MARKETING MANGEMENT

BBA-205
# Understanding the Marketplace and customer needs.
As a first step, marketers need to understand customer needs and wants and the
marketplace within which they operate.
There are five core customer and marketplace concepts:
1. Needs, wants and demands.
2. Market offerings: Products, Service and experience
3. Customer value and satisfaction
4. Exchange and relationships
5. Markets

1. Customer Needs Wants and Demands:

Needs, Wants and Demand represents the language of marketing. They come under
the core concept of marketing. They plays important role in marketing management.
Because, by the help of these factors the marketing manager solves the problems
related to marketing appeared in Business organization.

Needs: Need is a situation where a person felt deprivation of certain kind of

Satisfaction.
Needs exist in the individual. They describe basic human requirements. They indicate a
state of felt deprivation. Marketing does not create needs. They exist in the individuals
automatically with the follow of time. Different people have different needs some of them
are as follows:
Physical needs: This types of need is related to food, clothing, warmth ,and shelter.
Safety needs: Under this need, people want protection from physical harm and
economic threat.
Social needs: Under this need, they want love, friendship and belongingness.
Self Esteem needs: They want knowledge, achievement and creativity. And Self
actualization Needs.

Wants: When need becomes specific it becomes want.

Wants are the form, human needs takes as they are shaped by culture and individual
personality. Wants are unlimited. Wants are shaped by ones society and are described
in the terms of objects that will satisfy needs.
Demand: They are wants for specific products. Wants backed by money and
willingness to spend the money become demand.

2. Marketing Offering Products, Services and Experience:

Product: according to Philips Kotler, a product is anything that can be offered to a

market for attention, acquisition, use or consumption. It includes physical objects,
services, personalities, place, organization and ideas.
Service: are activities or benefits offered for sale that are essentially intangible and do
not result in the ownership of anything but experiences.
3. Customer Value and Satisfaction
Customers usually face a broad array of product and services that might satisfy a given
need. Customers form expectations about the value and satisfaction that various market
offerings will deliver and buy accordingly. Satisfied customers buy again and tell other
about their good experiences. Dissatisfied customers often switch to competitors and
spread negative word of mouth about product.
4. Exchanges and Relationships :
Exchange is the act of obtaining a desired object from someone by offering something
in return. The marketer tries to bring about a response to some market offering.
Marketing consists of actions taken to build and maintain desirable exchange
relationships with target audiences involving a product, service, idea, or other object.
Marketers want to build strong relationships by consistently delivering superior customer
value.

5. Markets:

The concept of exchange and relationships lead to the concept of a market. A market is
the set of actual and potential buyers of a product. These buyers share a particular
need or want that can be satisfied through exchange relationships

IMPORTANCE OF MARKETING
Marketing is a very important aspect in business since it contributes greatly to the
success of the organization. Production and distribution depend largely on marketing.
Many people think that sales and marketing are basically the same. These two concepts
are different in many aspects. Marketing covers advertising, promotions, public
relations, and sales. It is the process of introducing and promoting the product or
service into the market and encourages sales from the buying public. Sales refer to the
act of buying or the actual transaction of customers purchasing the product or service.
Since the goal of marketing is to make the product or service widely known and
recognized to the market, marketers must be creative in their marketing activities. In this
competitive nature of many businesses, getting the product noticed is not that easy.
Strategically, the business must be centered on the customers more than the products.
Although good and quality products are also essential, the buying public still has their
personal preferences.
Marketing Promotes Product Awareness to the Public
Reorganization of product or service by the market is the primary goal of marketing. No
business possibly ever thought of just letting the people find out about the business
themselves, unless you have already established a reputation in the industry. But For a
start-out company, the only means to be made known is to advertise and promote. Your
business may be spending on the advertising and promotional programs but the

important thing is that product and company information is disseminated to the buying
public.
Various types of marketing approaches can be utilized by an organization. All forms of
marketing promote product awareness to the market at large. Offline and online
marketing make it possible for the people to be educated with the various products and
services that they can take advantage of.
A company must invest in marketing so as not to miss the opportunity of being
discovered. If expense is to be considered, there are cost-effective marketing
techniques a company can embark on such as pay-per-click ads and blogging.
Marketing Helps Boost Product Sales
Apart from public awareness about a companys products and services, marketing helps
boost sales and revenue growth. Whatever business is selling, it will generate sales
once the public learns about product through TV advertisements, radio commercials,
newspaper ads, online ads, and other forms of marketing. The more people hear and
see more of advertisements, the more they will be interested to buy.
If company aims to increase the sales percentage and double the production, the
marketing department must be able to come up with effective and strategic marketing
plans.

