices, where the final price is determined through
bargaining or negotiations, between the buyer and the seller. Cars, two wheelers,
televisions sets, refrigerators, etc. are sold at variable prices.
7. Trade Discount or Functional Discount - The idea of this discount is to compensate
different classes of intermediaries operating in the company's distribution channel,
for the services rendered by them. For example, a publisher gives books 33.33 % to
wholesale book dealers, and 30% to retail book dealers. When the wholesalers sell
to the retailer, he will keep 3.33% which is his margin to cover his expenses and
profit. The retailer allows 15 % to students and keeps 15 % to cover his expenses.
8. Cash Discount - This is a deduction granted to buyers, for paying their bills within a
specified time period. This is a reward for prompt payment, and is usually intended
to encourage cash inflow. For example, "3/15 net 30" means that the buyer is
entitled to a 3 % discount if the amount is paid within 15 days and if it is paid
after 15 days, he has to pay the net amount without any rebate.
9. Quantity Discount - Quantity discount is a deduction from the quoted price allowed
to all buyers, in consideration of their purchasing stipulated quantities of goods.
Quantity discount stimulates larger sales. For example, if you buy 5 packets of
cement, you will get 2 % discount, for 5 packets to 10 packets 4 %, for! 0 packets to
20 packets 5 % etc.
10. Resale Price Maintenance (R.P.M.) This is a marketing policy adopted by one or
a group of manufacturers, not allowing retailers to sell goods below the fixed retail
price decided by the manufacturer. According to the MRTP Act, RPM is an unfair
trade practice and considered void. This policy ensures uniform retail prices for all
the dealers. This method is also known as fair trading.
Factors Affecting Pricing Decision
1. Internal Factors Influencing Pricing Decisions - The factors influencing pricing
decisions are divided into internal and external factors on the basis of whether the
management has control over the factors or not. If the management has control
over the factors, it will come under internal factors, if not it will come under external
factors. Some internal factors are within the control of the management, and are
particularly related to the internal environment of a firm. The internal factors
affecting pricing decisions are:
a. Company Objectives - This has considerable influence on the pricing decisions of
a firm. Pricing policies and strategies must be in conformity with the firm's
pricing objectives. For example, if a company desires a targeted rate of return on
capital investment, then the pricing decisions are so made that the total sales
revenue from all products, exceeds the total cost by a sufficient margin, to
provide the desired return on the total capital investment.
b. Organisation Structure – Generally, the top management has full authority for
framing pricing objectives and policies. Some firms allow workers' participation in
decision making and therefore in such firms, all the employees give their views
and suggestions for the pricing policy. The marketing manager also helps and
assists the top management in framing the pricing policies and strategies and the
cost accountant can make an important contribution to this 'decision making
process by providing the management with costs, which are relevant to the
pricing decision at hand.
c. Marketing Mix - Price, product, promotion and place are the four 'p's of a
marketing mix. The pricing policy of a firm must consider the other components
of a marketing mix as well, because these factors are closely related. Marketing
research and the marketing information system can be utilised to form the
appropriate pricing policy.
d. Product Differentiation – If a product is different from its competitive products,
with features such as a new style, design, package, etc., then it can fetch a higher
price in the market. ·For. Example, Lee, Arrow and Park A venue shirts, are sold
at a high price in the market. Thus, if the product has distinguishing features,
then the firm has greater freedom in fixing the prices, and customers will also be
willing to pay that price.
e. Cost of the Product - Pricing decisions are based on the cost of production. If a
product is priced less than the cost of production, the firm has to suffer the loss.
But the cost of production can be reduced, by co-ordinating the activities of
production properly, the firm can reduce the price accordingly.
2. External Factors
The external factors affecting the pricing decision of a firm are:
a. Demand - Market demand for a product or service has great impact on pricing. If
there is no demand for the product, the product cannot be sold at all. If the
product enjoys good demand, the pricing decision can be aimed to utilise this
b. Competition - There has been a revolutionary change experienced in the Indian
market after the liberalisation and opening up of the economy. The number, size
and pricing strategy followed by competitors have a significant role to play in the
pricing decision. If the product cannot be differentiated with special features, a
firm cannot charge a higher price than that of its competition
c. Buyers - If there are no ready takers for the product, it is said to have failed in the
market. Pricing decision is thus related to the characters, nature and preferences
of the buyers.
d. Suppliers - They supply the required items of production to the firm. As already
pointed out, the firm can reduce the price if it can reduce the cost of production.
If not, the usual tendency is to charge the increased cost of production to the
consumer. For example, the price hike for petrol or diesel will automatically
increase the price of vegetables, fruits, provisions, etc. If a firm could get the
required raw materials at reasonable rates from suppliers, then it can also price
the goods at a less rate.
e. Economic Conditions. - This also affects the pricing decision of a firm. In a
depressed economy, business activities will be considerably less, but in a boom
condition, there will be hectic business activity. Therefore, economic conditions
affect the demand for goods and services. So, in a depressed economy, in order
to accelerate business one sells goods at a lesser price, but in a boom period,
goods can be sold at a high price.
f. Government Regulations - The government has the power to regulate the
activities of business firms, so that they do not charge high prices, and don't
indulge in anti-social activities. The government does this by passing various acts;
for example, the MRTP Act, Consumer Protection Act, etc. To quote one case,
Nestle had advertised that they are giving one Kit Kat chocolate free.
In the marketing context, channels of distribution indicate routes or pathways through
which goods and services flow, or move from producers to consumers. The distribution
system has two sub-divisions, namely:
1. The choice of distribution channels, through which the product shall flow from the
manufacturer to the ultimate consumer, and
2. Physical distribution, comprising transportation and storage of goods.
The best thing for the firm is to distribute its products directly to consumers, without the
help of any intermediaries.
Otherwise it can distribute through one or more middlemen, such as a wholesaler, retailer,
selling agent, etc. Whatever be the channel used, the objective is that the product should
move efficiently, and at the lowest possible cost, from the place of manufacture to the
The choice of a suitable distribution channel is an important policy decision for the firm, due
to the following reasons:
1. The channel selected for the product has a vital effect on, pricing, promotion and
other elements of the marketing mix.
2. The distribution channel influences the sales volume and profits of the firm. '
3. The choice of a distribution channel involves long term commitment of the firm and is
very difficult to change. Therefore it should be selected accordingly.
