elements of marketing book

ELEMENTS OF MARKETING

BABASAB PATIL



BABASAB PATIL


SYLLABUS

Modern Marketing Concept – approaches to the study of marketing Features ofIndustrial, Consumer and Services Marketing

Consumer Behaviour – Meaning – Consumer Behaviour models – their relevanceto marketing – Market Segmentation Strategies – Marketing Mix.

Product Planned and Development – Test Marketing – Product positioning –Product life cycle – Brand policies and practices

Pricing policies and Methods – New Product Choice and management

Promotional Mix : Personal and Impersonal selling Salesmanship –Compensation plans – Evaluation of performance salesforce – Advertisementpractices – Measurement of effectiveness advertisement – publicity – Salespromotion : Methods and their uses.

Contents

SL. No. Lessons

1. Marketing – Meaning and Importance

2. Marketing Concept

3. Approaches to the study of marketing

4. Features of industrial, consumer and service marketing

5. Marketing Mix

6. Market Segmentation

7. Consumer Behaviour

8. Product Planning an Development and PLC


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9. Branding and Packaging

10. Pricing policies and method

11. Physical distribution

12. Personal Selling

13. Sales Management

14. Advertising

15. Sales Promotion

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LESSON – 1MARKETING – MEANING AND IMPORTANCE

Marketing has been defined by different authors differently. A populardefinition is that “marketing is the performance of business activities that directthe flow of goods and services from producer to consumer or user”. Anothernotable definition is that “marketing is getting the right goods and services tothe right people at the right place at the right time at the right price with theright communication and promotion”. Yet another definition is that “marketingis a social process by which individuals and groups obtain what they need andwant through creating and exchanging products and values with other.” Thisdefinition of marketing rests on the following concepts.

i) needs, wants and demands.

ii) Products,

iii) Value and satisfaction,

iv) Exchange and transactions, and

v) Markets

Needs, wants and demands:

A human need is a state of felt deprivation of some basic satisfaction.People require food, clothing, shelter, safety, belonging, esteem etc. Theseneeds exist in the very nature of human beings.

Human wants are desires for specific satisfiers of these needs. Forexample, cloth is a need but Raymonds suiting may be want. While people’sneeds are few, their wants are many.

Demands are wants for specific products that are backed up by an abilityand willingness to buy them. Wants become demands when backed up bypurchasing power.


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Products:

Products are defined as anything that can be offered to some one tosatisfy a need or want.

Value and satisfaction:

Consumers choose among the products, a particular product(s) that givethem maximum value and satisfaction.

Value is the consumer’s estimate of the product’s capacity to satisfy a setof his goals.

Exchange and transactions:

Exchange is the act of obtaining a desired product from someone byoffering something in return. A transaction involves atleast two things of value,conditions of agreement.

Markets:

A market consists of all the potential customers sharing a particular needor want who might be willing and able to engage in exchange to satisfy thatneed or want.

Importance of Marketing

1. Marketing process brings goods and services to satisfy the needs andwants of the people.

2. It helps to bring new varieties and quality goods to consumers.

3. By making goods available at all places, it brings balanced distribution.

4. Marketing converts latent demand into effective distribution.

5. It gives wide employment opportunities.


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6. It creates time, place and possession utilities to the products.

7. Efficient marketing results in lower cost of marketing and ultimatelylower prices to consumers.

8. It is vital link between production and consumption and primarilyresponsible to keep the wheels of production and consumptionconstantly moving.

9. It creates and raises standard of living of the society.

Marketing Vs Selling

The marketing and selling are frequently confused. Theodore Levitt in hissensational article ‘Marketing Myopia’ draws the following contract betweenmarketing and selling.

Selling focuses on the needs of the seller, marketing on the needs of thebuyer. Selling is preoccupied with the seller’s need to convert his product intocash, marketing with the idea of satisfying the needs of the customer by meansof the product and the whole cluster of things associated with creating,delivering and finally consuming it.

Selling Marketing

1. It is a part of the marketingprocess

1. It is a comprehensive term ortotal system.

2. The emphasis is on product 2. The emphasis is on customer

3. It aims at seller’s needs 3. It aims at buyer’s needs

4. Its aim is sales volume 4. Its aim is buyer’s satisfaction

Marketing Management:

Marketing Management takes place when atleast one party to a potentialexchange gives thought to objectives and means of achieving desired respondsfrom other parties.

Marketing Management is defined as “the analysis, planning,implementation and control of programmes designed to create, build and


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maintain beneficial exchanges and relationships with target markets for thepurpose of achieving organizational objectives.”

Marketing managers have to carry marketing research, marketingplanning, marketing implementation and marketing control. Within marketingplanning, marketers must make decision on target markets, market positioning,product development, pricing, channels of distribution, physical distribution,communication and promotion. Thus, the marketing managers must acquireseveral skills to be effective in market place.

REVIEW QUESTIONS:

1. Bring out the importance of marketing

2. Distinguish marketing and selling

3. What do you understand by marketing management?

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LESSON – 2MARKETING CONCEPTS

There are five competing concepts under which business organisationcan conduct their marketing activity.

1. Production concept

2. Product concept

3. Selling concept

4. Marketing concept

5. Societal marketing concept

Production concept:

The production concept holds that consumers will favour those productsthat are widely available and low in cost.

Product concept:

The product concept holds that consumers will favour those productsthat offer the best quality, performance and features.

Selling Concept:

The selling concept holds that consumers will ordinarily not buy theorganization’s products on their own unless that organisation undertakes andaggressive selling and promotion effort.

The selling concept is undertaken most aggressively with ‘unsoughtgoods’, those goods that buyers normally do not think of buying such asinsurance. The selling concept is also practiced in the areas like politics wherethe political parties sell their candidates to the votes.


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Marketing Concept:

In a modern industrial economics, productive capacity has been built upto a point where most markets are buyers markets (i.e. the buyers are dominant)and sellers have scramble hard for consumers and ultimately consumers beganto occupy a place of unique importance. The business firms recognize that“there is only one valid definition of business purpose to create a customer”. Inother words, the recognition of the importance of marketing leads to theacceptance of marketing concept.

The marketing concept holds that the key to achieving organizationalgoals consists in determining the needs and wants of the target markets anddelivering the desired satisfactions effectively and efficiently:

On other words, marketing concept is a customer’s needs and wantsorientation backed by integrated marketing effort aimed at generatingcustomer satisfaction as the key to satisfying organizational goals.

The salient features of the marketing concept are:

1. Consumer orientation

2. Integrated marketing

3. Consumer satisfaction

4. Realization of organizational goals.

1. Consumer orientation:

The most distinguishing feature of the marketing concept is theimportance assigned to the consumer. The determination of what is to beproduced should not be in the hands of the firms but in the hands of theconsumers. The firms should produce what consumers want. All activities of themarketer such as identifying needs and wants, developing appropriate productsand pricing, distributing and promoting them should be consumer – oriented. Ifthese things are done effectively, products will be automatically bought by theconsumers.


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2. Integrated marketing:

The second feature of the marketing concept is integrated marketing i.e.integrated management action. Marketing can never be an isolatedmanagement action. Marketing can never be in isolated management function.Every activity on the marketing side will have some bearing on the otherfunctional areas of management such as production, personnel or finance.Similarly any action in a particular area of operation in production or financewill certainly have an impact on marketing and ultimately on consumer. In abusiness firm that accepts the marketing concept as the corner stone of itsbusiness philosophy, no management area can work in isolation. Therefore inan integrated marketing setup, the various functional areas of management getintegrated with the marketing function. Integrated marketing presupposes aproper communication among the different management areas with marketinginfluencing the corporate decision making process. Thus, when the firmsobjective is to make profit – by providing consumer satisfaction, naturally itfollows that the different departments of the company are fairly integrated witheach other and their efforts are channelized through the principal marketingdepartment towards the objective of consumer satisfaction.

3. Consumer satisfaction:

The third feature of the marketing concept is consumer satisfaction. Theobjective of the company adopting marketing concept is to satisfy thecustomers’ needs so perfectly that they will become regular or permanentsatisfied customer. For example, when a consumer buys a tin of coffee, heexpects a purpose to be served, a need to be satisfied. If the coffee does notprovide him the expected flavour, the taste and the refreshments his purchasehas not served the purpose. Or more precisely, the marketer who sold thecoffee has failed to satisfy his consumer. Thus, ‘satisfaction’ is the properfoundation on which alone any business can build its future.


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4. Realization of organizational goals including profits:

Though the organizational goals may differ from firm to firm, though keyareas such as innovation, market standings, profits and social responsibility arecommon to all firms. According to the marketing concept, the right way toachieve these organizational goals is through ensuring consumer satisfaction.

A distinguishing feature of the marketing concept is that it considers thecreation of profits as an essential requirement for any business concern. Themarketing concept is against profiteering but not against profits. Reasonablereturns or surplus are essential for the survival and growth of an business.

Benefits of Marketing Concept :

i) Benefits to firms:

A firm that believes in the marketing concept always feels the pulse ofthe market through continuous marketing audit and marketing research. It isfast in responding to the changes in buyer behaviour. It rectifies any drawbackin its product and this proves beneficial to the firm. The firm gives moreimportance to planning, research and innovation and its decisions are no longerbased on hunches but on reliable scientific data and the proper interpretationof such data. The profits for the firm become more certain.

ii) Benefits to consumers:

The concept on the part of various competing firms to satisfy theconsumer puts the later in an enviable position. Reasonable prices, betterquality and easy availability at convenient places are some of the benefits thataccrue to the consumer as a direct result of marketing concept.

iii) Benefits to society:


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The practice of marketing concept contributes to better life style, betterstandard of living and also results in the development of entrepreneurial talents.All these sets the pace for social and economic development.

Thus the marketing concept benefits the organisation, the consumer andsociety at large. A proper understanding of this concept is fundamental to thestudy of modern marketing.

Societal Marketing Concept:

Now the question is whether the marketing concept is an appropriateoranisational goal in an age of environmental deterioration, resource shortages,explosive population growth etc., whether the firm is necessarily acting in thebest long run interests of consumers and society. For example, many moderndisposable packing materials create problem of environmental degradation.Situations like this, call for a new concept, which is called ‘Societal MarketingConcept’.

The societal marketing concept holds that the organization’s task is todetermine the needs, wants and interests of target markets and to deliver thedesired satisfaction more effectively and efficiently than competitors in a waythat preserves or enhances the consumer’s and the society’s well being.

The societal marketing concept calls upon marketers to balance threconsideration in setting their marketing policies namely firm’s profits,consumer wants satisfaction and society interests.

REVIEW QUESTIONS:

1. Briefly discuss the various concepts of marketing.

2. Discuss in detail the modern marketing concept.

3. Write a note on societal marketing concept.

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LESSON – 3APPROACHES TO THE STUDY OF MARKETING

Marketing may be studied by different approaches. To facilitate the study theseapproaches may be broadly classified as follows:

i) Commodity approach,

ii) Functional approach,

iii) Institutional approach, and

iv) Management approach.

v) System approach

i) Commodity approach:

The first approach is the commodity approach under which a specificcommodity is selected and then its marketing methods and environments arestudied in the course of its movement from producer to consumer. In thisapproach, the subject matter of discussion centres around the specificcommodity selected for the study and includes the sources and conditions ofsupply, nature and extent of demand, the distribution channels used,promotional methods adopted etc.

ii) Functional approach

The second approach is the functional approach under which the studyconcentrates on the specialized functions or services performed by themarketers and the problems faced by them in performing those functions. Suchmarketing functions include buying, selling, storage, standardizing, transport,finance, risk-bearing, market information etc. This approach certainly enablesone to gain detailed knowledge on various functions of marketing.


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iii) Institutional approach:

The third approach is the institutional approach under which the maininterest centres around the institutions or agencies that perform marketingfunctions. Such agencies include wholesalers, retailers, merchantile agents andfacilitating institutions like transport undertakings, banks, insurance companiesetc. This approach helps one to find out the operating methods adopted bythese institutions and the various problems faced because institutions and toknow how whey work together in fulfilling their objectives.

iv) Management approach:

In the management approach, the focus of marketing study is on thedecision-making process involved in the performance of marketing function atthe level of a firm. The study encompasses discussion of the differentunderlying concepts, decision influencing factors, alternative strategies – theirrelative importance, strengths and weaknesses and techniques and methods ofproblem-solving. This approach entails the study of marketing at themicro-level of a business firm – of the managerial functions of analysis,planning, implementation, co-ordination and control in relation to themarketing functions of creating, stimulating, facilitating and valuingtransactions.

v) System approach:

Modern marketing is complex, vast and sophisticated and it influencesthe entire economy and standard of living of people. Hence marketing expertshave developed one more approach namely ‘System approach’. Under thisapproach, marketing itself is considered as a sub-system of economic, legaland competitive marketing system. The marketing system operates in anenvironment of both controllable and uncontrollable forces of the organisation.The controllable forces include all aspects of products, price, physicaldistribution and promotion. The uncontrollable forces include economic,


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socio-logical, psychological and political forces. The organisation has todevelop a suitable marketing programme by taking into consideration boththese controllable and uncontrollable forces to meet the changing demands ofthe society. The system approach, in fact, examines this aspect and alsointegrates commodity, functional, institutional and managerial approaches.Further, this approach emphasizes the importance of the use of ‘marketinformation’ is marketing programmes.

Thus from the foregoing discussion, one could easily understand that themarketing could be studied in any of the above approaches and the systemsapproach is considered to be the best approach as it provides a strong base forlogical and orderly analysis and planning of marketing activities.