Marketing Builds Company Reputation

In order to conquer the general market, marketers aim to create a brand name
recognition or product recall. This is a technique for the consumers to easily associate

the brand name with the images, logo, or caption that they hear and see in the
advertisements.
For example, McDonalds is known for its arch design which attracts people and
identifies the image as McDonalds. For some companies, building a reputation to the
public may take time but there are those who easily attract the people. With an
established name in the industry, a business continues to grow and expand because
more and more customers will purchase the products or take advantage of the services
from a reputable company.
Marketing plays a very essential role in the success of a company. It educates people
on the latest market trends, helps boost a companys sales and profit, and develops
company reputation. But marketers must be creative and wise enough to promote their
products with the proper marketing tactics. Although marketing is important, if it is not
conducted and researched well, the company might just be wasting on expenses and
time on a failed marketing approach.

The Marketing Management Philosophies

Marketing management can be described as carrying out the tasks that achieve desired
exchanges, between the corporation, and its customers.
There are a number a different philosophies that guide a marketing effort.
Production Concept :
According to Philips Kotler, this concept holds that consumers will favour those
products that are widely available and low in cost.
He also emphasis on two counts:
1. This concept is related to uninterrupted product availability.

2. the low price at which the product is made available to the ultimate
consumers.
These are based on the assumption that the consumers are primarily
interested in getting quality products.
In Production concept:
o

Demand for a product is greater than supply.

o To increase profit, focus on production efficiencies knowing all output can
be sold. Also useful concept when increasing production raises economies
of scale etc. to reduce price.

The production concept is still a useful philosophy in some situations. For example,
computer maker Lenovo dominates the highly competitive, price-sensitive Chinese
PC market through low labour costs, higher production efficiency and mass
production.

Product Concept:
The Product concept holds that consumers will favour those products that offer the
most :
Quality
and Features
Performance
Managers focus their energy on making goods products and improving them over time.
The consumers do admire well made products. Quality and performance of the product
make them willing to pay even more that what actually they are willing to pay in normal
conditions.
Product oriented companies often design their products with little or no consumer input
they trust their engineers can design exceptional products The product concept may
leads to marketing myopia as it unduly concentrates on the product rather than need.

Selling Concept

The selling concept holds that consumers, if left alone, will ordinarily not buy enough of
the organisations products. The organization must, therefore, undertake an aggressive
selling selling promotional effort.
The product does not sell itself. The consumer has to be educated and convinced that it
is this and this product only which will satisfy his need.
Thus, says Philips Kotler, selling to be effective, must be preceded by several
marketing activities such as needs assessment, marketing research, product
development, pricing and distribution. if the market does a good job of identifying
consumer needs, developing appropriate products, and pricing, distributing and
promoting them effectively, these products will sell very easily.

In Selling Concept:
o Demand for a product is equal to supply.
o Emphasis is needed to sell the product to increase profits. Focus on
advertising. .
o Dominant era: 1920's to Mid 1930's WWII to early 1950's

Marketing Concept
Philip Kotler says, The marketing concept holds that the key to achieving
organizational goals consists in determining the needs, needs, and interests of
target markets and to delivering the desired satisfactions more effectively and
efficiently than competitors.
Supply for a product is greater than demand, creating intense competition among
suppliers.
o Company first determines what the consumer wants, then produces what
the consumer wants, and then sells the consumer what it wants.
o Dominant era: 1930's to WWII 1950's to present.

 The Societal Marketing Concept:

According to the Philips Kotler, the societal marketing concept holds that the
organizations tasks is to determine the needs, wants and interests of target markets
and to deliver the desired satisfaction more effectively and efficiently than
competitors.
This concept holds that marketing strategy should deliver value to customers in way
that maintains or improves both the customers and society well being.

Companies should balance three considerations in setting their marketing strategies:

company profits, consumer wants and society interests.
Society (welfare)

Company (Profit)

Consumer(Satisfaction)

Example: Johnson & Johnson does this well. Its concern for societal interests is
summarized in a company document called Our Credo which stress honesty,
integrity, and putting people before profits.