According to Stanton, "a distribution channel consists of the set of people and firms,
involved in the transfer of title to a product, as the product moves from the producer to the
ultimate consumer or business user. It includes both the producer and the final user of the
product, as well as mercantile agents and merchant middlemen engaged in the transfer of
title to goods and services
Functions of Channels of Distribution
a) Channels of distribution are the link between manufacturers and ultimate
consumers. Now, goods and services produced anywhere in the world are
available to us only with the help of channels of distribution. For example, the US-
based Kentucky Fried Chicken counters are functional in all Indian metros.
b) Goods are stored by the middlemen while being transferred from manufacturers
to consumers and released in the market depending on the demand. For example,
in the case of jams and juices manufacturers have to store the fruits in the season
but the end products are available throughout the year.
c) Channels of distribution are helpful in promoting goods and services. Through
their widespread network they talk about the new products and help
manufacturers create demand. This is very helpful in promoting new products and
d) Channels also help in financing functions. They give credit to wholesalers and
retailers. They also help in fixing prices as they know about market conditions. The
possible price accepted by the consumers is known through them and is helpful to
e) Channels of distribution serve as an effective tool for building up clientele. On the
other hand inefficient physical distribution leads to the loss of customers and
f) These channels also provide information concerning the availability, characteristics
and prices of the goods in transit, inventory and on purchase.
Factors Affecting Choice of Distribution Channel
Different factors affect the choice of a distribution channel, and differ from firm to firm. We
can divide these factors under five heads:
1. Market Factors
2. Product Factors
3. Company Factors
4. Environmental Factors
5. Financial Factors
1. Market Factors - As per the modern concept of marketing, market factors influence
marketing decisions. Similarly, the choice of distribution channel is also influenced by
market factors. This can be classified under three heads:
a) Consumers: The number of consumers, their geographic location and purchase
pattern affect the choice of a channel for distribution. If the number of
consumers is large, spread over a wide area, and their purchases are frequent
and in small lots, then the indirect channel is preferable. On the other hand, if
the number Of consumers is small, concentrated in a small geographic location,
and if the purchase is deliberative, then it is preferable to use the direct
b) Middlemen: The terms and conditions of middle men also affect the channel
choice. For example, if the wholesaler asks for more commission, then the
manufacturer may have to go for a direct channel
c) Competitors: The distribution channel used by competitors also influences the
channel choice, because it may mean choosing a customary channel in the same
line of business activity. For example, automobiles are sold in India through the
indirect channel and a change from the indirect channel to direct channel is not
2. Product Factors - The nature of the product also affects the choice of the channel in
the following manner:
a) Industrial or Consumer Goods - If the product to be distributed is an industrial
good, then the direct channel is adopted, because there are very few customers
who can be given personal attention and provided with good after sales
services. But for consumer goods, the indirect channel is preferable.
b) Perishable Nature' - If the goods are of a perishable nature, like milk,
vegetables, fruits, etc., then it is better to adopt direct methods
c) Standardisation- If the goods are standardised (for example, ISI Mark, AG Mark,
etc.) then the indirect method is preferable, because standardisation is a proof
of uniformity and quality.
d) Unit Value - If the unit price of the product is high, then it is preferable to use
the direct method, and if the unit price is less, then the firm can go for an
e) Technicality - If the product is highly technical and complex, it is advised to go
for the direct method. For example, for computers and machinery because they
require actual demonstration, after sales service, warranty, etc
f) Seasonal - In the case of seasonal goods like woollen items, jams, pickles,
squash etc., production is highly seasonal, according to the availability of raw
materials. In such a situation, the manufacturer-retailer-consumer method is
preferable, i.e., the indirect channel.
g) New Products - In the case of new products which require aggressive marketing
techniques, the indirect channel is adopted, usually by giving franchise rights.
h) Style Obsolescence - In the case of ready-made clothes, which may go out of
fashion within a short time, it is preferable to sell the items fast, through retail
shops, i.e., the indirect channel.
i) Number of items in the Product-line -If the firm's product mix consists of a large
number of product items, it can sell the items directly to consumers through its
ability to deal directly with them and the experience gained over the years.
j) Price Stability - If the product is subject to frequent price changes, due to
product up gradation and modification, then the direct channel is preferable.
3. Company factors - Strengths and weaknesses of the company also affect the
choice of channel in the following way
a) Financial Strength - For a reputed and financially strong company, it is possible to
move from the customary methods of distribution to experiment with new
methods. So these companies usually go for direct methods and financially weak
companies go for customary methods.
b) Past Channel Experience - For a firm, if past experiences with middlemen have
been satisfactory, then the firm may continue in the same line and if not the firm
may change the line of distribution.
c) Marketing Policies - If the firm is advertising heavily, and supported with sales
promotion, then it can choose an indirect method. For example, Pepsi and Coke.
The company has to use direct channels, if the product is not advertised properly
or not aided by sales promotion efforts.
d) Reputation - For highly reputed companies, middlemen are ready to join in
order to be associated with the firm. Firms like MRF Tyres and Bombay Dyeing
may not find it difficult to find middlemen, to go for the indirect channel.
e) Market Control Desired - The channel of distribution is influenced by the degree
of market control desired by the company. Market control refers to the efforts of
a company to control intermediaries. A company may use a smaller channel to
facilitate better co-ordination, communication and control.
4. Environmental Factors - Elements of the marketing environment can also influence
the choice of alternative channels available. They are:
a) Economic Conditions - This affects the choice of a channel. During depression,
economic activities are dull and therefore a shorter and cheaper channel is
preferable. But in times of inflation, it is full of business activities and so a wider
channel may be adopted.
b) Legal Factors - In India, various Acts prevailing in the country, viz., the
Companies' Act and The Monopolies and Restrictive Trade Practice Act influence
the choice of a channel. These Acts have been passed with a view to control
monopoly, to prevent resale price maintenance and to protect the rights and
interests of companies. Therefore, channel selection is also influenced by various
Acts passed in the country.
c) Technological Factors - Various inventions in the technological field also
influence the choice of a channel. For example, if perishable items are to be
distributed, proper refrigerated storage facilities are a must. Only if that is
possible, can the firm can go for indirect channel methods, otherwise it has to
restrict distribution through the direct method.