REVIEW QUESTIONS:

1. Discuss the various approaches to the study of marketing.

2. Explain ‘Systems Approach’ to the study of marketing.

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LESSON – 4

FEATURES OF INDUSTRIAL, CONSUMER AND SERVICESMARKETING

Product may be classified broadly into two major categories namely consumergoods and industrial goods.

Consumer goods

Consumer goods are those goods meant for use by the ultimate householdconsumer and in such form that they can be used by him without furthercommercial processing.

Consumer goods are generally divided into three sub-categories according tothe method in which they are purchased namely convenience goods, shoppinggoods are specialty goods.

i) Convenience goods: There are goods which the consumer usuallypurchases frequently and with the minimum efforts. Usually they haveeasy substitutes and the unit value will be low. The consumer may nothave much of a preference for a particular brand. E.g. Match Box.

ii) Shopping goods: These are goods which the consumer purchase lessfrequently and the unit value will be higher. The consumer will lookfor their suitability, quality, price and style. Consumer will exerciseconsiderable effort in choosing the product. Many consumer durablescome under this category. Example: Textiles, foot wear.

iii) Specialty goods: These are consumer goods which the consumer buysrarely and the unit value will be very high. Hence buyers expect certainspecial characteristics and for which they make a special purchasingeffort. E.g. car, jewellaries.

Industrial goods:


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Industrial goods are those goods which a reused in producing othergoods or rendering services. They cannot be used without further processing.Industrial goods fall into three main categories.

1. Raw materials: These are industrial goods which in part or in wholebecome a part of the physical product and which have undergone only aminor change before becoming ready for a final consumption. Stainlesssteel which are used for making steel utensils is an example.

2. Equipments: These goods are exhausted only after repeated use such asinstallation, equipment, accessories etc.

3. Fabricated materials: These are industrial goods which have undergoneprocessing Metals, plastics, cement come under this category.

the marketing practices for industrials and consumer goods differ due to theircharacteristics.

Features of Industrials

The marketing of industrial goods generally possesses the followingfeatures.

1. Industrial goods are those which are produced by and sold to industries.They are mostly meant for producing consumer gods.

2. The demand for industrial goods is a derived demand. For example, thedemand for paper manufacturing machinery will increase when thedemand for paper increases.

3. Industrial marketing is normally backed by technical details and usuallydone by people with technical knowledge. In many cases, there may notbe substitutes.

4. Industrials buying is comparatively a rational process. Precisespecifications and quality of products are the main criteria.

5. Number of buyers are limited.

6. Advertising are made in technical and trade journals backed by directmailing and personal selling.


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7. In many cases, it is short channel, involving either direct selling or with alimited number of middlemen.

8. Each sale would generally be high value.

9. Supplier’s reliability and reputation is important criterion in the industrialmarket.

10. The demand is normally inelastic.

Features of manufactured consumer goods:

1. The consumer goods are those goods which are bought by ultimateconsumer for their consumption.

2. The consumer goods are manufactured on mass scale.

3. The number of buyers are also large and widespread.

4. Majority of consumer goods are non-durable.

5. Demand is primary in nature.

6. Other than essential products, most of the durable consumer goods haveelasticity in demand.

7. The unit cost of consumer goods is normally not very high.

8. The unit of purchase is normally low. But the frequency of purchase isgreater.

9. The consumer goods are very often bought by emotional impulse.

10. The goods are subject to serve competition. They may be pricecompetition, quality competition and competition from substituteproducts.

11. Branding and packaging also add some strength to the products.

12. The goods are under constant threat from fashion/design changes.

13. The channel of distribution is normally long as the buyers arewidespread.

14. Mass advertisement is a must. The marketer has to give equalimportance to personal as well as impersonal methods of sales promotion.

15. The products are not usually technical complex.


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Services marketing:

A service may be defined as an activity which has some element ofintangibility associated with it, which involves some interaction with customersor with property in their possession and does not result in a transfer ofownership. The American Marketing Association defines services as “activities,benefits or satisfactions which are offered for sale or are provided in connectionwith the sale of goods.”

Scope of services marketing:

Services marketing extend to the activities listed below:

- Insurance, banking, financial services, investment counselling, credit andloan services.

- Business and professional services such as legal, accounting, consultancyand computer services.

- Transportation and communication.

- Housing and accommodation and hotels, apartments, holiday resorts,motels etc.

- Recreation and entertainment.

- Medial and health care.

- Personal care services, E.g., beauty parlours, barber shop etc.

Features of services marketing:

1. Services are to a large extent abstract and intangible.

2. Services are non-standard and highly variable in dispensation.

3. Services are produced and consumer simultaneously and hence cannot beseparated from the person who sells them.

4. Services are perishable and cannot be stored.

5. The demands for services are not stable.


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The analysis of the target market, planning and developing the services, pricingthe channels of distribution and promotion of the services should be covered ina programme for marketing of services.

Review Questions:

1. Explain different kinds of consumer and industrial goods.

2. What are the characteristics of manufactured industrial goods?

3. What are the features of services marketing?

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LESSON – 5MARKETING MIX

Marketing mix is one of the major concepts in modern marketing. It is thecombination of various elements which constitutes the company’s marketingsystem. It is the set of controllable marketing variables that the firm blends toproduce the response it wants in the target market. Though there are manybasic marketing variables, it is Mc Carthy, who popularized a four-factorclassification called the four Ps: Product, Price, Place and Promotion. Each Pconsists of a list of particular marketing variables.

The first P – Product consists of

i) Product Planning and development;

ii) Product mix policies and strategies; and

iii) Branding and packaging strategies.

The second P – Price consists of

i) Pricing policies and objectives, and

ii) Methods of setting prices.

The third P – Place consists of


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i) Different types of marketing channel,

ii) Retailing the wholesaling institutions, and

iii) Management of physical distribution system.

The fourth P – Promotion consists of

i) Advertising;

ii) Sales promotion; and

iii) Personal selling.

A detailed discussion on each of the above four P’s follows now:

PRODUCT:

Product stands for various activities of the company such as planning anddeveloping the right product and/or services, changing the existing products,adding new ones and taking other actions that affect the assortment ofproducts. Decisions are also required in the areas such as quality, features,styles, brand name and packaging.

A product is something that must be capable of satisfying a need or want, itincludes physical objects, personalities, places, organizations and ideas. Thus,a transport serviced, as it satisfies, human need in a product. Similarly, placeslike Kashmir and Kodaikanal, as they satisfy need to enjoy cool climate are alsoproducts.

The second aspect of product is product planning and development. Productplanning embraces all activities that determine a company’s line of products. Itincludes:

i) Planning and developing a new product,

ii) Modification of existing product lines, and

iii) Elimination of unprofitable items.


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Product development encompasses the technical activities of product research,engineering and decision.

The third aspect of product is, product mix policies and strategies.

Product mix refers to the composite of products offered for sale by a company.For example Godrej company offers cosmetics, steel furnitures, officeequipments, locks etc. with many items in each category.

The product mix is four dimensional. It has breadth, length, depth andconsistency.

The breadth of the product mix refers to how many different product lines aremanufactured by a company. The product line is the group of products that areclosely related either because they satisfy a class of need, are used together,are sold to the same customer groups, are marketed through same types ofoutlets, or fall within given price ranges. Thus, the Godrej companymanufactures several product lines such as – Cosmetics, steel furnitures, officeequipments and locks.

The depth of the product mix refers to how many items are found in eachproduct line. Thus, the Godrej produces, for example.

- Five product items is steel furniture such as almirah and table.

- Three product items in office equipments such as typewriters, filingcabinets and racks.

- Four product items in locks, such as five levers, six levers, seven leversetc.

The consistency of the product mix refers to how closely related the variousproduct line are in end use, production requirements, distribution channels orin some other way.


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Major product mix strategies are expansion of product mix, contraction ofproduct mix and modification of existing product.

a) Expansion of product mix means increasing the number of lines and/orthe items.

Contraction of product mix – means either eliminating an entire line or a fewitems within a line. Alteration of product-means modifying the existing productto suit the changing consumer requirements.

All products, like human beings, have certain length of life cycles during whichthey pass through different identification stages. Broadly, the stages areintroduction, growth, maturity and decline. It is the responsibility of thecompany to identify the stage through which its product passes, so that it couldevolve an appropriate marketing strategy to capitalize the opportunities and toovercome the problems.

The second major component of product is branding. A brand, brand name andbrand mark are used synonymously. A brand is a name, term, sign symbol ordesign or a combination of them which is intended to identify the products orservices. Thus ‘Liril’ ‘Colgate’ are examples for brand name and ‘Maharaja’ orAir India and ‘Butterfly’ of Co-optex are examples for brand mark.

When a brand is registered with the Registrar of Brand Names, it becomes atrade mark. The significance of registration is that no other producer could usethe same name or mark for his products.

Brands help identify the product and differentiate the product from those ofcompetitors. It is an indicator of product quality. For example, any product ofTVS – either Sri Chakra Tyres or TVS Washing Machine creates a feeling that itmust be a good quality product. Further, brands increase the success thesuccess of advertising and personal selling. Once the manufactures succeeds increating brand loyalty for his products, then it would be easier for him tointroduce new product it the market.


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Yet another integral part of product is packaging. Packaging not only protectsthe contents, but also helps to identify the product, offers convenience inhandling and promoters sales by inducing the customers to buy the product. Itis common experience that consumers, sometimes, buy the product attractedmerely by the containers.

PRICE

The second element of the marketing mix is Price. Price stands for themonetary value that customers pay to obtain the product. In pricing, thecompany must determine the right price for its products and then decide onstrategies concerning retail and wholesale prices, discounts, allowances andcredit terms.

Before fixing prices for the product, the company should be clear about itspricing objectives and strategies. The objectives may be to set low initial priceand raising it gradually or to set high initial price and reducing it gradually orfixing a target rate of return or setting prices to meet the competition etc. Butthe actual price setting is based on three factors namely cost of production,level of demand and competition.

Regarding retail pricing, the company may adopt two policies. One policy is thathe may allow the retailers to fix any price without interfering in his right.Another policy is that he may want to exercise control over the products.Discounts and allowance result in a deduction from the base price.

PRICE

The third element of marketing mix is place or physical distribution. Placestands for the various activities undertaken by the company to make theproduct accessible and available to target consumers. There are four differentlevel channels of distribution. The first is-zero-level channel which meansmanufacturer directly selling the goods to the consumers.


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The second is-one-level channel which means supplying the goods to theconsumer through the retailer. The third is-two-level channel which meanssupplying the goods to the consumer through wholesaler and retailer. Thefourth is-three-level channel which means supplying goods to the consumerthrough wholesaler-jobber-retailer and consumer.

It is the responsibility of the company to select the right channel through whichthe products will reach the right market at right time. The factors affecting thechoice of channel are the nature of the product, supply, middlemen, customer,environment, the distribution policy of the company and the cost of the channel.

There are large-scale retail institutions such as departmental stores, chainstores, mail order business, super-market etc. and small-scale retailinstitutions such as small retail shop, automatic vending, franchising etc. Thecompany must choose to distribute their products through any of the aboveretailing institutions depending upon the nature of the product, area of themarket, volume of scale and cost involved.

The actual operation of physical distribution system requires company’sattention and decision-making in the areas of inventory, location ofwarehousing, materials handling, order processing and transportation.

PROMOTION:

The fourth element of the marketing mix is promotion. Promotion stands forthe various activities undertaken by the company to communicate the merits ofits products and to persuade target customers to buy them. Advertising, salespromotion and personal selling are the major promotional activities. A perfectco-ordination among these three activities can secure maximum effectivenessof promotional strategy.

Advertising to marketing is that steam to machinery. It is impersonalpresentation and promotion of ideas, goods or services. It has a strongpersuasion power. It is a common technique for mass selling.


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The advertisement copy must be able to attract the attention of the audience,arouse interest, create desire and stimulate action. The advertisement mediachosen should be able to reach maximum number of people at minimum cost.

The second element of promotional mix is the sales promotion. It includes allthose marketing activities that stimulate consumer purchasing and dealerstocking the goods. Such activities include issue of free samples, coupons,gift-offer, conducting contest, demonstrations in exhibition etc. The distinctfeature of sales promotional activities is that they are purely temporary innature and are meant for short duration only.

The third element of promotional mix is personal selling. Personal sellinginvolves oral presentation in a conversation with prospective purchases for thepurpose or making sales. The purpose is to bring the right products intocontract with the right customers and to make certain that sales takes place.

The salesman should have right aptitude and qualities to be successful. Hencegreat care has to be taken in selection, training and compensating the salespeople.

For successful marketing, the marketing manager has to develop a bestmarketing mix for his product.

REVIEW QUESTION:

1.Define Marketing Mix. Briefly explain elements of marketing mix.

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LESSON – 6MARKET SEGMENTATION

Market in heterogeneous both in the supply side and in the demand side. Onsupply side, many factors like differences in production equipments, processingtechniques, nature of resources or inputs available to different manufacturers,unequal capacity among the competitors in terms of design and improvementand deliberate efforts to remain different from others account for theheterogeneity. Similarly, the demand side, which constitute consumers- is alsodifferent due to differences in physical and psychological traits. As a result,imperfect markets are common. This problem is to be solved by the strategy ofproduct differentiation and market segmentation.

According to William Stanton, “Market segmentation is the process of dividingthe total heterogeneous market for a product into several sub-markets orsegments each of which tend to be homogeneous in all significant aspects.

