Marketing-Management

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					Marketing
Management                                2010
This book has been compiled by Vipin MK
                                            For JGI
                                            Students
                                           Chapter 1
Definition


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

utilities.


Marketing Concept


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

                   management.

         iii)      The company must produce only basic products.

                 Good                                                  Good
                Product                                                Sales
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.


       iv)
  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

      approach.

   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

      work together.

   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

          change.


Marketing Scope

   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

   the consumer.

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

   accordingly
Importance


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

       competition.

   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

growth


    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

       economic growth.

   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

technology.


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.
Differences

   a. Difference between selling and marketing

                       Selling                                 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

                    Traditional                       Modern
       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.
                                        Chapter 2

                                 Marketing Environment

To understand the various components of marketing environment, it may be classified into

two categories:


   a. Macro Environment (External, uncontrollable)

   b. Micro Environment (Internal, controllable)


Macro Environment


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

   environment:



   a. Changes in lifestyle

   b. Social problems such as concern over the promotion and product’s impact on the

       environment

   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

   recyclable products.


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.


Micro Environment


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

   into segments.

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

       packages.

       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

   another.
Market Segmentation


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

marketing mix.


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

   goods.

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

       profit.

   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


                            Consumer              Consumer
                          Characteristics         Responses


                              Geographic              Benefits



                             Demographich
                               and Socio               Usage
                               Economic



                              Psychological           Loyalty




                                                      Occasion




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

              set up.

   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

          human behaviour

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

   characteristics:

   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

product:


      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

       strategies:

       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

       youngsters.

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

      the day.
Market Targeting


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. [1] 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

       resources.

   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
                                           Chapter 3

Product


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


Product Differentiation


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

   replacement part.

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

              become popular.

       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.
Product Strategy


It addresses the following issues:


   a. Product Line

   b. Product mix

   c. Packaging

   d. Labelling

   e. Branding

   f. Service after sale

   g. Organizing for product planning and development

   h. Product research and improvement


Product Mix


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

       product line
   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

other users.
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.
Branding

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
indicate

    Product benefits

    Product quality

    Names easy to remember, recognize, pronounce

    Product category

    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.:

       Surf, Ovaltine.
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


Brand Loyalty

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.
Brand extension


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

category,
Brand Equity

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

brand name.


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

           product.
b. Growth Stage


   In the growth stage, the firm seeks to build brand preference and increase market

   share.


      Product quality is maintained and additional features and support services may

       be added.

      Pricing is maintained as the firm enjoys increasing demand with little

       competition.

      Distribution channels are added as demand increases and customers accept the

       product.

      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

   maximizing profit.


      Product features may be enhanced to differentiate the product from that of

       competitors.

      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

           niche segment.

          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

       Promotional effort

       Distribution intensity

       Perceived risk

       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

          them.

         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

                    market?

             c)     What is the current or expected competitive pressure for the product

                    idea?

             d)     What are the industry sales and market trends the product idea is

                    based on?

             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

         Resource estimation

         Requirement publication

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
                                        Chapter 4

Pricing Objectives

   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

          regulations.



   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

          employed.

       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

       chosen
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

   business
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

       quality.


   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

       trend.

   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.
                                         Chapter 5
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

ultimate customer.

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

         services.

    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

         manufacturers.

    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

         markets.

    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

             channel.

        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

        possible.

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

        indirect channel.

   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

     channel.
Types of Intermediaries

   1. Middleman

   2. Wholesalers

   3. Retailers

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

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

     to them.

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
                                                         Marketing Management              87


Retailers

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




Store 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

        also accepted

     5. They make their appeal on the basis of low prices, selection of merchandise, wide
                                                         Marketing Management             89


        publicity, etc.

     6. They conduct customer surveys and also have a number of lucky draws, promotional

        schemes, etc.

     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

     wholesalers

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
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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

       and manufacturers.

   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

       accordingly.

   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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                                        Chapter 6

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

   intelligent buying


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

   training.

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.
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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

   budget etc.


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

          product

    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
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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

       salesmen.

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.
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Sales Promotion

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

      consumer behaviour.

 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
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      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

      increases sale

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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     jewellery.

8.   Contests - These are meant for consumers, in order to stimulate consumer interest in

     the product;

9.   Trading Stamps - These are given for purchasing in a particular shop. For example, Food

     World.

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

     airline trips
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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

   manufacturer's goods.

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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Advertising

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'

attention.

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

   market.
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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

programme.

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.


DAGMAR Approach

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

         company.

    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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Advertisement Copy

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

advertisements.

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

         stimulate interest.

   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

     paper,

     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

     companies.

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

     these markets.

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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                                           Chapter 7

E-Business

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

www.f1ykingfisher.com

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.
                                                             Marketing Management            114


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.
                                                         Marketing Management               115


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.
                                                            Marketing Management              116


Retailing


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

manufacturer's office)


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.
                                                             Marketing Management             117


     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

            automatic vending

       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

                  electronic shopping

       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.
                                                   Marketing Management             118


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.
                                                       Marketing Management             119


Viral Marketing

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.


Virtual Marketing

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

     world.

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

     its products.

3)   Web marketing is completed at a faster pace.

4)   The company can reduce the business expenses like salary, showroom expenses, etc.

				
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