5. Financial Factors - The financial factors which influence the choice of a channel are
the desired sales volume and the rate of return on investment.
a) Sales Volume - The required sales volume will have to be predicted on the basis
of trend analysis, past experience, industry-wise data, interpolation,
extrapolation, regression, etc. Accordingly, the firm has to choose the
distribution channel in order to achieve the targeted sales volume.
b) Rate of Return on Investment - This is the return expected from investments. If
the firm has to achieve a targeted rate of return, it has to increase the sales
volume accordingly. Therefore, the firm has to select as appropriate distribution
Types of Intermediaries
Middlemen - Middlemen are the intermediaries who participate in the distribution of goods
from the point of production to the point of consumption. They help bridge the gap
between producer and consumers and serve as a link between the two:
a) Agent Middlemen: They are otherwise known as mercantile agents and exist in the
buying and selling of goods by taking part in negotiating the purchase and sale of
commodities. They do not take the title to goods. Their charge commission or
brokerage for their services and include brokers, commission agents, etc.
b) Merchant Middlemen: Merchant middlemen are those channel members who take both
the title and possession 0f goods from preceding members and channelize them to the
subsequent member in the channel sequence. They take up the marketing risks and
include wholesalers and retailers
Wholesalers are individuals or business firms who buy am sell products to retailers or
industrial units, but do not sell directly to the ultimate customer. Usually they specialise in
only one product and keep large stocks.
Functions of Wholesalers
The functions performed by wholesalers are:
a) Storage - They forecast the demand for goods and store different varieties of goods
from several manufacturers, either from India or abroad.
b) Sales Promotional Work - They do their level best to promote the goods and services
of the manufacturer.
c) Transportation - A wholesaler carries goods from producers to his warehouses and
from there he gives it to the retailers. He keeps a fleet of trucks for this purpose.
d) Storage - A wholesaler is the warehouse keeper of the market. He stocks large
quantities - of stock and supplies it to retailers so that he can stabilise prices by
adjusting the supply of goods with the demand.
e) Financial help to both manufacturers and retailers - A wholesaler buys goods on
cash basis from the manufacturer and sells them on credit to retailers. Thus, he
provides financial help to the manufacturer and retailer.
f) Risk Taking - A wholesaler bears the risk of changes in demand, prices, bad debts,
spoilage of goods, etc. in the course of transportation and storage. Thus, he undertakes
various marketing risks and simplifies the process of distribution.
g)Packing and Grading - A wholesaler re-packs goods in convenient forms. Sometimes he
grades the products into standardised grades also.
Functions of Wholesalers to Manufacturers
a) Order Collection - Retailers are usually scattered, their orders are small and they
are too many in numbers. The wholesaler acts as an order collecting and marketing
agency for manufacturers.
b) Risk Transfer - A wholesaler usually places huge advance orders on the
manufacturer. Thus the manufacturer is insured for sale or disposal of goods
produced and thereby relieved from bearing the risk of loss.
c) Concrete Relief - Wholesalers acquire goods from the manufacturer on a cash basis
and sometimes even make advance payments to small manufacturers. Thus, they.
give financial relief to the manufacturer.
d) Expert Advice - Wholesalers know the pulse of the market trends so they can provide
first hand information about market trends and are of great help to manufacturers.
e) Helps in Distribution - The wholesaler undertakes the task of distribution. So the
manufacturer is relieved from the task of maintaining a large sales force to deal with
a large number of retailers and selling the goods in small lots.
Services provided by Retailers to Wholesalers
1. Retailers need not hold large stocks of varied goods - Wholesalers supply goods from
their stock as and when the retailers require the goods.
2. Financial help - Wholesalers usually allow credit to retailers thus giving financial relief
3. Prompt delivery of goods - As and when the order is placed by the retailer the
wholesaler delivers the goods to them.
4. Announcement of New Products - The wholesaler informs the retailer about the arrival
of new goods.
5. Benefits of specialisation -. The wholesaler specialises in one line of goods and thus
knows the pulse of the market. Therefore, he can advise the retailer 'when to buy',
'how much to buy’ etc
Types of Wholesalers
Classification on the basis of kind of function performed
a) Sole Distributors - In this case, the manufacturer gives away marketing rights throughout
one state, district or city to' one agent. The sole distributor takes charge of all marketing
and distribution responsibilities while the manufacturer concentrates on production. For
e.g. Mercedes Benz has a sole distributor for Bangalore city.
b) Franchisees - A franchising operation is "a legal contractual relationship between a
franchiser (the company offering the franchise) and the franchisee (the individual who
will own the business). The terms and conditions between the parties may vary based
on the agreement between them. This method of distribution channel originated in
America; the parent company provides loans, designs for buildings, training for both the
owner and his staff and helps in advertising for and promoting the business. These
outlets are called franchisees.
c) Stockists - This type of wholesaler stocks products for the retailer. Hence, their area of
operation is limited to the local re-distribution function. Generally the promotion and
advertising functions are not undertaken by a stockist. Hence, they get lesser
commission as compared to sole distributors and franchisees. For e.g. M/S AB Ltd. is the
stockist for ACC cement.
Classification on the basis of kind of business
a) General Merchandise Wholesalers - These types of wholesalers deal in a number of
unrelated goods. For example, a wholesale dealer stocks building materials and food
items: These types of wholesalers are not popular now because the general
tendency is to deal in specialized goods.
b) Speciality Wholesalers - These types of wholesalers deal in only one type of
merchandise. For example a wholesaler dealing in tea leaves. General Line
Wholesalers - These types of wholesalers deal in closely related items. For example,
a wholesaler dealing only in two types of two wheelers.
c) Cash and Carry Wholesaler or Metros - These types of wholesalers stock a variety of
goods. The retailer pays cash and carries the goods. In Bangalore 'Metro' has
different outlets in the city. Only retailers are allowed to buy from Metro and the
wholesaler operates just like a retail store.
d) Drop-shipment Wholesalers - These types of wholesalers do not handle goods; they
sell. But they collect orders from retailers and pass them on to manufacturers who
deliver the goods directly to retailers. They perform most of the wholesaling
function, with the exception of storage and handling. They are found in the cement,
iron, steel, and paper industry
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Retailing is a "trading activity directly related to the sale of goods and services to the
ultimate consumers for personal or non-business use." The party which does the retailing is
called the retailer. A retailer is the last link in the channel of distribution. He sells either
goods or services to the final consumer
Types of Retailers
As the name indicates, a store retailer sells the products to consumers through its retail
outlets. The various types of store retailers are:
a) General Stores: These stores are very common and offer a wide variety of unrelated
products. They fulfil the requirements of a large section of consumers. For example,
Sunday to Monday, FabMall, Food World, etc.
b) Convenience stores: These are stores located near residential areas. They store
provisions, vegetables, dairy products, etc. and often give one month's credit, are open
seven days a week with long working hours and home delivery facilities.
c) Speciality Stores: In this type of stores, goods of a particular variety are sold. These
dealers specialize and deal only in one line of gooks. For example, Exide Battery
showroom; it sells batteries for two, three and four wheelers.