Market segmentation is a strategy of ‘divide and rule’. The strategy involves thedevelopment of two or more different marketing programmes for a givenproduct or service, with each marketing programmes aimed at a different groupof individuals whose expected reactions to the seller’s marketing efforts will besimilar during a specified time period. A strategy of market segmentationrequired that the marketer first clearly define the number and nature of thecustomer groupings to which he intends to offer his product or service. This isa necessary condition for optimizing efficiency of marketing effort.

Bases for market segmentation:

There are a number of bases on which a firm may segment its market.

1. Geographic basis

a. Nations

b. States


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c. Regions

d. Cities

2. Demographic basis

a. Age

b. Sex

c. Material status

d. Family size

e. Education

f. Occupation

3. Socio-economic

a. Income

b. Nationality

c. Religion

d. Culture

4. Psychographic

a. Social class

b. Life style

c. Personalities

d. Loyalty status

e. Benefits sought – price or quality or durability

f. Usage rate (volume segmentation)

g. Buyer readiness stage (unaware, aware, informed, interested,desired, intend to buy)

h. Attitude stage (Enthusiastic, positive, indifferent, negative, hostile)

Bases for segmenting industrial markets:

1. Geographical

2. Behaviouristic


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a. Benefits sought

b. User status

c. Loyalty status

d. Readiness stage

Requirements for Effective Segmentation:

1. Measurability – the degree to which the size and purchasing power of thesegments can be measured.

2. Accessibility – the degree to which the segments can be effectivelyreached and served.

3. Substantiality – the degree to which the segments are large and /orprofitable enough

4. Actionability – the degree to which effective programmes can beformulated for attracting and serving the segments.

Possible market coverage strategies:

The firm can adopt one of three market coverage strategies known asundifferentiated marketing, differentiated marketing and concentratedmarketing.

Undifferentiated marketing: The firm might decide to ignore market segmentdifferences and go after the whole market with one market offer.

Differentiated marketing: Here the firm decide to operate in several segmentsof the market and designs separate marketing programmes to each. Thus,“Maruti Udyog” produces cars for every ‘purse, purpose and personality’.Similarly Bajaj two-wheelers.

Concentrated marketing: Under this strategy, the firm goes after a large sharein one or a few sub-markets.


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Benefits of market segmentation:

Market segmentation gives a better understanding of consumer needs,behaviour and expectations to the marketers. The information gathered will beprecise and definite. It helps for formulating effective marketing mix capable ofattaining objectives. The marketer need not waste his marketing effort over theentire area. The product development is compatible with consumer needs,pricing matches consumer expectations and promotional programmes are intune consumer willingness to receive, assimilate and possibility react tocommunications.

In short, the strength of market segmentation lies in matching products toconsumer needs that augment consumer satisfaction and firm’s profit position.However, the major limitation of market segmentation is the inability of a firmto take care of all the segmentation bases and their numerous variables. still,the strengths of market segmentation outweigh its limits and offersconsiderable opportunities for market exploitation.

REVIEW QUESTIONS

1. What is market segmentation? What are its bases?

2. What are the benefits of market segmentation?


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LESSON – 7CONSUMER BEHAVIOUR

Under the modern marketing ‘Consumer’ is the fulcrum, he is lifeblood, he isvery purpose of the business and hence the business firms have to listenconsumer voices.... understand his concerns. His needs have to be focused andhis respect has to be earned. He has to be closely followed – what he wants .......when, where and hos. The new business philosophy is that the economic andsocial justification of a firm’s existence lies in satisfaction of consumer wants.Charles G. Mortimer has rightly pointed out that, ‘instead of trying what iseasiest for us to make, we must find out much more about what the consumeris willing to buy..... we must apply our creativeness more intelligently to peopleand their wants and needs rather than to products.’ To achieve consumersatisfaction, the marketer should know, understand consumer behaviour – theircharacteristics, needs attitudes and so on But, the study of consumer behaviouris not an easy task as it involves complex system of interaction of variousfactors namely sociological, cultural, economical and psychological.

BUYER BEHAVIOUR MODELS

The influence of these social on buyer behaviour has promoted marketingexperts to propound certain models for explaining buyer behaviour. Broadly,they include the economic model, the learning model, the psychoanalyticalmodel and the sociological model.

The Economic Model

According to the economic model of buyer behaviour, the buyer is a rationalman an his buying decisions are totally governed by the concept of utility. If hehas a certain amount of purchasing power, a set of need to be met and a set ofproducts to choose from, he will allocate amount over the set of products in avery rational manner with the intention of maximizing the utility or benefits.

The Learning Model


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According to the learning model which takes its cue from the Pavlovian stimulusresponse theory, buyer behaviour can be influenced by manipulating the drives,stimuli and response of the buyer. The model rests on man’s ability at learning,forgetting and discriminating.

The Psychoanalytical Model

The psychoanalytical model draws from Freudian psychology. According to thismodel, the individual consumer has a complex set of deep-seated motiveswhich drive him towards certain buying decisions. The buyer has a private worldwith all his hidden fears, suppressed desires and totally subjective longings. Hisbuying action can be influenced by appealing to these desire and longings.

The Sociological Model

According to the sociological model, the individual buyer is influenced bysociety – by intimate groups as well as social classes. His buying decisions arenot totally governed by utility, he has a desire to emulate, follow and fit in withhis immediate environment. And several of his buying decisions may begoverned by societal compulsions.

The Nicosia Model

In recent years, some efforts have been made by marking scholars to buildbuyer behaviour models totally form the marketing man’s standpoint. TheNicosia model and the Howard and Sheth model are two important models inthis category. Both of them belong to the category called the systems model,where the human being is analyzed as a system with stimuli as the input to thesystem and behaviour as the output of the system.

Francesco Nicosia, an expert in consumer motivation and behaviour put forwardhis model of buyer behaviour in 1966. The model tries to establish the linkagesbetween a firm and its consumer towards the product. Depending on thesituation, be develops a certain attitude towards the product. If these steps


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have a positive impact on him, it may result in a decision to buy. this is the sumand substance of the ‘activity explanations’ in the Nicosia model. The Nicosiamodel groups these activities into four basic fields.

Field One has two sub-fields- the firm’s attributes and the consumer’sattributes. An advertising message from the firm reaches the consumer’sattributes. Depending on the way the message is received by the consumer, acertain attribute may develop, and this becomes the input for Field Two. FieldTwo is the area of search and evaluation of the advertised product and otheralternatives. If this process results in a motivation to buy, it becomes the inputfor Field Three. Field Three consists of the act of purchase. And Field Fourconsists and the use of the purchased item. There is an output from Field Four– feedback of sales results to the firm.

The Howard – Sheth Model

John Howard and Jagadish Sheth put forward the Howard and Sheth model in1969, in their publication entitled. ‘The Theory of buyer Behaviour’. The logic ofthe model runs like this. there are inputs in the form of Stimuli. There areoutputs beginning with attention to a given stimulus and ending with purchase.In between the inputs and the outputs there are variables affecting perceptionand learning. These variables are termed ‘hypothetical’ since they cannot bedirectly measured at the time of occurrence.

Over the years, several other models have also been put forward, with theintention of explaining buyer behaviour. All these models have certain merits aswell as limitations. They do not fully explain the complex subject of buyerbehaviour. Nor do they establish a straight input-output equation on buyerbehavior.

And, none of them provides a precise answer to the why’s or how’s of buyerbehaviour. They merely explain the undercurrents of human behaviour fromdifferent angles and premises. But these models will certainly be helpful ingaining at least a partial insight into buyer behaviour.


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Factors influences consumer behaviour:

Consumer are stimulated by two types of stimuli - internal and environmental.The internal influence comprise of motivation, perception, learning andattitudes – all concepts drawn from the field of psychology. The environmentalinfluences include cultural, social and economical. Experts in these areasattempt to explain why people behave as they do as buyers. All these influencesinteract in a highly complex ways, affecting the individual’s total pattern ofbehaviour as well as his buying behavour.

Cultural Factors:

Culture is the most fundamental determinant of a person’s wants andbehaviour. It encompass customs, traditions and any other capabilities andhabits required by an individual as a member of a society. Each culture containssmaller groups of sub-cultures such as national culture, religious culture andcaste culture that provides more specific identification and socialization for itsmembers. Thus, the Japanese culture provides for certain manners of dressingwhile the Indian culture provides for different patterns. Similarly, religiousgroups such as Hindus, Christians and Muslims possess distinct culturalpreferences and taboos. Each culture evolves unique pattern of social conduct.The prudent marketer has to analyze these pattern to understand theirbehaviour to evolve a suitable marketing programme.

Sociological Factors:

The sociological factors are another group of factors that affect the behaviourof the buyers. These include reference groups, family and the role and status ofthe buyers. The reference groups are those groups that have a direct or indirectinfluence on the person’s attitudes, options and values. These groups includepeer group, friends, and opinion leaders. The marketers, therefore, aim theirmarketing efforts to reach reference groups and through them reach thepotential buyers. A more direct influence on buying behaviour is one’s familymembers namely, spouse and children. The person will have certain position inhis family, that is called a status and has a duty assigned - that is role and thisstatus and role also determine buying behaviour. The marketer needs to


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determine which member normally has the greater influence on the purchase ofa particular product and should try to reach him to market his product.

Personal Characteristics:

An individual’s buying behaviour is also influenced by his personalcharacteristics such as his age and life cycle stage, occupation, income, andpersonality.

For example, if the target market is kids, their food and other reqirements willcertainly be different from aged people. Similarly, behavour and need differsdepending on the nature of occupation, of the buyers. For example, factoryworkers and other defence people require footwear of mainly durable type thatcould withstand severe strain whereas people with white collar jobs requirefootwear of light and fashionable type. Hence, marketers should try to identifythe occupational groups that have interest in their products and services. Anorganisation can even specialize in manufacturing products needed by aparticular occupational group.

Basically it is the level of income, its distribution and the consequentpurchasing power that determine one’s buying behaviour. Out of the one’s totalincome, a part may be saved and the remaining part is available for spending.Again out of this, a sizable part has to be reserved for meeting essentialexpenses and it is only the balance – the individual has the discretion to spend.An intelligent marketer has to watch the income – serving trend of hisconsumer and basing on that evolve a marketing programme.

Each person has a distinct personality that will influence his buying behaviour.A person’s personality is usually described in terms of such traits asself-confidence, dominance, autonomy, and adaptability. Personality can be auseful variable in analyzing consumer behaviour.

Psychological Factors:


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Psychological characteristics play the largest and most enduring role ininfluencing the buyers behaviour. A person’s buying choices are influenced byfour major psychological processes – motivation, perception, learning andattitudes.

Motivation is one which leads the individual to behave in a particular way. Itmay be conscious or subconscious – a force that underlies a behaviour. It is thecomplex network of psychological and physiological mechanism. Motives canbe instinctive or learned, conscious or unconscious, rational or irrational. Themost popular human motivation theories are profounded by Maslow’s, Freud’sand Herzberg. For example, Maslow has classified human needs into five typesin the order of importance – basic, safety, social, esteem and self actualizationneeds. The most urgent motive is acted upon first. If this is fulfilled, theindividual proceeds to fulfill them next higher need. It is important for themarketer to understand the motives that lead consumers to make purchasesand he must be able to explain the prospective buyers how best his product cansatisfy a particular need. But he must be sure that the target consumers havealready fulfilled the previous need.

Freud’s Theory deals with sub-conscious factors. He asserts that people are notlikely to be conscious of the real motives guiding their behaviour because thesemotives are often repressed from their own consciousness. Only throughspecial methods of probing such as in depth interviews, projective techniquestheir motives can really be discovered and understood. The marketer should beaware of the role of visual and tactile elements in triggering deeper emotionsthat can stimulate or inhibit purchase.

Frederick Herzberg develop a two factor theory of motivation whichdistinguishes between dissatisfiers and satisfiers. The implication of this theoryis that the marketers should do their best to prevent dissatisfiers from affectingthe buyers and then he should carefully identify the major satisfiers ormotivators of purchase.

Perception means how one views or thinks about a particular situation. Themarketer while issuing advertisement message should be sure that a givenmessage is properly perceived by the consumers. If the message is susceptibleto different types of perceptions, it would defeat the purpose.


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Learning is the changes that occur in an individual’s behaviours arising fromexperience. Learning is produced through the interplay of drives, stimuli, cues,responses and reinforcement. A drive is a strong internal stimulus impellingaction and it becomes a motive when it is directed toward a particulardrive-reducing stimulus object. Cues are minor stimuli that determine when,where and how the person responds. These cues can influence response to buya product and if its experience is rewarding, he will continue to buy the sameproduct which means his response is reinforced. The principal importance oflearning theory for marketing is that they can build up demand for a product byassociating it with strong drives, using motivating cues and providing positivereinforcement.

A belief is a descriptive thought that a person holds about something. Thesebeliefs may be based on knowledge, opinion or faith. Marketers are very muchinterested in the beliefs of people about their products and service becausethey influence their buying behaviour. If some of the beliefs are wrong andinhibit purchase, the marketer should launch a campaign to correct thesebeliefs.

An attitude describes a person’s enduring favourable or unfavourable cognitiveevaluations, emotional feelings and action tendencies toward some object oridea. Attitudes put them into a frame of mind of liking and disliking an object,moving toward or away from it. This leads people to behave in a fairlyconsistent way towards similar objects. Hence, the marketer should try to fit hisproduct into existing attitudes rather than to try to change people’s attitudes.