MARKET

The term market originates from Latin noun Marcatus which mean a place where
business is conducted.
Market is generally known as the place or geographical area where buyers and sellers
meet and enter into transactions involving transfer of ownership of goods, services,
securities etc.
According to Philips Kotler, A market consists of all the potential customers sharing a
particular need or want who might be willing and able to engage in exchange to satisfy
that need or want.

In a market, buyers and sellers are connected by 4 flows

1) Goods & Services

SELLERS

BUYERS

2) Communication to the market

In turn, Seller receives
3)Money
SELLERS

4)Information

BUYERS

MARKETING
The term Marketing ha been derived from the word market. Marketing is the basic
reason for the existence of a business organization. It is a powerful mechanism which
alone can satisfy the needs & wants of consumers at the place and they desire.
According to Kotler, Marketing is a social and managerial process by which individuals
and groups obtain what they need and want through

Creating,

Offering &

Exchanging

Products of value with others.

Marketing helps in having a good range of products in constant demand and suggests
to the management the scope for improving and developing new products to satisfy the
changing customer needs.
Customers is the king of the market. Customers decide what products suit their
needs. Therefore, we can say marketing satisfies our needs providing :

Form
Time Utility

Utility

Person Utility

Exchange Utility

Place Utility

1. FORM UTILITY

Raw Materials

Converting into

Finished Goods

Understanding customers requirement

2. PERSON UTILITY

Marketer

Customers

Establishing contacts

Understanding customers
requirement
3. EXCHANGE UTILITY

Seller

Buyers

Transfer goods to

as per the requirements of customers

4. PLACE UTILITY
Physical distribution
Seller

and logistics

Seller

as per convenience of customers

5. TIME UTILITY
Warehousing

making available goods when

Customers

needed creating time utility

as per the requirements of customers

Marketing Mix
Marketing mix is the set of marketing tools that the firm uses to pursue its marketing
objectives in the target market. McCarthy classified these tools into four broad groups
that he called the four Ps of marketing: product, price, place, and promotion.

Marketing Mix

Product
Product
variety
Quality
Design
Features
Brand name
Packaging
Sizes
Services
Warranties

Price
List Price
Discounts
Allowances
Payment
Period
Credit Terms

Promotion
Sales
promotion
Advertising
Sales force
Public
relations
Direct
marketing

Place
Channels
Coverage
Assortments
Locations
Inventory
Transport

Management
Management is the organization and coordination of the activities of an enterprise in
accordance with certain policies and in achievement of defined objectives.
Management is often included as a factor of production along with machines, materials,
and money.

Marketing Management:

Marketing management is the process of planning and executing the conception,

pricing, promotion, and distribution of ideas goods , services to create exchanges that
satisfy individual and organizational goals.
MM is the art and science of choosing target markets and getting, keeping and growing
customers through creating, delivering and communicating superior customer value.

NATURE OF MARKETING
1. Marketing is Consumer-oriented:
A business exist to satisfy human needs. Therefore, business must find out
what the
customers want and then produce goods according to the needs of the
consumers. Only
such products should be produced which best satisfy consumer needs and at
the profit to
the maker.
2. Marketing Starts and ends with the consumer:
Marketing is concerned only with the flow of goods and services from the
producer to the consumer. Under consumer-oriented marketing its is essential to
know what the customers really want and this is only possible if we collect
information from consumers.

3. Modern Marketing Precedes and succeeds Production.

Today, all the organization s accept that the marketing activities must start far
ahead of production. It is not enough if the activities are begun after the product
is ready. Marketing would have authority over product innovation and planning,
production scheduling as well as over the sale. In companies operating under the
marketing concept entire marketing is designed to serve consumer needs.
4. Modern Marketing is the guiding element of the business:
Marketing has become a pervasive force capable of guiding and even controlling
production. In fact, it is the market potential and not production resources that
guide a business today. This involves the integration of a number of activities
from the conception of a product idea to its profitable selling and ultimate
consumption.
5. Marketing is a Science as well as Art:
Marketing is an art in the sense that a considerable body of rules or principles on
buying, selling, financing, standardization, market information etc. have been put
into practice to achieve success in the economic life of man.
But later development have changed the art base of marketing into a science
base. Many aspects of marketing are becoming increasingly technical. This has
created the need for complex tools of measurement and experimentation. Hence,
it is not wrong to say marketing is science-based.
6. Marketing is a System:
Marketing is a System consisting of several interdependent and interacting subsystems. It obtain the inputs from the environment (Supra system), transforms
these inputs and supplies the output (customer satisfaction, profits etc )
7. Exchange process is the Essence of Marketing
Exchange implies transactions between buyers and seller. The seller hands over
a product or service to the buyer who in turns give money.there is exchange of
information etween buyers and sellers.
8. Marketing is Goal-oriented:
The ultimate aim of marketing is to generate profits through the satisfaction of
human wants.
The following aims are sought to be achieved by studying marketing:
1. To provide guiding policies regarding marketing procedures and their
implementation.
2.
To study marketing problems according to circumstances and to suggest
solutions.