Marketing Management 88
d) Specialized Departmental stores or Hypermarkets: This combines the principles of a
supermarket, departmental store, speciality shop and service shop in one giant sized
store. It has a wide collection of goods in one shopping mall. These types of shops are
called "one stop shops" and store food products, sport goods, garden products, dress
materials etc. For example, Big Bazaar.
e) Departmental stores: A departmental store is a huge retail shop situated at a central
place in the city, divided into a number of smaller shops or departments, each dealing
with one or two lines of goods and specializing in those lines. All such departments or
speciality stores are under one roof and under one management and control. This type
of department store is usually owned by one company as requires huge capital. For
e.g. Wills Life Style store, Shoppers Stop, etc. . .
f) Super market: a departmentalized retail establishment having four basic departments,
i.e. self service; grocery, meat produce and dairy plus other household items and doing
a maximum business. It may be entirely owner operated or have some of the
departments leased on a concession basis. Usually these stores are self service stores
and store lots of food and non-food products. The features of a super market are:
1. They are located in areas with ample parking facilities
2. They use mass displays of merchandise
3. Some shops have centralized security surveillance
4. They normally operate on a cash and carry basis, but credit cards and debit cards are
5. They make their appeal on the basis of low prices, selection of merchandise, wide
Marketing Management 89
6. They conduct customer surveys and also have a number of lucky draws, promotional
7. They operate largely on a self service basis
8. Supermarkets carry on retail trade with a speciality
g) Manufacturer's Own Stores: Manufacturers themselves organize retail stores for selling
their products. This is needed to survive in today's competitive world. These type of
shops are popular with ready-made shirts, jeans, branded shoes etc. For example,
Adidas, Peter England,' Lee, etc
h) Chain Stores or Multiple Shops: Chain stores or multiple shops are a network of retail
shops owned and operated by a manufacturer or an intermediary. A chain shop is
owned and operated by a big retailer. They deal in a variety of products manufactured
by different manufacturers. For example Food World, FabMall, etc. The' idea is to avoid
i) Consumers' Co-operative Stores: A consumers' co-operative society is set up to ensure
the steady supply of essential commodities of standard quality at fair prices. This
society can eliminate middlemen by establishing a direct link with producers. They
purchase articles of daily consumption" directly from manufacturers or wholesalers and
sell them to members at reasonable prices
j) Public Distribution System: This is an initiative of the Govt of India to supply essential
commodities to the poorer section of society. The other objectives of the public
distribution system are stability of prices and equitable
Marketing Management 90
Functions of Retailers
a) The retailer gives maximum local convenience to consumers. They are now providing
home delivery also, thus giving maximum convenience to consumers.
b) Consumers need not store the commodity beyond their normal requirements.
c) A retailer also stocks a wide variety of items.
d) A retailer gives information to consumers and displays the item in his store.
e) Retailers give advice and guidance to customers regarding the goods and services.
f) A retailer is the connecting link between manufacturers and wholesalers. Thus,
without retailers it is not possible to distribute goods to the ultimate customer and if
so, our wants will remain unsatisfied.
g) Retailers ensure the supply of essential items like fruits, vegetables, bread, milk, etc.
h) Retailers give consumer durables on an instalment basis, thus helping consumers
i) Retailers give the feedback to wholesalers and manufacturers about the latest
change in consumer wants and preferences so that they can make the changes
j) A retailer also educates customers about the diverse uses of new products.
k) A retailer is a guide and friend to his customer.
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Nature of Promotion
1. Informative process: All promotions, essentially, are designed to inform the target
market about the firm's offerings. It provides information to prospective consumers
about the availability, features and uses of products. This will help the consumer in his
2. Persuasive process: The very purpose of promotion is to persuade people to buy. It is
designed to stimulate purchase and to create a positive image in order to influence
long-term buyer behaviour.
3. Motivating process: Promotion aims at motivating distributors to provide more floor
space to company's product and push them
4. Brand switching: Promotion aims at attracting customers using competitor's brands
to its product or making consumers to switch brands.
5. Promotion is an investment: Promotional expenditure should not be seen as short-
term effort to gain sales. It is an investment in the customers, hopefully creating
positive attitude towards an organization or a product/service. A great deal of
promotional investment is future orientated in exactly the same way as R&D and
6. Promotion is directed towards a target group: A promotion strategy developed by
company aims at a target group. Therefore, marketing communicators must start with a
clear view of the target group. They should decide how comprehensively the group is to
be covered and what type of message and media should be selected.
Marketing Management 92
7. Promotion calls for economics: Promotion involves huge amount of expenditure. It
is suggested that promotional expenditure should be raised to the point where the
marginal return matches marginal cost on promotional expenses.
8. It is an intelligence process: Promotion decision involves lot of activities that are to
be handled carefully. It includes identifying target audiences, determining sales-
promotion objectives, deciding sales promotion vehicles, setting sales promotion
Importance of Promotion
The sales promotion is basically aimed at increasing sales. Sales can be increased mainly by
attracting more customers. Promotion is successful only if the middlemen co-operate with
the manufacturer. However, the promotion offers the following advantages:
1. It attracts more customers to the product. The incentives like price
off, premium etc, offered by the manufactures attracts people to the
2. It encourages the middlemen to buy and store more: As a result of
the incentives offered more people may go to the shops where the product will
be available. Sometimes manufactures encourage middlemen through additional
commission or allowances
3. It encourages the sales force by offering incentives to salesmen. This will
influence salesmen to participate in the campaign wholeheartedly
4. It boosts sales in the short and long term
5. It reinforces the brand image with the customer
Marketing Management 93
Push Strategy: Under this strategy, the producer directs all promotion efforts towards the
middlemen, i.e., the wholesalers and retailers. Thus, through this promotion strategy the
flow of goods moves in this direction: producer-wholesaler-retailer- consumer. A push
strategy can be successfully used when
a) The product is a high quality product with unique features .
the product is high priced
b) The producer offers adequate financial incentives to middlemen and their
It is also called the pressure strategy.
Pull Strategy: In this strategy the producer directs all efforts of promotion directly towards
the consumer. Subsequently consumers pull their wanted products from the retailers. This
forces the retailer to pull the products from the wholesalers who in turn stock the products
from the producers. Thus, in a pull strategy the request for the product starts from the
consumer to the producer. A pull strategy is also called a suction strategy. Here, there is
lesser emphasis on personal selling and so small firms find this promotion channel useful as
they can avoid heavy investments in advertising and sales promotion.