From the above discussions, it becomes obvious that consumer behaviour isinfluenced by economic, sociological and psychological factors. But it is wrongto assume that consumer behaviour is influenced by any ‘one’ of these factors.The fact is that at a point of time and in a giver set of situation, it is influencedby a sum total of these diverse yet interrelated factors. When a consumer is inthe process of taking a purchase decision, all these factors are prove to worksimultaneously and influence his choice. But it is possible that the relativeimportance of these factors vary in a given situation. It is the intelligence of themarketer to find out the nature and intensity of the influence exerted by thesefactors and to formulate appropriate marketing programme.


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REVIEW QUESTIONS:

1. Bring out the importance of studying consumer behaviour.

2. Discuss the influence of socio-cultural factors in determining consumerbehaviour.

3. Explain how the psychological determine buyer behaviour.

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LESSON – 8PRODUCT : PLANNING AND DEVELOPMENT

In common parlance, any tangible items such as textiles, books, tooth pasteand many other items are called as ‘products’. But an individual’s decision tobuy an item is based not only on its tangible attributes but also on a variety ofassociated non-tangible and psychological attributes such as services, brand,package, warranty, image etc. Hence, it is essential to understand the term‘product’.

According to Alderson, “Product is a bundle of utilities consisting of variousproduct features and accompanying services”. The bundle of utilite is composedof those physical and psychological attributes that the buyer receives when hebuys the products.

A product is anything that can be offered to a market for attention, acquisition,use or consumption might satisfy a want or need. It includes physical objectsservices, persons, places, organisation and ideas.

In order to further facilitate understanding it would be appropriate to know themeaning of some other also which often recur in any discussion on product.Some of these terms are discussed below.

Product item: A distinct unit that is distinguishable by size, appearance orsome other attribute.

Product line: A product line is a group of products that are closely related, areable to satisfy a class of need are used together, are sold to the same customergroups, are marketed through the same type of outlets or fall within given priceranges. Example: cosmetics, office furniture.


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Product mix: A product mix is the set of all product lines and items that aparticular seller offers for sale to buyers. It is also called Product assortment.

A product mix can have certain width, length, depth and consistency.

The width of product mix refers to how many different product lines thecompany carries.

The length of product mix refers to the total number of items in its product mix.

The depth of product mix refers to how many variants are offered of eachproduct item in the line.

The consistency of the product mix refers to how closely related the variousproduct lines are in end use, production requirements, distribution channels orsome other way.

Above four dimensions of the product mix defines the firm’s product strategy.

Product Planning:

Product planning is the process of determining that line of products which cansecure maximum net realization from the intended markets. It is an “act ofmarking out and supervising the search, screening, development andcommercialization of new products, the modification of the existing lines andthe discontinuance of marginal or unprofitable items”.

Thus, product planning encompasses the following aspects:

1. Planning and developing new products.

2. Modification of existing products,

3. Elimination of marginal or unprofitable product items.


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New Product Development Process:

New product development process consists of the following eight steps.

1. Idea generation

2. Screening of ideas

3. Concept development and testing

4. Marketing strategy development

5. Business analysis

6. Product development

7. Test marketing

8. Commercialization of new product.

Idea generation

The new product development process starts with the search for ideas. Aproduct idea is an idea for a possible that the firm can see itself offering to themarket.

The new product ideas can be derived from the following sources.

Customers: Customers’ needs and wants are the logical place to start in thesearch for new product ideas. Firms can identify consumer needs and wantsthrough direct consumer surveys, projective tests, focused group discussionsand suggestion and complaint letters from customers.

Scientists: The Company’s scientists will also be able to supply new productideas.

Competitors: Companies can find new ideas by monitoring their competitor’sproducts. The company should assess who is buying competitor’s new productsand why. Many companies buy competitors products, take them apart and buildbetter ones.


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Sales representatives and dealers: Since sales representative and dealers havefirst hand exposure to customer’s needs and complaints, they are good sourceof new product ideas.

Top management is another major source of new product ideas because its vastexperience in the particular field.

Besides the above, new product ideas can come from a variety of sources suchas University and commercial laboratories, industrial consultant, advertisingagencies, marketing research firms and industrial publications.

Really good ideas come out of inspiration and creativity. The followingtechniques may help generate better ideas.

1. Attribute listing: The major attributes of an existing product are listedand then each attribute is modified in the search for an improved product.

2. Problem analysis: Consumers may be asked for the problem theyencounter in using a particular product.

3. Brain-storming: Groups can be stimulated to greater creativity throughthe technique called brain-storming.

Screening of ideas:

Under this stage, the ideas are pruned and the purpose of screening is to spotand drop poor ideas as early as possible.

In the screening stage the company must avoid two types of errors. Adrop-error’ occurs when the company dismisses a good idea. A ‘go-error’occurs when the company permits a poor idea to move into development andcommercialization.

The purpose of screening is to spot and drop poor ideas as early as possible.The ideas are screened considering the target market, market size, competition


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price, development time and costs, manufacturing costs and rate of return. Theideas are also screened in terms of company’s objectives, strategies andresources. Ideas that do not satisfy these are dropped. The remaining ideas canbe rated using the weighted index method – considering the factors requiredfor the successful launching of the product and weights assigned by themanagement to these factors to reflect their relative importance.

Concept development and testing:

The selected ideas, then be developed into product concepts. A productconcept is an elaborated version of the idea expressed in meaningful consumerterms.

Concept testing implies testing these concepts with an appropriate group oftarget consumers. The concept may be presented symbolically or physically. Atthis stage a picture description is also sufficient. The consumers’ responses willhelp the firm determine which concept has the strongest appeal. Conceptdevelopment and testing methodology applies to any product or service.

Marketing strategy development:

The preliminary marketing strategy consists of three aspects. The first aspectdescribes the size, structure and behaviour of the target market, the sales, themarket share and profit goals planned in the first few years.

The second aspect outlines the product’s planned price, distribution andpromotional strategies for the first year and the third part describes theplanned long-run sales and profit goals and marketing – mix strategy over time.

Business analysis:

Once management develops the product concept and marketing strategy, it canevaluate the business alternativeness of proposal by reviewing the sales, costand profit projections to determines whether they satisfy the company’sobjectives.


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Management needs to estimate whether sales will be high enough to return asatisfactory profit to the firm. It has to estimate first – time sales of the newproduct, replacement sales and repeat sales.

After preparing the sales forecast, management can estimate the expectedcosts – Research and development, manufacturing, marketing and financedepartments and profits of this venture.

Product development:

Under this stage, the product concept is converted into a real physical product.This stage will answer whether the product idea can be translated into atechnically and commercially feasible product. Whenever possible, a prototypecould be produced, otherwise products should be produced only in limitedquantities. When the prototypes are ready, they must be put through rigorousfunctional and consumer tests. The functional tests are conducted underlaboratory and field conditions to make sure that the product performs safelyand effectively. Consumer testing can take a variety of forms such as givingsamples to use in their homes.

Market testing:

After management is satisfied with the product’s functional performance, theproduct should be given a brand name, packaging and a preliminary marketingprogramme to test it in real market. The purpose of market testing is to learnhow consumers and dealers react to handling, using and repurchasing theactual product and to know the size of the market, marketing programmeeffectiveness and other matters. The amount of market testing is influenced bythe investment, cost and risk, time pressure and research cost.

Commercialization:


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In this stage, management makes a final decision about whether to launch thenew product. In launching a new product, the management must make fourdecisions a) the right time to introduce the new product b) The geographicalarea – single locality, a region, the national market – or the international marketto introduce the product c) The target market prospects and d) action plan tointroduce the new product in the market. It must allocate the marketing budgetamong the marketing-mix elements and sequence the various activities.

The Consumer – Adoption Process:

The consumer – adoption process begins where the firm’s innovation processends. It describes how potential consumers learn about new product, try themand adopt or reject them. Management must understand this process in orderto build in effective strategy for early market penetration.

Innovation - Diffusion and Adoption:

An innovation refers to any good, service or idea that is ‘perceived’ by someoneas new.

The diffusion is defined as “the spread of a new idea from its source ofinvention or creation to its ultimate users or adopters.

Adoption is the decision of an individual to become a regular user of a product.

Adoption process:

The adoption process focuses on the ‘mental process through which anindividual passes from first hearing about an innovation to final adoption.

The adoption process consists of five stages:


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a) Awareness: The consumer becomes aware of the innovation but lacksinformation about it.

b) Interest: The consumer is stimulated to seek information about theinnovation.

c) Evaluation : The consumer evaluates whether it would be beneficial to trythe innovation.

d) Trial: The consumers tries the new product on a small scale to find outhis estimate of its value.

e) Adoption: If the consumers is satisfied, he decides to make full andregular use of the new product.

Product Diversification:

Product diversification means adding a new product to the existing product lineor mix. It does not mean that the new product should be complementary or anallied product to the existing one. It may be a product which may be entirelydistinct and different from the existing products. For example, Bata enteringinto readymade garments, Raymonds entering into footwear business etc.

Reasons for diversification:

1. To offset declining market for the existing products.

2. To compensate for technological obsolescence.

3. To utilize the existing spare capacities more profitability.

4. To take advantage of the reputation of the company’s image.

5. To maintain employment of labour force.


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Product Modification:

Product modification is any deliberate alternation in the product’scharacteristics in a way that will attract new users and/or more usage fromcurrent users. It may be quality improvement aiming at increasing functionalperformance of the product its durability, reliability, speed, taste etc. and/orfeature improvement aiming at adding new features such as size, weight,materials etc that expand the product’s versatility, safety or convenience. Itwould also be style appearance improvement. E.g. new car models.

Product Elimination:

Product elimination is the process of withdrawing or dropping a product in theexisting product line if they are unprofitable.

Such product tend to consumer a disproportionate amount of management’stime, the advertising and sales force effectiveness will go waste, requiresfrequent price, adjustments and affects the company’s image.

Product life cycle:

Like human beings, every product has a life span. When a new product islaunched in the market, its life starts and the product passes through variousdistinct stages and after the expiration of its span dies – dies in terms of itscapacity to generate saels and profits. This is called Product Life Cycle (PLC)

The Product Life Cycle is an attempt to recognize ‘distinct stages’ in the ‘saleshistory’ of the product. In each stage, there are distinct opportunities andproblems with respect to marketing strategy and profit potential. Hence,products require different marketing, financing manufacturing, purchasing andpersonal strategies in the different stages of their life cycle. The PLC conceptprovides a useful framework for developing effective marketing strategies indifferent stages of the Product Life Cycle. There are four stages in the ProductLife Cycle which are known as Introduction, growth, maturity and decline.


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Introduction Stage:

When a new product is launched, the company has to stimulate awareness,interest, trial and purchase. This takes time. In introductory stage only a fewpersons will buy the product. Further, it takes time to fill the dealer pipelineand to make available the product in several markets. Hence, sales will be lowand profit will be negative or low. The distribution and promotion expenses arevery high. There are only a few competitors. Regarding pricing, themanagement can pursue either skimming strategy i.e., fixing a high price orpenetration strategy i.e., fixing a low price.

Growth Stage:

The growth stage is marked by rapid increase in sales and profits. Newcompetitors enter the market, attracted by the opportunities for high profits.

Prices remain the same. Companies maintain their promotional expenditure atthe same level to meet competition and continue educating the market. Salesrise much faster.

During this stage, the company uses the following marketing strategies.

- The company improves product quality and adds-product features andmodels.

- It enters new market segments.

- It enters new distribution channel

- It changes the price.

Maturity Stage:


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This stage normally lasts longer than the previous stages. At this stage, saleswill slow down. This stage can be divided into three phases – growth maturity,stable maturity and decaying maturity.

In the growth phase, the sales start to decline because of distribution saturation.

In the stable phase, sales become static because of market saturation.

In decaying maturity phase, the absolute level of sales now starts to decline andcustomers start moving toward other products and substitutes. Competitionbecomes acute.

Marketing strategies in the maturity stage:

- Market Modification: The company should seek to expand the market.

- Product modification: The company should modify the product’scharacteristics such as quality improvement, feature improvement, styleimprovement to attract new users and/or usage from current users.

- Marketing – mix modification: The company should also try to stimulatesales through modifying one or more marketing-mix elements such asprice cut, step up sales promotion, change advertisement copy,extending credit etc.

A major problem with marketing-mix modification is that they are highlyimitable by competitors. The firm may not gain as much as expected and in factall firms may experience profit erosion as they compete each other.

Decline stage:

In this stage, sales decline due to number of reasons including technologicaladvances, consumer changes in tastes and acute competition. As sales andprofit decline, some firms withdraw from the market. Those remaining mayreduce the number of product offerings.


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They may drop smaller market segments and marginal trade channels. Theymay reduce the promotion budget and prices further.

Marketing strategies during the decline stage:

- Identify the weak products by appointing a product-review committeewith representatives from marketing, manufacturing and finance.

- The firms may adopt the following strategies.

i)Continuation strategy by increasing the firm’s investment toreap the profits.

ii) Concentration strategy by continuing sales only inselected pockets.

iii) Harvesting strategy by selling to get profit whatever ispossible in the market.

When a company decides to drop a product, the firm can sell or transfer theproduct to someone else or drop it completely. It must decide to drop theproduct quickly or slowly. It must decide on how much parts in inventory andservice required to maintain service to past customers.

Use of PLC Concept:

PLC concept’s real usefulness varies in different decision-making situations. Asa ‘planning tool’, the PLC concept characteristics the main marketing challengesin each stage and suggests major alternative marketing strategies the firmmight pursue. As a ‘control tool’, it allows the company to compare productperformance against similar products in the past.

Criticism of PLC concept:

1. PLC stages do not have predictable durations. It may vary from product ofproduct.

2. The marketer cannot tell at what stage the product is in, as there is nodefinite line of demarcation between one stage to another stage.