Push and Pull strategy: Most consumer goods manufacturers generally use the Push-Pull
(or combination) strategy to sell their products. The ratio of the push and pull strategies is
decided on the basis of the requirements of the market situation. Salesmen are used to
push goods through their marketing channel, and advertising and sales promotion support
personal selling" to accelerate sales. Thus, the combined strategy works effectively.
Marketing Management 94
The phrase 'sales promotion' is made up of two words, namely sales and promotion. It
implies special efforts or offers, special in the sense that they are extra and also specific as
to time and place. Offers means that they are direct propositions, the presence of which
forms a part of the deal.
According to the American Marketing Association, "sales promotion is the set of those
marketing activities, other than personal selling, advertising, and publicity, that stimulates
consumer purchasing and dealer / effectiveness, such as displays, shows and exhibitions,
demonstrations and various non-recurrent selling efforts in the ordinary routine".
Differences between Sales Promotion and Advertising
1. In order to promote sales, the approach followed in the case of "sales promotion", is
both personal and impersonal in its efforts and approach, while in the case of
advertising, it is purely an impersonal approach of contracting and changing
2. Advertisement policies are long term, which do not change very often, while sales
promotion aims at attaining short term goals, which may change often from time to
time and place to place.
3. The aim of sales promotion is to increase immediate sales, whereas that of
advertising is to build the image of the producer and the product.
4. Sales promotion is non-recurring, and it is for a limited period, whereas advertising
is regular and recurring.
5. Sales promotion is supplementary to advertising and personal selling, and pushes
Marketing Management 95
the product towards buyers, whereas advertising informs, persuades and reminds
buyers, and attracts customers towards the product.
6. Sales promotion is the marketing activity which stimulates consumer buying, and
dealer effectiveness, whereas, ‘advertising is any paid form of impersonal
presentation and promotion of a product, service or idea by an identified sponsor
Consumer Sales Promotion Methods
1. Sampling - This is usually called consumer sampling. Free samples are given to
consumers to try the product. For example, free shampoo sachets are distributed when
a new brand is introduced.
2. Demonstration - To educate consumers about how to use a product, for example, free
cooking classes to demonstrate how to use a microwave.
3. Coupon - A coupon is a certificate that reduces prices; for example coupons published
in national dailies for Pizza Hut's Pizzas. '
4. Money Refund Orders - Here the full purchase price is refunded. This method is used
for introducing new products. Refund offers create additional interest, and also
5. Premium Offers or Gifts - These are merchandise offered at a relatively lower price for
free, as an incentive to purchase a particular product. For example, a plastic bucket
is free with three 1 kg packets of Henko washing powder.
6. Price off - Offering a lesser price than the retail price.
7. Fashion shows - Quite popular for men's and women's exclusive clothing and fashion
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8. Contests - These are meant for consumers, in order to stimulate consumer interest in
9. Trading Stamps - These are given for purchasing in a particular shop. For example, Food
10. Tie in Promotions - Two or more brands or companies team-upfor providing coupons,
refunds and discounts to increase their pulling power. For example, buy one FILMFARE,
get a packet of RASNA free.
11. Product Warranties - The promise to replace an item in case of any complaints. This is
popular for consumer durables.
12. Free Trials - Inviting prospective buyers to try a product without cost, in the hope that
they will buy the product. For example, test driving allowed for cars.
13. Patronage Rewards - These are values in cash or in oilier forms, proportional to one's
patronage to a certain vendor. For example, most airlines offer frequent flyer free
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Dealer Sales Promotions
1. Retail Demonstration -. In the premises of the wholesaler or retailer, the product sales
personnel conduct special demonstrations of the product.
2. Trade Discount - The discount offered to retailers or wholesalers. For example, retail
book dealers are entitled to a 33.33% trade discount.
3. Dealer Contests - This is an indirect way of increasing sales. It is conducted by the
manufacturer, at a wholesaler or retailer level.
4. Special Displays - The producer, in collaboration with dealers, may put up special shows
of the product at fairs and exhibitions. Sometimes, producers may compensate dealers
for the space given for the display of the product.
5. Advertisement Materials - Advertisement materials prepared by the' company, such as
store signs, banners; shelf signs, boards, etc. are distributed to sub-dealers for display
purposes. Its examples are Pepsi and Coke.
6. Special Allowance - Manufacturers may offer special allowances (usually mentioned as a
percentage), in return for the retailer agreeing to feature their product in some way.
This is done in the case of new products.
7. Gifts - Manufacturers may offer free gifts to dealers, or to their sales force to push the
8. Special Allowance - An extra discount is given if the retailer buys a certain quantity. For
example, a retail book dealer is entitled to a 30% discount normally, but if he buys 50
books at a time, the publisher may give a 35 % discount.
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Personal Selling / Salesmanship
Personal selling is a marketing process with which consumers are personally persuaded to
buy goods and services offered by a manufacturer. Personal selling is a component element
in the communication mix. It is a two- way form of communication that has' a. number of
advantages from the point of view of marketing organization.
Personal selling gives marketers the freedom to adjust the message to satisfy the
customer's information needs. The American Marketing Association defines personal selling
as "oral presentation in a conversation with one or more prospective purchases for the
purpose of making sales".
A significant feature of personal selling is the interaction between the marketer and the
customer. For .e.g. Eureka Forbes and Aqua Guard uses this method for selling
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Personal selling is an efficient promotional method due to the following reasons:
a) It allows marketers to adapt the selling situation according to the situation at hand.
b) A personal relationship can be developed between the customer and sales person.
c) Salesmen can demonstrate the features of products and services.
d) The customer can clarify or collect extra details about the products and services.
e) This method is an intensive means of promotion. Salesmen can use their tact, skill,
wisdom, and calibre to handle the situation efficiently.
f) Salesmen also adopt the language of communication of the customer while
explaining the features of goods and services
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The Definitions Committee of the American Marketing Association defines advertising as,
"any paid form of non- personal presentation and promotion of ideas, goods or services by
an identified sponsor."
The term advertising is derived from the Latin word, "advertere" which means 'to turn'
Every piece of advertising turns the attention of the reader or the listener or the viewer or
the onlooker, towards a product 'or a service or an idea. Thus, it can be said that anything
that turns one's attention to an article or a service or an idea, can be called advertising
Features of Advertising
a) It is a Mass Communication Process - Advertising is the means to communicate a
message to a target audience. For example, an advertisement in television for a few
seconds, reaches millions of people.
b) It is Information in Action - Each and every advertisement is a piece of information to
listeners, readers, viewers and onlookers. An advertisement announces the arrival of a
new product, talks about its special features and explains the best use of the product.
c) It is a Persuasive Act - Advertising is persuasive because the main function of advertising
is to persuade the reader, listener or viewer. We can say that advertisement draws
attention, creates interest, converts interest into desire, and desire into action. Thus,
the success of advertising is its ability to persuade.
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d) It is a Competitive Act - Through advertising, the advertiser wants to communicate the
superiority of his product to other products or services available in the market. Thus,
advertising is the medium for a business unit to turn business in its favour, to increase
its market share, sales and hence profits.
e) It is not Part of the Product - Advertising is the total benefit that a consumer derives
through the use of a product or a service. It is true that the product price includes
advertising cost but advertising is not a part of the product or service
f) It is paid for - Advertising is not possible free of cost, and whatever be the media of
advertising, it has a cost to the advertiser.
g) It has an Identified Sponsor - Advertising is a matter of public relations. Each and every
advertisement is sponsored by a manufacturer or dealer on behalf of manufacturers,
with the specific name, brand or logo. Thus, we can identify the advertiser.
h) It is Non-Personal Presentation - Advertising is an impersonal attempt to present the
message, regarding a product or a service or an idea. In other words, the manufacturer
and consumer are not in direct or personal contact with one another. For example,
Ratan Tata does not personally tell us about his products, instead, he selects a
convenient and viable media to pass on his message to the target audience or target
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Choice of Advertising Media
1. Nature of the Product
The product to be advertised is the main determinant of the advertising medium. Consumer
products such as soap, paste, tooth brushes, cold drinks, beauty aids, etc. are meant for the
masses, and therefore should be advertised through newspapers, radio, films and outdoor
displays, which have a general and wide-spread appeal. But consumer durables need
demonstration and so they can be advertised on television. Industrial goods like raw
materials, tools, machinery, etc. can be advertised better in specialised trade, technical and
professional journals. Accordingly, the advertising planner has to select the media which
matches the product and its nature.
2. Potential Market
The characteristic of a potential market for the company's products will determine the
exact choice of the media. The aim of every advertising effort is to carry on the advertising
message to prospective customers, economically and effectively. This depends on
identifying the potential market for the product, in terms of number of customers, their
geographic spread, their income level, their age group, their tastes, their likes, dislikes, etc.
Market research can give valuable information in this regard. If the message is to reach
moderately rich people, then magazines are the best medium. If a local area is to be
covered, news paper and outdoor advertising media are helpful. If the idea, is
to reach illiterate people, then radio, television and film media are best suited. So, the
media must match the demographic features of the market for the products
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3. The Type of the Distribution Strategy
The medium or the media should be one that goes in line with the company's distribution
strategy. There is no point in advertising a product if it is not available in retail outlets.
Similarly, the advertiser need not use a national media, if he does not have a national
distribution system or network.
4. The Advertising Objective
The objective of advertising has a significant role to play in deciding the medium of
advertising. If the objective is to introduce a new product, or to fight the competition, a
combination of various media may be used. Prize contests will help to build up the goodwill
of the firm and may increase sales also. If the firm wants national coverage, it can go for
news papers, magazines, radio, television, etc. If the firm wants worldwide publicity, it can
go for dot.com advertising.
5. The Finance Available
Funds at the disposal of the advertiser have a direct bearing on media selection. A
manufacturer may have a deep desire to go for costly media, but funds may not be
sufficient for this. So; the advertiser must go in for that medium or media, where he gets
the maximum participation, or schedule of insertions, to achieve an effective advertising
6. Media used by Competitors
The success of the advertising programme and strategy also depends on the media used by
competitors. So, the advertiser should study the moves of his competitors carefully, and
make his plans accordingly. Usually, the majority of advertisers follow what their industry
follows, or what the competitors follow.
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7. Characteristics of Media
Media characteristics differ widely, and this factor affects the choice of media. These
characteristics are coverage, reach, cost, consumer confidence and frequency.
a. Coverage: This refers to the circulation or the speed of the message provided by
the media. The larger the coverage, the greater are the chances of message
exposure to the public. So, advertisers usually prefer media with larger coverage
or circulation. In this context, news papers, magazines, radio, television and
cinema are known for mass coverage. On the other hand, direct advertising and
outdoor advertising media are known for local and regional coverage.
b. Reach: This is a better measure to evaluate the effectiveness of the
advertisement, because it indicates the actual potential audience exposed to the
advertisement. We can measure the reach with readership in case of press media,
listenership in case of radio and viewership in case of television. This data is most
important to evaluate the actual and potential reach of the advertisement.
c. Relative Cost: This refers to the amount of money spent on a particular
advertisement. The amount of funds available for advertising should cover its
cost. Now, newspapers have reduced advertising rates considerably and so it is
cheaper and more popular as compared to television advertising.
d. Frequency: This refers to the number of times the advertising impression reaches
the target audience. In this heavy expenditure on advertisements, and the costs
are passed on to consumers.
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8. Monopoly - A few large firms in the industry utilise advertisements to prevent the entry
of small firms in the market; and thus create a monopoly in the market. Only big
manufacturers can afford to spend lavishly on extensive and intensive advertisements
to retain and enlarge their market share.
In 1961 Professor Russel H., College wrote a book titled "Defining Advertising Goals for
Measured Advertising Results". The book introduced what has become known as the
DAGMAR approach to advertising planning, and includes a precise method of selecting and
quantifying goals, and for using these goals to measure the performance. The approach says
that the objectives of advertising must fulfil the communication task as follows.
a. Awareness - The prospect must become aware of the existence of brand or
b. Comprehension - The prospect must understand what the product is and what it
will do for him.
c. Conviction - The prospect must be mentally convinced to buy the brand.
d. Action - The prospect takes meaningful action.
These four goals of advertising in communication terms are measurable.
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The objective of advertisement copy is to influence and motivate people. The words used to
convey the advertising idea or themes are collectively called the "copy" and the person who
prepares the copy is called a "copywriter". The success or failure of the advertisement is
closely related to the copy of the advertisement. The objective of advertisement copy is that
people should see the advertisement, read it, the message should be conveyed and then
they should act upon it on that basis.
For example, an advertisement for 'Honda' generators states "Get the power to run all your
appliances even during long power cuts" The preparation of an advertisement copy requires
psychological, imaginative and artistic skills. The copywriter should also have knowledge of
the product, the company's image and other motivational aspects.