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3. Not all products pass through all the stages. It is possible that the productmay travel to the first and second stage and then die out.

4. A product may not be in an identical stage in all the market segments, itmay be in the second stage in one segment whereas in the third stage inanother segment at a point of time.

Product Positioning:

Each competitive product occupies a given place in the market segment. What isimportant is the consumer perception of the place each product occupies in themarket. Product positioning is the act of designing the company’s product andmarketing mix to fit a given place in the consumer’s mind in relation tocompetitor’s product.

Every product offered to a market needs positioning strategy so that its place inthe total market can be communicated to the target market. The following sixalternatives are identified for a product-positioning strategy.

- Positioning on specific product features.

- Positioning on benefits or needs

- Positioning for specific usage occasions.

- Positioning for user category

- Positioning against competitor’s product

- Positioning for another product class. E.g. Positioning a recreationaltheme park not as recreation but as an educational institution.

The company’s product positioning decision further defines its customers andcompetitors. At this point the company can start planning the details of itsmarketing mix.

REVIEW QUESTIONS:

1. Discuss the new product development process.

2. Explain PLC concept. What are its uses?


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3. Write a not on product diversification and product modification.

4. What are the steps involved in the adoption process.

5. Write a note on product positioning.

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LESSON – 9BRANDING AND PACKAGING

Branding and packaging are the integral part of the product. The word ‘brand’is a comprehensive term. A brand is a name, term, sign, symbol or design or acombination of them, which is intended to identify the goods or services of oneseller or group of sellers and to differentiated them from those of competitors.

Brand name: It consists of words, letters and/or numbers which can bevocalized or pronounced. E.g. ‘Crompton’, ‘Kelvinator, No/: 1 Premier.

Brand mark: It is that part of a brand which can be recognized such as asymbol, design or distinctive colouring or lettering. E.g ‘Maharaja’ of Air India.Red inverted triangle of Family Welfare Dept.

Trade Name/Trade Mark: When a brand name or brand mark is registered andgiven legal protection, it becomes trade name/trade mark respectively. A trademark protects the seller’s exclusive rights to use the brand name and/or brandmark.

Reasons for branding:

1. It helps in product identification

2. It helps indicate the product quality and other characteristics

3. It helps create brand image and brand loyalty to products.

4. It helps increase the success of advertisement and personal selling.

5. It helps increase sales

6. It ensures legal right on the products.

7. It helps product and price differentiation.

8. It helps introduce new product easily.

Characteristics of a good brand name:


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1. It should be short, simple, easy to pronounce, spell and remember.

2. It should suggest something about product’s benefits, quality and action.E.g. ‘Stopache cream balm. ‘Ruchi pickles’.

3. It should be distinctive

4. It should be versatile

Types of brands:

Individual brand name: When each product has a unique brand name, it iscalled individual brand name. E.g. TVS XL, TVS Champ, TVS Scooty.

Family brand name: When a same brand name is given to all the products of asingle manufacturer, it is called family brand name. E.g. Godrej, Tata.

Packaging:

Packaging may be defined as the activities of designing and producing thecontainer or wrapper for a product. The container or wrapper is called thepackage.

In recent times, packaging has become a potent marketing tool.

The package must perform many of the sales tasks. It must attract attention,describe the products’ features, give the consumer confidence and make afavourable impression.

Packaging protects the products and provides convenience, appearance,dependability and prestige for the products.


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Packaging helps create brand and corporate image for the products.

Innovative packaging can bring benefits to consumers and profits to products.

Packaging decisions:

Developing an effective packaging for a new requires a number of decisions.The first task is to establish the packaging concept i.e., what the packageshould basically be or do for a particular product – protection, convenience orimage building.

Decisions must be made on further elements of package design – size, shape,materials and colour. The packaging elements must also be harmonized withdecions on pricing, advertising and other marketing elements.

After the packaging is designed, it must be put through a number of tests.Engineering tests are conducted to ensure that the package stands up undernormal conditions, visual tests are conducted to ensure that the letters andcolours are legible, dealer tests to ensure that dealer find the packagesattractive and easy to handle, and consumer test to ensure favourableconsumer response.

Labelling:

Label is a small ship placed on or near the product to denote its nature,contents ownership etc.

Labels perform several functions:

- The label helps identify the product or brand

- The label might describe several things about the product, who made it,where it was made, when it was made, its contents, how it is to be usedand how to use it safely etc.


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- It might promote the product through its attractive design.

Kinds of labels:

1. Brand labels: These labels are exclusively means for popularizing thebrand name of the product. E.g. Soaps, Cigarettes.

2. Grade labels: These labels give emphasis to standards or grades. E.g.Dust tea, Cloth etc.

3. Descriptive Labels: The label which are descriptive in nature are calleddescriptive labels. They describe product features, contents, method ofusing it etc. E.g. Milk – food products and medicines.

4. Promotional Labels: These labels aim at attracting the attention,arousing desire and creating interest among the consumers to buy theproduct.

The marketers should make sure that their labels contain all the requiredinformation before launching the product.

REVIEW QUESTIONS:

1. Define brand. What are the reasons for branding the product?

2. Define packaging. What are the functions of packaging?

3. What is labeling? What are the usual contents of labeling.

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LESSON – 10PRICING POLICIES AND METHODS

Among the different components of the marketing –mix, price plays animportant role to bring about product-market integration. Price is the onlyelement in the marketing-mix that produces revenue.

Price may be defined as the value of product attributes expressed in monetaryterms which a consumer pays or is expected to pay in exchange and anticipatedof the expected or offered utility. It helps to establish mutually advantageouseconomic relationship and facilitates the transfer of ownership of goods andservices from the company to buyers. The managerial tasks involved in productpricing include establishing the pricing objectives, identifying the pricegoverning factors, ascertaining their relevance and relative importance,determining product value in monetary terms and formulation of price policiesand strategies. Thus, pricing plays a far greater role in the marketing-mix of acompany and significantly contributes to the effectiveness and success of themarketing strategy and success of the firm.

Factors influencing pricing:

Price is influenced by both internal and external factors. In each of thesecategories some may be economic factors and some psychological factors,again, some factors may be quantitative and yet others qualitative.

Internal factors influencing pricing:

- Corporate and marketing objectives of the firm

- The image sought by the firm through pricing

- The characteristics of the product

- Price elasticity of demand of the product

- The stage of the product on the product life cycle

- Turn around rate of the product


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- Costs of manufacturing and marketing

- Product differentiation practiced by the firm

- Other elements of marketing mix of the firm and their interaction withpricing.

- Composition of the product line of the firm.

External factors influencing pricing:

- Market characteristics

- Buyers behaviour in respect of the given product.

- Bargaining power of the major customers

- Bargaining power of the major suppliers

- Competitors’ pricing policy

- Government controls/regulations on pricing

- Other relevant legal aspects

- Social considerations

- Understanding, if any, reached with price cartels.

Pricing Objectives:

A business firm will have a number of pricing objectives. Some of the them areprimary, some of them are secondary, some of them are long-term while othersare short-term. However, all pricing objectives emanate from the corporate andmarketing objectives of the firm.

Some of the pricing objectives are discussed below:

1. Pricing for a target return

2. Pricing for market penetration

3. Pricing for market skimming.


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4. Discriminatory pricing

5. Stablishing pricing

6. Competitor – oriented pricing

7. Achieving market share

8. Profit maximization pricing.

1. Pricing for a target return:

This is a common objective found with most of the established business firms.Here, the objective is to earn a certain rate of return on investment (ROI) andthe actual price policy is worked out to earn that rate of return. The target is interms of ‘return of investment’. There are companies which set the target at, forexample, 20 percent return on investment after taxes. They target may be for ashort-term or a long-term. A firm also may have different targets for itsdifferent products but such targets are related to a single overall rate of returntarget.

2. Pricing for market penetration:

When companies set a relatively ‘low price’ on their new product in initial stageshoping to attract a large number of buyers and win a large market-share it iscalled penetration pricing policy. They are more concerned about growth insales than in profits. Their main aim is capturing and to gain a strong footholdin the market. This object can work in a highly price sensitive market. Is it alsodone with the presumption that unit cost will decrease when the level of salesreach a certain target. Besides, the lower price may make competitors to stayout. When market share increases considerably, the firm may gradually increasethe price.

3. Pricing for market skimming:

Many companies that launch a new product set ‘high prices’ initially to skim themarket. They set the highest price they can charge given the comparativebenefits of their product and the available substitutes. After the initial sales


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slow down. They lower the price to attract the next price-sensitive lover ofcustomers.

4. Discriminatory Pricing:

Some companies may follow a differential or a discriminatory pricingpolicy-charging different prices for different customers or allowing differentdiscounts to different buyers.

Discrimination may be practices on the basis of product or place or time forexample, doctors may charge different fees for different patients, railwayscharge different fares for usual passengers and season ticket holders.Manufacturers may offer quantity discounts or quote different list prices tobulk-buyers, institutional buyers and small buyers.

5. Stabilising pricing:

The objective of this pricing policy is to prevent frequent fluctuations in pricingand to fix uniform or stable price for a reasonable period. When price is revised,the new price will be allowed to be remain for sufficiently a long period. Thispricing policy is adopted, for example, by newspapers and magazines.

6. Competitor – oriented pricing:

Under this method, pricing is fixed on par with competitor’s pricing policy. Ifthe competitors reduces the prices, the firm will also correspondingly reducethe price. If the competitors increases the price, the firm will also increase theprice or keep the price as it is thereby prevent competition.

7. Achieving market share:


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A firm may aim to secure a target market share by employing price as an input.Target market share means that share of the industry sale which a firm aspiresto attain. It is usually expressed as percentage.

8. Profit maximization pricing:

Profit maximization is the most common pricing objective. It means in a givenset of market conditions, firm attempts to maximize profit through theinstrument of price.

Besides the above, fast turn around and early cash recover, Profit optimizationin the long term and target sales volume could also be other pricing objectives.

Pricing Methods:

The pricing method must be appropriate for achieving the desired pricingobjectives. There are several methods of pricing. Each of them is appropriatefor achieving a particular pricing objective or combination of pricing objectives.

The different methods of pricing can be grouped under the following broadcategories.

1. Cost-based Pricing

Under this category, there are several approaches:

i) Make-up pricing

ii) Rate of return pricing

iii) Marginal cost pricing

2. Demand-based pricing method:

Under this category, there are different approaches.

i) Skimming pricing


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ii) Penetration pricing

3. Competition – Oriented Pricing Method:

Three alternatives are available under this method.

i) Premium – pricing

ii) Discount pricing

iii) Parity pricing

4. Product-line Pricing Method:

Under this method, the firm fixes the price of each product is such a mannerthat the entire product line is prices optimally resulting in optimal sales of allthe products in the line put together and optimal total profits from the line.

5. Affordability-based Pricing Method:

The affordability-based pricing method is relevant in respect of essentialcommodities which meet the basic needs of all sections of people. Under this,often, an element of state subsidy is involved and the product items are oftendistributed by the Public distribution system.

New Product Pricing:

Firms launching a new product can choose between market-skimming pricingand market penetration pricing.

i) Market skimming Pricing:


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Firms launching a new product may set high prices initially to skim the market.After the initial sales slow down, they lower the price to draw in the next-pricesensitive layer of customers.

ii) Market penetration pricing:

Firms may set a relatively low price on their innovative product, hoping toattract a large number of buyers and win a large market share.

Government Control on pricing:

Price controls refer to the Governmental regulations in respect of price fixation.

Usually statutory price control entails imposition of price ceiling so that it doesnot exceed consumer capacity to pay. Currently for example, the price of petrolis under statutory price controls. The firms manufacturing these products areassured retention prices which are based on costs, and ensure fair return oninvestment.

In case of sugar, a dual pricing system has been introduced. Under this system,a manufacturer is required to compulsory sell a part of its production to theGovernment at substantially low prices, called levy price.

The rest of production may be sold in the open market at a price the firmdeems fit. The statutory price control also envisages the announcement of‘support price’ for certain agricultural products like cotton, food grains etc. soas to protect cultivators from price fluctuation.

Voluntary price control envisages formulation of price control measures by therespective industry association under the direction of and according to theguidelines provided by the Government.

REVIEW QUESTIONS:

1. What is pricing? What are the factors influence pricing?


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2. Discuss various pricing objectives.

3. State the pricing methods.

4. Write a note on ‘Government control on pricing’.


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LESSON – 11PHYSICAL DISTRIBUTION

Distribution management consists of two major tasks - physical distributionand management of distribution channels.

Physical distribution is the process of taking the product to the consumers. Itencompasses all the activities involved in the physical flow of products fromproducers to consumers.

Importance of Physical distribution:

Physical distribution provides places utility and time utility to a product. Inother words, it is physical distribution that makes the product available at theright place and at the right time.

Physical distribution largely determines the customer service level and serves asan effective tool for building up a market.

It is a very important area of cost savings. A systematic planning of inventorylevels, warehousing operations, transport schedules and materials handlingwould lead to considerable savings in cost.

An efficient management of physical distribution may accrue to a firm’s largermarket share. It is possible to achieve a larger market share by decentralizingwarehousing operations and by using economic and efficient modes oftransportation to reach those market segments which have hitherto beeuntapped.

An effective management of physical distribution can also stabilize prices ofproducts by a judicious use of transport and warehousing facilitate.


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Channels of distribution:

The channels of distribution may be defined as “a pathway composed ofintermediaries also called middlemen, who perform such functions as neededto ensure smooth and sequential flow of goods and services from themanufacturing ends to the consuming ends in order to achieve marketingobjectives of a company.”