For example 'Nakshatra' diamond jewellery carries the message "the brightest circle of
light". The advertisements should be capable of attracting and creating interest in
consumers. At the same time it should also persuade the reader to buy.
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Qualities of a Good Advertisement Copy
An advertising copy is defined as "all the written or spoken material in it, including the main
body, headlines, sub-heads, and all other printed elements such as picture captions, slogans,
brand names, trademarks, and prices, logotypes (advertiser's name or signature).
Thus, a copy is the reading matter; the words, sentences, paragraphs, sub heads, headlines
and figures in an advertisement. For example, the new car model from Maruti Suzuki -
"Swift" lists its features, price and showroom details with phone numbers on its
The qualities of good advertisement copy are:
a. It must get the attention of people. It must have personal appeal
b. People should get the relevant information. It must be easily understandable
c. It must make people believe in it and impress them
d. It must create a desire among people to buy the product
e. It should be imaginative but never misleading
In short, a scientifically defined copy should:
a) Attract initial attention
b) Hold the attention of viewers in an interesting manner i.e. awakens them and
c) Preserve the message in memory.
d) Convince, persuade or induce the reader
e) Suggest and lead to a specific response that will ensure the determination to buy
It is worth quoting the "AIDA" formula of advertising here, where "A" stands for Attention,
"I" stands for Interest, "D" stands for Desire and "A" for Action.
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Elements of Advertising Copy
a. Attention Value: The first and foremost element of an advertisement copy is its
attention value because if it fails to attract attention the entire effort is useless. The
copy must be so well prepared that it must attract the notice of even involuntary
readers. The general tendency of readers is to skip advertisements while reading.
Thus, it is inevitable for the advertiser to make the 'advertisement attractive. Usually
advertisers use pictures, drawings, attractive headings, slogans, contests, puzzles, gift
coupons, etc. When Maruti Suzuki introduced its new model "Swift", the company
gave full-page advertisements in all national dailies to get maximum attention. .
c. Suggestive Value: The copy should suggest the usefulness of the article advertised. The
use of slogans, pictures and phrases have been found to ·have great memorizing value.
Even repeated advertisements have been found to be noticed by people. Tata Steel's
advertisements say "Relationship. The bond of building quality."
d. Memorising Value: The copy should create a lasting impression on the reader's mind.
Even the very first advertisement is aimed at the reader remembering the product
image. The same message is communicated in repeated advertisements for a
memorizing effect. For example, Sachin Tendulkar's "Boost is the secret of my energy".
e. Conviction value: The advertisements should never be misleading but should convince
the prospective buyer about the accuracy and truth of the statements conveyed. The
message should not be an exaggeration or misrepresentation. The company can use
sincere and plain statements. For example, the Fevicol adhesive states that it sticks
thermocole, wood, cardboard, cloth and cotton.
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f. Sentimental Value: Sentiments play a significant role in advertising. It is the duty of the
advertiser to respect local habits, customs, traditions, likes and dislikes, communal
value, etc. For example 'Godrej' chicken states that they sell "halal cut" chicken. Some
companies insist that their product is "Indian" to distinguish it from those of foreign
g. Educational Value: The copy must possess educative value. The advertiser should be
well aware of the habits of the people and the advertising campaign can be designed
accordingly. For example polio vaccination advertisements educate people about the
need for that particular vaccination.
h. Instinct Value: Human actions are guided by instincts and inclinations. A successful
advertiser must appeal to the right instinct. Human behaviour is fundamentally related
to instincts. Thus, people behave differently at different times and occasions. In order
to create the desired instinct the advertiser should plan well before the preparation of
an advertisement copy. These instincts are pride, beauty, health, fear, etc. and the
advertisement should be capable of tackling these instincts and directing people
towards a particular product.
i. Action Value: The main objective of advertisement copy is to persuade the people so
that they act upon it. People will act if the company enjoys goodwill acquired over the
years. For example, Mahindra and Mahindra, Tata and Ashok Leyland enjoy goodwill in
the heavy vehicles sector.
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Evaluation of Advertising
The evaluation of advertising performance refers to the managerial exercise aimed at
comparing advertising results to established standards of performance and objectives so as
to assess the effectiveness of the advertising campaign.
Need for Evaluation of Advertising
It is necessary to evaluate because of the following reasons.
a. It is an established fact that advertising has an impact on sales and so evaluation is
useful in deciding the succeeding advertising budget.
b. Evaluating the effectiveness of advertising is also useful to measure the impact of
alternative advertising media such as print media, television, layout, etc. to best
understand channels for future decisions.
c. Similarly, due to the dynamic nature of the market it is necessary to identify the
effect of different components of a marketing mix so as to ascertain the
effectiveness of each against the target contribution.
d. Evaluation is necessary to ascertain the saturation point of advertisements, i.e.,
the point beyond which advertising produces negligible sales response. This point
is where the firm has to reshuffle the communication mix and marketing mix to
produce a traceable sales response.
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Methods to evaluate the effectiveness of advertising
a. Statistical Techniques - The most commonly used method for measuring the sales
accomplished in past advertising expenditure. The limitation of this method is that in
highly fluctuating market conditions, many factors affect sales others than advertising.
b. Test Marketing - In this method, before launching a campaign, certain territories are
kept as test markets and are expected to different levels of advertising campaigning.
The results of such test markets are computed to get an idea of the impact of sales in
c. Direct Mail Campaign - In this method, short term and immediate sales and their
impact on advertising can be made more effective along with some contests, slogan
writing, and sending empty packets to confirm usage, etc.
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E-business can be defined as "the use of electronic means and platforms to conduct a
company's business". The electronic revolution and advancements in science and
technology have greatly increased the ability of companies to conduct their business faster,
more accurately, over a wider range of time and space, at reduced cost and to offer better
and more personalised services to customers. Most prominent companies, in today's date,
have set up websites to inform 'consumers and promote their own products and services.
For example: The website for the newly launched Kingfisher Airlines is
Companies have created intranets to facilitate employee communication and the
downloading and uploading of information to and from the company's networks. Similarly,
companies have also set up extranets with major suppliers and distributors to facilitate the
exchange of information, orders, transactions and payments.
E-commerce has given rise to e-purchasing and e-marketing. E-purchasing means that
companies are able to purchase goods, services and information from various online
suppliers. Similarly e-rnarketing describes a company's efforts to inform, communicate,
promote and sell its products and services over the internet. How e-commerce and e-
business takes place, can be divided into four categories:
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1. B2C (i.e. Business to Consumer)
2. B2B (i.e. Business to Business)
3. C2C (i.e. Consumer to Consumer)
4. C2B (i.e. Consumer to Business)
Let us explain these terms one by one:
1. B2C (i.e. Business to Consumer)
This is where an online consumer purchases directly from a company website.