Role and importance of middlemen:

Middlemen bring together the producer and consumer in an efficient andeconomic manner.

Middlemen combine the products of different firms and offer them in the formof ‘assortments’ that are convenient to final users. They help to sell newproducts in the market. The dealers promote the product through their task.They provide market intelligence and feed back to their principles. Since theymaintain constant and direct contract with customers and know the pulse of themarket.

Middlemen help create awareness and interest about the product among theconsumers by attractive display of the new product.

Middlemen help implement the price mechanism in the market, they assist inarriving at the price level that is acceptable to the producer and the user.

They also look after a good part of the physical distribution function liketransportation, warehousing and inventory management. In addition, they lookafter financing of the goods, credit transactions, negotiations with buyers etc.

Middlemen also act as ‘change agents’ among the buyers and generate demandfor new products.


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Pattern or Types of distribution channels:

1. Manufacturer – User – (Short or direct channel)

2. Manufacturer – Retailer – User

3. Manufacturer – Wholesaler – Retailer – User – Long channel

4. Manufacturer – Stockiest – Semi Wholesaler – Retailer – User – Longchannel.

Factors determining the choice of channel:

The best channel is one that works best in the marketing strategy selected bythe company. The channel chosen should achieve ideal market exposure andshould meet target customer’s needs and preferences.

The channel choice is influenced by

- Distribution policy

- Product characteristics

- Supply characteristics

- Supply characteristics

- Customer characteristics

- Middlemen characteristics

- Company characteristics

- Environmental characteristics

- Cost of channel

Distribution Policy

A firm’s distribution policy may be of intensive distribution, selectivedistribution or exclusive distribution.


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Intensive distribution refers to maximum distribution through every possibletype of outlet. This policy requires the use of more than one channel to reachthe target market with many intermediaries.

Selective distribution is the sale of product through only those outlets whichwill be able to sell more product.

Exclusive distribution involves granting of exclusive rights to the channelmember to distribute the products. Thus, the distribution policy of the firmdecides the choice of a channel.

Product characteristics:

The product characteristics such as the use of the product, its frequency ofpurchase, Perishability, value, the service required etc decide the channel.

For example, perishable products require more direct marketing, conveniencegoods such as soaps, match box which are frequently purchased and low unitvalue require long channel. Shopping goods such as refrigerator requireselective channel.

Supply characteristics:

Small number of producers, geographically concentrated use short channel. Ifthe number of producers are large, and geographically dispersed use longchannel.

Customer characteristics

Customer characteristics such as their number, geographical dispersion,frequency and regularity of purchase greatly influence the channel selection.


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Middlemen characteristics:

The choice of channel is also depends on the strengths and weaknesses ofvarious types of middlemen performing various marketing functions. Theirbehavioral differences, product lines, the number and locations affect thechoice of the channel.

Company characteristics:

The choice of channel is also influenced by company characteristics such as itsfinancial position, size, product mix, past channel experience etc. The companymarketing policies such as speedy delivery, after-sales service etc. alsoinfluence the choice of channels.

Environmental characteristics:

Environmental characteristics such as economic conditions and law alsoinfluence the channel selection. For example, when economic conditions aredepressed the producers prefer shorter channels to reduce cost.

Cost of channel:

As each channel will be doing some of the marketing functions, the cost ofperforming such marketing functions at each distribution level and the totalcost of performing the entire marketing task has an influence in the choice ofthe channel. Those channels which ensure efficient distribution at least expenseand which secure the desired volume of sales should be chosen.

Functions of Middlemen


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The middlemen mainly, comprised of wholesalers and retailers. The word‘wholesaler’ means to market goods in relatively larger quantities and whousually does not sell the ultimate consumers’.

Services rendered by the wholesaler to the manufacturers:

1. Securing orders form large number of retailers

2. Reducing the manufacturer’s need for carrying large stocks and incurringwarehousing expenses.

3. Saving the manufacturer from the risk of credit sales with numerouscustomers.

4. Participation in sales promotion and advertising tasks of themanufacturers.

5. Acting as the interpreter of consumers needs and opinions.

6. Helping the manufacturers for continuous production.

7. Taking over the marketing functions from the manufacturer, thusenabling him to concentrate on production.

Services to the Retailers:

1. Relieving the retailers to hold large stocks.

2. Prompt delivery of goods to the retailers

3. The wholesaler who specialists in one line of goods can offer betteradvise to the retailer regarding the quality of goods.

4. Grant credit to the retailers

5. Informing and influencing the retailers to buy new products.

6. Sharing the risk involves in marketing.

Retailers:


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Retailer is the last link in the channel of distribution. He sells the commoditiesto the ultimate consumer. As an intermediary between themanufacturer/wholesaler and the consumer he is performing the followingservices.

1. He makes available wide assortment of goods to the consumer.

2. He keeps ready stock to meet the day to day demand of the customers.

3. He brings new products and new varieties to the consumers.

4. He offers expert advise to the consumers regarding suitability of product.

5. He is able to ascertain first hand needs and requirements and reactionsof consumers

6. He undertakes sales promotion activities

7. He extends credit facilities.

8. He maintains personal contract with consumers and exercisesconsiderable influence on their buying decisions.

Elimination of Middlemen:

Middlemen are used by the manufacturers because they can perform themarketing functions more economically and more effectively than themanufacturer at a given cost.

Further the manufacturer does not have the ability to perform those, functionsand / or because he does not possess adequate financial resources to performthem effectively. Even those producers who have required financial resources tosell directly to final consumers often can earn a greater return by increasingtheir investment in other aspects of business. The element of risk also ariseshere. Direct selling involves owning warehouses, delivery equipments and salespersonnel. These involve fixed costs and increases the risk. But if middlemenare used, these risks are borne by the middlemen. These middlemen by virtueof their specialization and experience may do the job better than the producer.


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It is wrong notion to believe that goods are marketed cheaply when middlemenare not used. The elimination of middlemen does not mean the elimination ofthe marketing functions. The functions are to be performed and the issue iswho should perform it is largely one of relative efficiency and effectiveness.Therefore, one of the reasons the producer does not choose to perform anumber of specific marketing functions is that the middlemen through theirspecialization may perform it at less cost. Hence it is not possible to eliminatethe middlemen from the channel and it is wrong to blame them as parasites onthe society by pointing to the difference between the final price and theproducers’ price. It is only when the middlemen take advantage of shortage andconsumer ignorance and exploit them, they can be termed as parasites.

Relating Establishments:

1. House – to – house selling:

House-to-house selling is also known as ‘Home selling’ or ‘Door-to-doorselling’. Under this method, salesperson directly meets the consumers in theirhomes, to promote the new products and to popularize existing productsextensively as well as intensively. It is a flexible method and no fixedinvestment is involved for a retail store at a specific place. It is a convenientmethod of buying to consumers, in many cases after demonstration.

Marketing by mail order:

Mail order marketing also known as Mail Order Business is one the popularmethod. Under this method, the prospective consumers become aware of theproduct through information furnished by the produces through the printmedia or through broadcast or through direct mail. Interested consumersrespond by placing order through mail to the suppliers. the products aresupplied to the consumer by mail and payment made either by VPP or bycheque.

Vending Machines:


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Vending machines enable the producers to supply the products to theconsumers through machine without employing salesmen. Usually productswhich belong to the ‘buy on impulse’ category like soft drinks, ice creams,cigarette etc are marketed through this method.

Independent stores:

Independent stores are retail shops marketing the products to the consumers.They have the following advantages:

- Personal relationship with customers

- Location at convenient places to the customers

- Greater flexibility in working

- Catering for more individualistic need

- Personal supervision

- Prompt and quick decisions

- Better services

Department Stores:

A department store is defined as ‘a retail institution that handles a wide varietyof merchandise grouped into well defined departments for purposes ofpromotion, service, accounting and control’. It is capable of supplying all therequirements of the customer under a single roof.

Main features of department stores are:

a. A wide variety of goods

b. Departmental organisation

c. Large size

Advantages:


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1. Centralized location

2. Availability of a wide range of goods in one location

3. Convenience of shopping for consumers

4. Being a large organisation it can get economics of large-scaleprocurement

5. It can afford to have effective advertisement and can derive economics oflarge scale advertisement.

6. It can offer better sales services.

Drawbacks:

1. High cost of doing business

2. Limited personal attention to customers

3. Need for higher capital

4. Higher mark-up in prices

5. Dependence on hired employees

Chain stores or Multiple shops:

‘A chain store system consists of a number of retail stores which sell similarproducts, are centrally owned and are operated under one management.’ Thevarious stores may be located in the various localities of a city or may be spreadover a number of cities in the country.

Advantages to the manufacturer or owner of the chain:

1. Low operational expenses

2. Low cost of goods


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3. Uniformity in prices

4. Standardized methods of operation

5. Multiplication of selling points

6. Low investments in inventory

7. Proximity to customers.

Advantages to customers:

1. Easy accessibility

2. Elimination of middlemen’s profits

3. Assured quality

4. Uninterrupted supply

5. Direct contact

Disadvantages:

1. Problems relating to personnel and supervision

2. Inflexibility in operations

3. Rise in distribution cost

4. Limited varieties

Super Market:

A supermarket is defined as ‘a large retailing business unit with wide varietyand assortments, self-service and heavy emphasis on merchandise appeal’

Advantages:

1. Supermarket stocks a wide variety of assortments of goods


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2. Prices are normally low

3. It operates on the principle of self-services

4. It is a low cost retail institution

Limitations:

1. It can operate in the area of concentration of buyers

2. It has to face the problem of personnel and supervision

REVIEW QUESTIONS

1. What are the factors that decide the choice of a channel?

2. ‘middlemen can be eliminated’ – Discuss

3. What are the services rendered by the wholesalers and retailers?

4. Evaluate the merits and demerits of department stores and chain stores.

5. Write note on i) automatic vending ii) mailorder business iii)House-to-house selling.


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LESSON – 12PERSONAL SELLING

Personal Selling is a broader concept and involves oral presentation in aconversation with one or more prospective purchasers for the purpose ofmaking sales. The purpose of personal selling is to bring the right products intocontact with the right customers and to make certain that ownership transferstake place. Personal selling is employed for the purpose of creating productawareness, stimulating interest, developing brand preference, negotiation priceand finally clinch the deal.

The art of selling is called salesmanship. Salesmanship is one of the skills usedin personal selling Salesmanship is defined as ‘seller-initiated effort’ thatprovides prospective buyers with information, and motivates or persuades themto make favourable buying decisions concerning the seller’s product or services.

The selling done by the salesforce is called personal selling while sellingachieved through advertising and other sales promotional methods are calledimpersonal selling.

Strengths of Personal Selling:

Personal Selling is present in all the three phases of buying namelypre-transactional, transactional and post-transactional.

It is two way communication and thereby it proves to be effective. It is onehuman mind influencing another human mind.

It is more flexible and adaptable to the varying purchase situations. It ispossible for a salesman to adapt himself to the needs, motivates, impulses andother behavioural traits of the prospective customers.


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In personal selling, there is minimum possibility of message distortions. Thesalesman is able to focus his message on qualified consumers only.

It is possible for a salesman to detect loss of consumer attention and interestand regenerate them by proper techniques.

A relatively durable relationship may be developed between salesman andconsumer which makes future sale exploration much effectives.

The salesman acts as a market researcher. He gathers and promptly transmitsrelevant market information to the company in making timely strategic andtactical decisions.

Conditions favouring Personal Selling:

Personal selling is relatively more economical and effective in the followingconditions.

1. When a firm sells in the small market.

2. When desired agent-middlemen are not available

3. When the product is in the introductory stage of its cycle

4. When the product is of a high unit value

5. When the product requires demonstration

6. When the product needs personal attention to match specificconsumer needs.

7. When the product requires after sales servicing.

8. When the consumer purchasing involves a deliberative process i.e., notimpulsive

9. When consumer need instant answers to his questions.


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10. When a company cannot afford a consistent and large advertisingoutlay.

Qualities of a Effective Salesperson

Good salesmanship is not a matter of some rare, persuasive, inherited skill,which, when ‘turned on’, magically gets the order. On the contrary, goodsalesmanship is the result of careful analysis of the buyer’s problem combinedwith some articulateness in explaining to the buyer how the seller can solve hisproblem. The size-up of salesmanship may well emphasize the personalqualities required of good salesmen.

Most companies desire that certain essential personally traits, qualities,characteristics, aptitudes, attitudes and abilities should be possessed by thepeople whom they want to recruit to the sales force. However there is nostandardized formula for listing the essential qualities such thing as the idealsales personality. There are many kinds of selling jobs requiring different typesof salesmen. So the characteristics of salesmen usually varies also from onesales position to another and also from company to company. This means, eachcompany should make its own study of its selling job and decide thecharacteristics of its own sales force.

However, a number of lists of essential characteristics are available. Mayer andHerbert conclude, ‘it is enough if a good salesman has two basic qualities -empathy and ego drive’. Empathy is the ability to feel as the customer does.Ego drive refers to a strong personal need to make the sale for its own sake andnot merely for the money to be gained. But these are rarely enough. Themajority of scholars feel that the following should be the essentialcharacteristics of successful salesman.