Nowadays, customers need not go to shops to buy products and services. All the
information is available from company websites and companies also give numerous
discounts for online purchasers. Additionally, the goods purchased or services accepted
are delivered to the doorstep of the customer. Thus, consumers can now book hotel
reservations, buy air tickets, send gifts, etc. through this internet facility. It is also useful
when buyers need information about product features and prices.
2. B2B (i.e. Business to Business)
This refers to online dealings between businesses. Business firms use company sites for
auctions, spot exchanges, purchases, selling, etc. Companies are able to save a lot on
the expenditure involved in the procurement of raw materials and logistics. Moreover,
companies are also able to interact with each other and enter business agreements
with companies throughout the world.
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3. C2C (i.e. Consumer to Consumer)
In the past, the popularity of goods and services proliferated through "word of mouth";
but now the same proliferation occurs through the "word of web". This refers to
consumer to consumer communication on the web. For example: Farmers located
anywhere in the world can communicate with each other about new methods of
farming, strategies for marketing their produce and obtaining manure and seeds. Etc.
Even websites are allowing consumer forums for customers to discuss product details
and drawbacks. A survey has proved that an unsatisfied customer spreads news much
faster than a satisfied customer does. Hence, through the "word of web", news
about good companies, products and services travels much faster; with this speed
multiplying in the case of bad products and companies.
4. C2B (i.e. Consumer to Business)
This allows consumers to communicate directly with companies. For example:
www.indiatimes.comis the official portal for the Times Group that publishes the
Times of India newspaper, where readers can communicate directly with the
publication, send queries, make suggestions and seek clarification via e-mail.
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Telemarketing and M-commerce
Telemarketing involves the use of telephones and call centres to attract prospective
clients, sell to existing customers, take orders and answer questions. This helps companies
increase sales, reduce selling costs and increase customer satisfaction. -
Companies use call centres for inbound telemarketing (i.e. receiving calls from customers)
and outbound telemarketing (i.e. calling prospective and existing customers). Companies
carry out four types of telemarketing:
1. Telesales - The taking of bulk orders from catalogues or advertisements and also
calling existing and prospective customers.
2. Telecoverage - This refers to calling customers to maintain good relations with them.
This is mainly in the case of after sales service for products like cars, in which, during
the servicing period, service station attendants may call customers every month to
enquire about the performance of the car.
3. Teleprospecting - This refers to extra initiatives taken to promote a company's
products and services so that other sales channels can be closed.
4. Customer Service & Technical Support - This refers to the answering of queries
about servicing, product use and post-sales follow up.
For example: Citibank uses this marketing tool to provide services to customers.
Telemarketers must have a pleasant voice and pleasing manners. It has been found out that
women are more effective than men for selling products and services.
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Retailing includes all the activities involved in selling goods or services directly to final
consumers for personal, non-business use. A retailer or retail store is any business
enterprise whose sales volume comes primarily from retailing. Any organization, whether a
manufacturer, wholesaler or retailer, selling to final consumers; is said to be doing retailing.
It does not matter how goods and services are sold, whether by person, mail, telephones,
vending machines, the internet or at the point of purchase (the store, street or
Retailing can be divided into two categories:
a) Retail Stores
b) Non-retail Stores
1. Store Retailing
Store retailing is done in retail stores. The kinds of services offered by a retail store can be
divided into three sub-categories:
i. Self-service Retailers - These types of retail stores give consumers the freedom to
select goods and procure them straight off the shelf. These shops carry household
items such as vegetables, groceries and provisions. For example: Big bazaar,
metro, Food World, FabMall, Monday to Sunday, etc.
ii. Limited Service Retailers - In these types of retail stores, only limited sales service
is available to consumers. These shops carry more shopping goods. For example:
Shops like Shopper's Stop and Lifestyle.
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iii. Full Service Retailers - In this case, a complete range of services is available to
consumers. These services are available in the case of jewellery shops,
automobiles, cameras, fashion goods, etc.
iv. Other types of retail stores such as specialty stores, department stores,
supermarkets and convenience stores have been discussed in previous chapters.
2. Non-store Retailing - In this type of retailing, goods and services are not sold to
consumers through retail stores. It includes direct marketing, direct selling and
i. Direct marketing: This method uses various advertising media to interact
directly with consumers, generally calling for consumers to make a direct
response. Direct marketing has been successful in increasing business to business
sales and business to consumer sales. There are five forms of direct marketing,
viz. direct mail, catalogue marketing, telemarketing, television marketing and
ii. Direct Selling: Door-to-door selling has been adopted by many companies to
push sales. Companies like Aquaguard and Eureka Forbes have been particularly
successful in adopting this policy. Eureka Forbes' representatives go from house
to house to demonstrate the company's vacuum cleaners. Similarly, Aquaguard
representatives show how water can be purified at home by using its water
purifiers. The advantages of door-to-door selling are consumer convenience and
personal attention. An important factor to note is that the success of any direct
selling program depends on the motivation of the on-field work force.
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iii. Automatic Vending - Automatic vending machines operate on computerized
machinery. In India, automatic vending machines sell products like ice creams
and soft drinks, but in developed countries they also sell cigarettes, newspapers,
beverages, food items and a wide variety of other products. Compared to store
retailing, vending machines offer consumers greater convenience, 24 hours self-
service, and fewer damaged goods.
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Internet marketers are using viral marketing as a form of 'word of mouth' to draw attention
to their sites. Viral marketing involves passing on company developed products, services or
information from user to user.
For example: Hotmail, offered free e-mail accounts to all those who signed up. Each e-mail
sent by a hotmail subscriber included a message "Get your free private e-mail at
www.hotmail.com ". The users were in effect advertising Hotmail to others.
This is the process of conducting marketing activities geographically via electronic means,
without any face to face contact between buyer and seller. In virtual marketing, the
customer can enquire about the product, compare the different products, prices and can
also ask for the door to door delivery of goods/services at their convenient time. Customers'
queries are answered online.
Advantages of virtual marketing:
1) Opening a website to sell a product is equivalent to opening of branches all over the
2) A web market can give information about different products and services from a single
website. For example, Hero Honda Company's website will give information about all
3) Web marketing is completed at a faster pace.
4) The company can reduce the business expenses like salary, showroom expenses, etc.