1. Ambition

2. Enthusiasm

3. Cheerfulness

4. Sympathy


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5. Patience and persistence

6. Tact

7. Hardwork

8. Determination

9. Dependability

10. Integrity

11. Ability to ask questions

12. Ability to make quick and accurate spot judgements

13. Ability to provoke answer

14. Modest and confident answers to questions

15. Alertness

16. Sense of humour

17. Story telling ability

18. Ability of smile

19. Optimism

20. Right facial expression

21. Ability to mix easily with other people

22. Memory

23. Leadership

24. Power of observation

25. Acceptance of criticism

26. Habit of asking for the order

27. Knowledge of the company

28. Knowledge of the product

29. Knowledge of the prospect

30. Personal appearance.


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As pointed out already, the above are the common qualities required of a goodsalesman. In practice, it is difficult to find from a single individual all the abovequalities. But still, the individual could develop the above qualities to become abetter salesman.

Difference between selling consumer and Industrial Goods

Consumer goods are those meant for use by the ultimate household consumerand in such form that they can be used by him without further commercialprocessing.

Consumer goods are generally divided into three sub-categories according tothe method in which they are purchased viz, convenience goods, shoppinggoods and specially goods.

Industrial goods are those which are used in producing other goods orrendering service. Industrial goods are divided into three main categories viz.,raw materials, equipments and fabricated materials.

Difference between selling consumer and Industrial Goods:

1. Scale of Production:

Consumer goods are manufacturing on a mass scale when compared toindustrial goods.

2. Nature of demand:

The demand for consumer goods are generally primary in nature whereasdemand for industrial goods is derived demand.

3. Number of buyers:


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In consumer market the buyers are large in numbers but in the case ofindustrial goods, the buyers are limited in number.

4. Location of buyers:

The consumer market is widespread and the consumers are scattered whereasindustrial users are generally concentrated geographically.

5. Unit of purchases:

The unit of consumer goods is invariably low and unit of purchase is also low.But the frequency of purchase is greater. In the case of industrial goods, thescale of purchase is high and the unit cost is also high.

6. Nature of products:

The consumer goods are not complex when compared to industrial goodswhich are of more technical and complex in nature.

7. Buying Process:

In the case of consumer goods, purchasing is done by individual consumerwhereas it is group process or by a Committee of Experts in the case ofindustrial goods.

8. Buying Motive:

Consumer goods are bought by emotional impulse whereas industrial goods arebought on rational motive.


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9. Competition:

Consumers goods are subject to severe competition when compared toindustrial goods.

10. Suppliers Reputation:

When compared to consumer goods supplier’s reputation plays a major role inindustrial goods.

11. Channel of distribution:

The length of the channel for consumer goods is long and indirect whencompared to industrial goods where the channel of distribution is short anddirect.

12. Pricing Policies:

The price of consumer goods are subject to frequent changes when comparedto industrial goods.

13. Constant threat from changes in fashion:

The consumer goods market has a constant threat from changes in fashionthan industrial goods.

14. Nature of salesman:

Industrial selling is normally backed by technical details and usually done bypeople with some technical background.


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15. Nature of Advertising:

Mass advertising essential for consumer goods whereas it is not needed forindustrial goods. Advertisement in trade and technical journals backed by directmailing and personal selling will serve the purpose for selling industrial goods.

16. Government Control:

Government control is comparatively more for consumer goods than forindustrial goods.

An understanding of difference between consumer goods and industrial goodsis necessary for the salesperson to workout a better sales strategy.

REVIEW QUESTION

1. What is personal selling? Bring out its importance

2. Enumerate the qualities required for a good salesman.

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LESSON – 13SALES MANAGEMENT

Sales management is an integral system of marketing management. Ittranslates the marketing plan into marketing performance. The various tasksinvolved in sales management are:

- Determining the personal selling objectives of the firm

- Formulating the sales policies

- Structuring the salesforce

- Deciding the size of the salesforce

- Selection and Recruitment

- Compensation, motivation and training and development

- Sales control

Personal Selling Objectives:

The major areas where personal selling objectives have to be set are:

- Sales volume

- Market volume

- Profits

- Selling expense level

- Appointment of new dealers

- Pre sale and after sale service

- Assistance in sales promotional measures

- Gathering and reporting market intelligence

Formulating Sales Policies


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Sales management has a major role in shaping and implementing policiesrelating to product, price, distribution and promotion.

Structing the sales force:

The sales force is usually structured on a territory basis or on a product basis.This structuring is the task of sales management.

Determining the size of the sales forces:

The size of the salesforce ahs to be fixed at the optimum level. The size of thesalesforce depends on the following considerations.

1. Level of sales expected and the number of salesmen needed forgenerating this sale.

2. Minimum number of salesmen needed from the servicing angle,irrespective of level of sales.

3. Costs involved in maintaining the sales force.

The firms integrate exercise of determining the number of territories and thenumber of salesmen and arrive at the optimum.

Managing the sales force:

The various activities involved in the management of sales force are:

- Recruitment and selection

- Training of salesmen

- Compensation the sales force


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Recruitment and selection:

After having determined the size of the sales force, the firm has to recruit andselect the right kind of persons to serve as salesmen. Recruitment is an act ofinducing qualified and competent people to get interested in and apply for asalesman’s position with the firm. Selection is a consequence of recruitmentactivities and implies choosing the desired number of applicants foremployment among those who have applied. It involves the process ofmatching educational, aptitudinal and personality attributes of the applicantswith the man-job specification laid down by the firm.

The selection process consists of the following steps:

1. Application blanks:

The firm may ask the prospective candidates to apply by issuing applicationblanks. The application blank contains questions relating to personal history,educational background, experience, expectations etc.

2. Conducting Tests:

In order to develop an indepth understanding of the candidates, the firm mayconduct psychological and other tests such as tests of ability, tests of habitualcharacteristic and tests of achievement. Besides, a firm may also administerphysical /medial tests to ascertain the physical fitness of the candidate for ahard and strenuous selling job.

Interviews:

Interviews involves personal interaction with the candidates and is aimed atdiscovering the ‘salesmanship’ in the candidate.

After having screened the application blanks, administrated the various testsand interviews, the results of these different components of the process are


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compiled and the final score is arrived at to prepare a panel of candidatesacceptable for employment.

Training of Salesman:

Having selected the salesmen, he should be trained and retained, adequatelycompensated and effectively motivated.

Need for training:

- To improve sales performance

- To increase the efficiency of the salesmen.

- To reduce the selling expense

- To have a better understanding of the company

- To have improved customer – relations

- To shape the behaviour of the salesmen.

Consists of Training Programme:

- Knowledge about the company

- Knowledge about the product

- Knowledge about the market

- Knowledge about selling techniques

- Knowledge about competitors

Training Method:

A variety of training methods are available to train the salesmen. Thesemethods may include the following:

1. Self-study Method:


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The individual salesmen may be supplied with booklets, journals, reports tostudy by himself to acquire sufficient knowledge.

2. Lecture Method:

Under this method, the lecturer delivers lecturers on the course content totrainees. Audio-visual aids are also used. It is a teacher-dominent methodwhich inhibits trainee’s active participation in the learning process.

3. Discussion:

Under this method, the trainee activity participates in the learning process bydiscussing buying – selling situations/problems and this their analyticalfacilities and help them think logically.

4. Royal Playing:

This method requires trainee to act out roles in contrived problem situationwherein the trainee assumes the role of customer, salesman and othercharacters. Having played the roles, each trainee evaluates his own performance– its strengths and weaknesses. Feed back is provided by groups members andaudio – visual means.

5. Case studies:

Case studies are particularly appropriate for developing analytical skills.Trainees are asked to analyze situations, identify problems and opportunitiesand make recommendations for dealing with them.

6. Sensitivity Training:


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Sensitivity training is aimed at making trainees sensitive to their environmentand customers’ behaviour to enable them to know how they should adjust to it.

7. On-the job training:

In this method, the trainee is imparted instructions by placing him on the job ofselling. In the beginning the trainee will accompany the trainer, observe hisperformance and he will be asked to do job under the trainees’ supervision. Thetrainee’s performance will be reviewed and if necessary suggestions made toimprove his performance.

8. Conference and Seminars:

The salesmen may also be deputed to conference and seminars conducted byoutside organisatoins to enable them to get new knowledge and experience.

Evaluation of Training:

The effectiveness of training programme may be done at the end of theprogramme by getting their views and analyzing them. The overall impact maybe evaluated by comparing salesmen’s performance in terms of sales volume,sales – profitability, expenses etc between pre and post training periods. Fornew recruits the judgement may be formed on the basis of absolute totalperformance.

Compensation of salesforce

Salesmen’s compensation means monetary reward given by a company to itssalesmen in consideration of the services rendered by them.


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Compensation serves as an important motivation tool to retain the salesmenand to contribute to the growth of the company. It is an important magnitudetool to direct and control sales force to attain the sales objectives.

Requirements of a Good Compensation Plan:

1. It should be simple to understand by salesmen.

2. It should be fair to both the salesmen and the company

3. It should ensure a living wage to salesmen

4. It should also be flexible enough to provide scope for adjustment ofcompensation basing on salesmen’s performance.

5. It should be easy and economical to administer.

6. It should really prove to be an instrument of attaining sales objectives.

A company has to develop an optimal mix of the above requirements so as todevelop a viable compensation plan.

Methods of Compensation:

Usually, the following methods of compensation are employed.

- Straight Salary

- Straight Commission

- Salary and Commission

Straight Salary:

Under this method, fixed salary for a specific period, usually, a month is paid tosalesmen. It is fixed and guaranteed and does not vary with quantum of sales.

This system ensures regular income to the salesmen and thereby providessecurity. It is simple to understand and easy to calculate.


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It does not provide any incentive to salesmen for additional performance. It maynot attract/retain high-performing sales people.

This method is used primarily in industrialized selling where technical service isan important element in the selling. It is appropriate when the salesperson sellsvery high-value products at very low volumes.

Straight Commission only:

In this method, compensations is composed of only a commission which isrelated to some measure of productivity like sales volume, net profits,collection of debts etc. Usually sales volume is the basis.

It provides maximum monetary incentive to salesmen. It attracts high calibersalesmen. It is simple to understand. It is flexible enough to meet changes inbusiness conditions.

This method, however, has certain drawbacks. The sales personnel may pursueshort-term goals to the detriment of activities which have the effect in thelonger term. Their focus is only on selling, non-selling tasks such aspreparation of report, market intelligence are usually ignored. The systemprovides little security to the sales people.

This system is used where there are a large number of potential customers, thebuying process is relatively short and technical assistance and services is notrequired. E.g. Insurance selling.

Salary plus commission:

Under this method, usually a mix of salary (fixed component) and commission(variable component) is developed in such a way that salesmen are assured of asecured steady income and also adequate incentive to work harder. Thecommission may be paid on total sales/profit or on a certain quota of salespredetermined.


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It is the most commonly used method of compensating salespeople, althoughmethod of calculating commission may vary.

Evaluation of Performance of Salesforce:

The performance of salesforce has to be evaluated both periodically and on acontinuing basis to determine the compliance of policies and achievement oftargets. Evaluation of performance involves establishing standards or measuresof performance and measuring actual performance and comparing it withestablished standard and taking corrective action, in case of deviation.

The standards of performance may be broadly divided into two namelyquantitative and qualitative. Quantitative standards are those which specifyperformance levels of salesmen in terms of targets. Qualitative standards arethose which measure the salesperson’s knowledge and behaviour. Whilequantitative standards could be measured qualitative standards are difficult tomeasured.

Quantitative measures of performance:

The main output measures relate to sales and profit performance. Specificoutput measures for individual salesmen include:

- Sales volume achieved

- Profits generated

- Number of orders

- Sales to new customers

- Number of new customers

Input measures include


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- Number of calls made per day

- Expenses per call

- Number of calls on prospects

- Expenses for square Km of territory

Qualitative Measures of Performance:

- Sales skills

- Customer relationship

- Product knowledge

- Co-operation and attitudes

For an evaluation, to work efficiently, it is important for the sales team tounderstand its purpose. It should be used and perceived as a means ofassisting salespeople in improving their performance.

REVIEW QUESTIONS:

1. Discuss the steps involved in the selection process of salesmen

2. Discuss the various methods of training of salesmen

3. Explain the major methods of compensating sales force

4. What are the methods of evaluating the performance of salesforce?


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LESSON – 14ADVERTISING

The term ‘advertising’ originates from the Latin work ‘adverto’, which means to‘turn around’. Advertising, thus, denotes the means employed to draw attentiontowards any object or purpose. In the marketing context, advertising has beendefined as, “an paid form of non-personal presentation and promotion of ideas,goods or services by an identified sponsor”. It is component of firm’spromotional mix. It is a common technique of mass selling. Publicity is differentfrom advertising. Publicity is not normally paid for and sponsor could not beidentified. It is not easily controlled by the firm. Advertising can have bothlong-term and short-term objectives. Some common objective are:

1. The basic objective of the advertising is to inform and influence thebuyers to buy the product and thereby increase the sales

2. Advertising may be used to introduce a new product to potentialcustomers.

3. It is used to induce the middlemen to store and handle the product.

4. It helps build up brand image and brand loyalty to the products.

5. Advertising may be necessary to publicise the changes made in prices,channels of distribution, any improvement made in the quality, size,weight and packing of the product.

6. It may be issued, sometimes, to compete with or neutralize competitor’sadvertising.

7. It helps build up corporate image.

8. In the case of mail order business, advertising does the selling job byitself.

9. By supplementing personnel selling, advertising makes the job ofsalesforce easier.

10. It helps increase the effectiveness of sales promotion campaign.

11. Finally, it encourages the creative arts and the artists.

Decision areas in advertising


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The decision areas in advertising comprises of:

1. Deciding the advertising objectives

2. Deciding the advertising budget

3. Deciding on the advertising copy

4. Deciding the media

5. Evaluating the effectiveness of advertisement.

Deciding the advertising objectives:

Advertising objectives are essential because it helps the marketer know inadvance what they want to achieve and helps ensure effective development ofadvertising programmes and guides and controls decision-making in each areaand at each stage.

Deciding the Advertising Budget:

Deciding how much money to the spent on advertising is not an easy task. Thetype of products involved, the competitive structure of the industry, legalconstraints, environmental conditions etc. influence advertising expenditure.The decision cannot be taken by applying a standard formula. The answervaries from industry to industry and from company to company within the sameindustry. The same company’s advertisement expenditure may differ from timeto time.

Methods of advertising budget:

1. Affordable method

2. Competitive parity method

3. Percentage of sales method

4. Objective and task method


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Affordable Method:

This method as the name indicates, rests on the principle that a firm willallocate for whatever it can afford. Usually small firms follow this method. Eventhe limited funds provides for advertising may get reallocated for other itemsdepending upon the emergent requirements.

Competitive Parity Method:

Under this method, the firms make their advertising budget comparable to thatof their competitors. They simply do what others are doing.

Percentage on sales method:

Under this method, the advertising budget is set in terms of a specifiedpercentage of sales. The fact that different product/brands at different stagesof their life cycle will require varying levels of advertising support which is nottaken into account by this method.

Another limitation is that the level of sales determines the level of advertisingbudget but the actual ‘functional relationship’ would seem to be the reverse.Hence it is advisable that at percentage of projected sales be allocated ratherthan a percentage of previous year’s sales.

Objectives and task Method:

In actual practice, marketers usually blend some of the well accepted methodsand arrive at compromise budget which is logical. In other words, the budgetdecision is closely linked up with the advertising objectives, the mediadecisions and copy decisions. These four decision areas in advertising interactamong themselves and influence each other. The decision-making is an


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integrated process, which takes into account the total task of advertising to beperformed.

Deciding the Copy:

The term ‘copy’ includes every single feature that appears in the body ofadvertisement such as the written matter, picture, logo, label and designs.

Developing the copy is, of course, a creative process. It is an area where norigid rules can be applied. Some essential qualities that must be present in agood advertisement are that it must be able to i) attract the attention ofaudience ii) arouse interest iii) create desire and iv) stimulate the action ofbuying. This is known as AIDA (Attention, Interest, Desire and Action).

Formulating the copy requires the consideration of the following:

1. Message content – What to say?

2. Message structure – How to say it logically?

3. Message source – Who should say it?

Message Content:

The advertising has to decide ‘What to say’ to the target audience to producethe desired response. The basis is ‘advertising objectives’. Depending on thenature of the product nature of target market the message can have rationalvalue, emotional value, moral value, educational value, suggestive value,attention value, humour value etc.

Message Structure:

The structure deals with the organisation and arrangement of the variouselements of a message. This includes decision on the headline, message size,colour drawings etc.


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Message Source:

The source of the message has great deal of persuasive influence on the buyers.The persuasive influence of the source depends mainly on two specificcharacteristic of the source.

- The credibility of the source

- Likeability/Attractiveness of the source

Source credibility is an important determinant of audience persuasion. Sourcefactors such as level of expertise, trust worthiness, culture, age and educationallevel usually deiced the source’s credibility with the audience. If an audienceperceives the source as sincere, honest and trustwirthly, the source will beeffective in communicating the message. For example, when a doctor is seen torender a message about a pain reliever, the receiver of the message is temptedto accept it as an authentic information.

Likability of the source is the second major characteristic. If the source isidentical to the audience is personality, political affiliations, the audience tendsto like the source. The audience would emulate the source and identitythemselves with the sources.

Deciding on media:

Media consists of channels for carrying the intended advertising message to theselected audience. There is difference between media and media vehicle. Forexample, newspapers are media, “The Times of India”, ‘The Hindu’ are mediavehicle. Media that are commonly used in advertising are:

Print Media:

- Newspapers


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- Magazines

- Trade journals

- Direct mail such as catalogues

Audio-Visual Media:

- Radio

- Television

- Cinema

- Outdoor media such as posters/banners/hoardings

Selecting the appropriate media and media vehicle and arriving at a soundmedia mix is a very crucial function in advertising. Now, advertising agenciesprovide help in media selection as an integral part of their service to theircustomers.

Considerations in Media Planning and Selection:

1. Target Audience:

It is essential for the media planner to find out the firm’s existing image in themarket, characteristics of its major customer segments, their habits, life styles,reading habits etc.

The media planner also has to seek information regarding the age, incomeoccupation, education, religion, social class etc of the firm’s customers. Thesedemographic and psychographic variables of the existing and potentialcustomers will give the medial planner the required background information.

Communication objectives:


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The marketing objectives, particularly, advertising objectives help the mediaplanner decide what media or what combinations of media or media mix canhelp attaining the objectives. Hence, the must know the objectives clearly.

Total budget available:

Another factor that has to be seriously taken into account by the media planneris the total budget available to run the advertising campaign.

Exposure, Reach and Frequency:

The main consideration in selecting the media is how many exposures can bepurchased for the budgeted amount, the cost of exposure in different mediaand media vehicles, and the reach of media. The exposure available through amedia is a product of its reach and frequency.

Nature of product and Message:

The nature of product and message also plays an important role in mediaselection.

Mathematical Models:

Of late, several mathematical models and computer programmes are availablein deciding the best media mix for a given situation. Linear programmingheuristic programming, and simulation techniques are now used for mediaselections. ‘MEDIAC’ a computer model is gaining popularity.

The innumerable qualitative dimensions enter the media selection call for a finetuning which only a conscious human judgement can provide.

Evaluating Advertising Effectiveness


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“Evaluating advertising effectiveness is not easy”. Jerome Mc Carty wrote threedecades back. This holds true even to-day. The quantum of sales orcommunication goals as the basis, still measurement of effectiveness becomesdifficult. In spite of the difficulty, firms resort to evaluation of advertisingresults. They try to assess how far the sales task and the communication taskhave been accomplished by advertising.

Copy tests are conducted during development process, at the end of actualproduction process and (pre-test) and after the campaign is launched(post-testing) to find out the effectiveness. Tests may be conducted inlaboratory, in the simulated environment or real/natural environment.

The labouratory methods normally use physiological measuring techniques withthe help of aids like eye-camera, polygraphs, etc. The market tests include foliotest in the print media, in-home projector test for T.V. commercials etc. one ofthe widely used methods for testing T.V. commercials is the Day-After-Recalltechniques, commonly called DAR. Those who had the opportunity to see thetest commercial are interviewed to find out their ability to ‘recall’ thecommercial. A majority of the tests are centering on ‘attention’, ‘recognition’and ‘recall’ factors. This means the tests are mostly concerned withcommunication effectiveness of the copy.

REVIEW QUESTIONS

1. Define advertising. What are its objectives?

2. What are the different methods of advertising budget?

3. What are the types of advertising media? What are the factors to beconsidered in choosing the media?

4. Write a note on ‘evaluating the effectiveness of advertisement’.

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LESSON -15SALES PROMOTION

Sales promotion is essentially a direct and immediate inducement that adds anextra value to the product, so that it induces the dealers and ultimateconsumers to buy the product. It is defined as “those sales activities thatsupplement both personal selling and advertising and co-ordinate them andhelp to make them effective, such as displays, shows and expositions,demonstrations and offer non-recurrent selling efforts not in the ordinaryroutine”.

Salespromotion measures are not that durable and lasting like the resultsobtained through advertising and personal selling. It is practised as a catalystand as supporting facility to advertising and personal selling.

Need for sales promotion

Marketers resort to sales promotion to meet the following needs:

1. To introduce new product

2. To overcome a unique competitive situation

3. To exhaust accumulated inventory

4. To overcome seasonal slumps

5. To get additional customers

6. To retain the existing customers

7. To supplement to the advertising effort.

8. To supplement to the salesmen’s effort

9. To persuade the salesmen to sell the full line of products.

10. To persuade dealers to procure more.


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The sales promotion effort may be aimed at Consumers, traders/dealers andsalesmen.

Tools and Techniques of Sales promotion:

The sales promotional methods aim at consumers include:

1. Free samples

2. Coupons

3. Premiums

4. Contests, or sweepstakes

5. Point of purchase displays

6. Discounts

7. Gifts

8. Demonstrations

9. Trade fairs and exhibitions

Free samples are offered to persuade the consumers, to try the product. By thismethod the firm tries to gain entry into that market. Soaps, soft drinks areexamples.

Coupons are certificates which offer price reductions to consumers during thesubsequent purchase of same items. Coupons are distributed throughnewspapers and magazines advertisements or even by direct mail. These areuseful for introducing new product and to increase the sale of existing product.

Premium or bonus offer:

An offer of a certain amount of product at free cost to buyers who buy aspecific amount of product or special pack there of is called premium offer orbonus offer. For example one silver spoon with Horlicks or plastic bucked with1 Kg. of surf powder.


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Contests or Sweepstakes:

Under this, an opportunity is provided for consumers to participate in asweepstake, contest or game with chances of winning cash prizes, goods, freeair/cricket match tickets. A sweepstake involves merely inclusion of theconsumer’s name or his bill number who buy more than the specified value ofproducts in the drawing of prize winners.

E.g. ‘Made for each other contest by will”.

A ‘game’ comprises finding out a missing letter or completing a slogan.Contests take variety of forms such as quiz contest, beauty contest, car rallies,lucky draws etc.

Point purchase promotion:

This is nothing but innovating, attractive displays of products in the shelf spaceto induce the consumers to buy the product. Various kinds of display materialslike posters, stickers, mobile wobblers are used at the retail shop to induce thepurchase.

Discounts/Price off:

It is giving discount on certain products to induce buying of products. Onecould see grand discount sales during festival seasons on textiles to stimulatesales.

Installment offers is another popular method of sales promotion.

Gifts:


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Companies also distribute gifts to customers such as pen, calenders, diaries,table decorations etc which will carry companies name and logo.

Demonstration:

Firms resort to product demonstrations when they introduce new productsVaccum cleaners, washing machines are best examples. Demonstration may bedone at retail stores, schools, homes and in trade fairs and exhibitions.

Trade fairs and exhibitions:

Firms can introduce their products by displaying them in trade fairs andexhibitions to induce the buyers to buy the product. Especially in internationalmarketing, international trade fairs play a pivotal role.

Dealer/Trade sales promotions:

Dealer sales promotion include

1. Buying allowance

2. Promotional allowance

3. Sales contest

Buying allowance:

It involves an offer of a percentage off on each minimum quantity of productpurchased during a stated period of time by the dealer. The buying allowance isusually deducted from the face value of the invoice.

Promotion allowance:


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This is given to compensate the dealers for promotion expenses incurred bythem. These include advertising allowance, displays allowance etc.

The manufacturers may also issue advertisement of other publicity materialslike calenders, key chains which carry the names of retailers who stock theproduct.

Sales contest:

It is a contest among the dealers in selling the product. The winners will thegiven prizes by the manufacturers. This is done to stimulate thedistrigutiosn/dealers.

Salesforce promotions:

The tools of sales promotion include

a. Bonus

b. Salesforce contest

c. Sale meetings

Bonus:

A quota is set for salesforce for a specific period. Bonus is offered to salesforceon sales in excess of the quota.

Salesforce contest:

The contests are conducted among the sales force to stimulate selling andprizes are awarded to the top performance.

Sales meetings:


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Sales meetings, conventions and conferences are conducted for the purpose ofeducating, inspiring and rewarding the salesmen. New products and new sellingtechniques are also described and discussed.

Factors to be considered in Organising sales Promotion Campaign:

1. Identifying and defining sales promotional objectives:

- Is it to enhance dealer’s off-take of the product?

- Is it to bring extra sales?

- Is it to clear accumulated stock?

- Is it to supplement advertisement?

2. Identify the right promotional programme

The firm has to select the right promotional programme suitable to thecurrent need and the current situation.

3. Enlist the support and involvement of salesmen.

For success, it is essential that salesmen are briefed on the context and contentof the promotion programme, informed their roles and given detailedinformation / guides regarding what they to do during different stages of thecampaign.

4. Enlisting the support of dealers:

Since major part of the activity has to take place around the dealer, it isessential to enlist their support and motivate them.

5. Timing of the campaign:

The programme has to be launched at the appropriate time.


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6. Launching and follow-up:

The programme has to be perfectly launched and tempo should be maintainedtill end with proper follow-up.

REVIEW QUESTIONS:

1. Define sales promotion. What are its objectives?

2. Discuss the various methods of sales promotion.

3. What are the factors to be considered while organizing sales promotioncampaign?

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PAPER 2.5 : MARKETINGTIME : 3 HOURS MAX. MARKS : 100

SECTION – A ( 5 X 8 = 40)Answer any FIVE questions

1. What is marketing concept? Discuss the components of marketingconcept.

2. Discuss the various approaches to the study of marketing.3. Bring out the features industrial and consumer marketing.4. What is market segmentation? What are the bases and benefits of marketsegmentation?

5. Explain PLC concept.6. What are the essential qualities of a successful salesmen?7. Explain the methods of compensating the salesmen.8. What are the objectives of advertisement?

SECTION – B (4 X 15 = 60)

Answer any FOUR Questions


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9. Discuss the factors determining consumer behaviour.10. Explain new product development process.11. What are the pricing objectives and pricing methods12. What are the factors that decide the choice of distribution channel.13. What are the objectives of sales promotion? Discuss the varioussales promotional techniques.

14. What are the different methods of training of salesmen?15. Discuss the advertising media. What are the factors to beconsidered in choosing the media.

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