3. To analyse the shortcomings in the exiting pattern of marketing.

4. To enable managers to assess and decide a particular course of action.
5. To develop an intelligent appreciation of modern marketing practices.
9. Marketing is a Process:
It is a dynamic process because it keeps on adjusting to the changes in the
environment of business. Marketing is also a social process in the sense that it is
concerned with human needs. Marketing is a managerial process as it involves
the functions of planning and control

SCOPE OF MARKETING
The scope of marketing is very wide. It may be analyzed in the term of marketing
performance through various functions. These functions are to be performed on the
basis of various utilities.
A)
Functions
of
Exchange

MARKETIN
G
FUNCTION
S

B) Functions
of Physical
Dustribution

C) Functions
of
Facilities

1. Buying Function
2. Assembling Function
3. Selling Function

1.
2.
3.
4.

Transportation
Inventory Management
Warehousing
Material Handling

1.
2.
3.
4.

Financing
Risk Taking
Standardisation
After Sales Service

A) Functions of exchange:
Buying Function: A manufacturer is required to buy raw materials for production
purposes. Similarly, a wholesaler has to buy goods from manufacturer for the

purposes of sales to retailers. Aretailer has to sell the goods to consumers. Thus
functions of buying have to be performed at various levels.
Assembly Function: Assembling is different and separate from buying. Buying
involves transfer of ownership of the goods from seller to the buyer; whereas in
assembling, goods are purchased from various sources and assembled at one
place to suit the requirement of the buyer.
Selling Function: Selling involves transfer of ownership from seller to the buyer.
Selling function is vital to the success of any firm. Its importance has been
continuously increasing in all organizations due to the emergence of severe
competition. Producing goods is easy but it is very difficult to sell them.
B) Functions of Physical Distribution:
Transportation: it is the function of transformation to carry commodities from where
utility is relatively low to places where it is higher.
It includes decision to be taken on
Modes of transport
Claims etc
Service
selection
Freight consolidation
Processing,
vehicle scheduling

VECHILE SCHEDULING
Vehicle Scheduling is part of the component Transportation Planning. It enables the
transportation planner to optimally use available capacities of trucks, trains, ships, and
airplanes with the goals of more efficiently planning loading capacities and lowering
costs, since most customers nowadays depend completely on external transportation

companies for optimum transportation (which means deliveries that are on time and
cost saving).

PROCESSING
The aim of transportation processing is to complete the formalities involved in getting a
shipment ready for dispatching to the customer. Tasks in transportation processing
include weighing the shipments, loading, and goods issue posting as well as recording
information on the means of transport such the drivers details, the weight of the truck,
and the time it arrive premises.

Inventory Management :
It includes

Short term sales forecasting

JIT or push or
pull
strat
egies
Product mix at stocking points

Number, Size & location

of stocking points

Warehousing:
Warehousing help in having a central place for keeping goods from where the
distribution could be made easily and according to needs. Ultimately, it tends to
adjust the supply to demand so as to equalize them in the interest of the
manufacturers, middlemen and consumers.
It includes

Space determination
Stock layout and design

Stock placements

Material Handling:
It includes

Equipment Selection
Equipment replacement

Order picking procedure

Stock storage &

retrieval

C) Functions of Facilities:
1. Financing
Arrangement of finance has become an increasingly important function.
Therefore, a marketer can plan for various kinds of finance: short term finance,
Medium term finance and Long term finance.
There are various sources of finance for example, commercial banks, cooperative banks, credit societies, government agencies etc.
2. Risk Taking :
There are innumerable risks in the process of marketing of goods and services.
Risks arise due to unforeseen circumstances. Risks can be insured also. For
example, the risk due to fire and accidents may be covered by insurance. But the
risks due to changes in government policies, risks due to increased competition,
technological risks and business cycle risks cannot be insured.
3. Standardization:
Buyers and sellers always prefer to have standardized goods and services. This
will relieve buyers from examining the product and wasting time. That is why
standardization has now been accepted as a convenient and ethical basis of
marketing.
4. After sales service:

The importance of after sales service facilitates as a marketing tool cannot be

ignored. Hence arrangement of after sales service has become an increasingly
important function. Therefore, a marketer has to plan for after sales service.
For example: Repairs, replacements, maintenance etc.
5. Marketing Information:
Modern marketing requires a lot of information accurately, adequately and
promptly. This information becomes the basis of many decision in marketing.
Marketing information makes a seller know when to sell, at what price to sell,
who are the competitors etc. marketing information and its proper analysis has
led to marketing research.

# MARKETING MIX:
The idea of the mix of marketing functions was conceived by Prof. Neil H. Borden of
the Harvard Business School.
According to him, the marketing mix refers to the combination, the designing and
integration of the elements of marketing into a programme or mix which on the basis on
an appraisal of the market forces, will best achieve the objectives of an enterprise at a
given time
Marketing mix represents the total marketing programme of a firm. It involves decisions
regard to product, price, place and promotion.
4 Ps may described as 4Cs:

____4Ps
Product

4Cs_______________
Customer Solution

Price

Customer cost

Place

Convenience

_____Promotion

Communication______

Marketing mix serves as the linkage between a business firm and its customers.

Marketing mix is a dynamic concept as it keeps on changing with changes in market

conditions and the environment.

Elements of Marketing mix:

1.

Product: A product is any good or service that consumers want. It

is a bundle of utilities or a cluster of tangible and intangible attributes. Product
components of marketing involves planning, developing and producing the
right type of product and services. It deals with dimensions of product line,
durability and other qualities.

Product mix requires decisions with regard to :

a. size and weight of the product
b. quality of the product
c. design of the product
d. volume of output
e. brand name
f. packaging
g. product range
h. product testing
i. Warranties and after sales services etc.

Price :
Pricing decisions and policies have a direct influence on sales volume and profits of
business. A lot of exercise and innovation is required to determine the price that will
enable the firm to sell its products successfully. Demand, cost, competition, government
regulation etc. are the vital factors that must be taken into consideration in the
determination of price.
Price mix involves decision regarding base price, discounts, allowances, freight
payment etc.

Price Component Mix:

Basic Price
Price Reductions
Price Alternation

Credit Terms

Place:
This element involves choice of the place where products are to be displayed and made
available to the customers. It is concerned with decisions relating to the wholesale and
retail outlets or channels of distribution. The objective of selecting and managing trade
channels is to provide the products to the right customer at the right time at right place
on continuous basis. In deciding where and through whom to sell, management should
consider where goods through whom to sell, management should consider where the
customers wants the goods to be available.
Tata partners with a large body of the independently owned dealerships that sell the
company many different models. Tata selects dealers carefully and support them
strongly the dealers keeps an inventory of Tata automobiles, demonstrate them to
potential buyers, negotiate prices, close sales and service the cars after the sale.

PlaceComponent Mix:

Channel Network
Transport Housing
Storage facilities

Inventory Control

4. Promotion:
Promotion is concerned with bringing products to the knowledge of customers and
persuading them to buy. Promotion Mix involves decision with respect to advertising,
personal selling and sales promotion.
Promotion means activities that communicate the merits of the product and
persuade target customers to buy it. Tata Motors spends a huge amount each year
on advertising to tell consumers about the company and its many products.

Promotion Component Mix:

Advertising
Public relation
Personal Transactions Special Promotion

Marketing Environment
Marketing activities are influenced by several factors inside and outside a business firm.
These factors or forces influencing marketing decision making are collectively called
marketing environment.
According to Philips Kotler, marketing environment refers to external factors and
forces that affect the companys ability to develop and maintain successful transactions
and relationships with its target customers.
Economical Env.
Physical Env.

Political Env

Suppliers

Intermediaries
FIRM
Public

Technological
Env.

Competitors

Cultural Env

Customers

Demographic Env

A companys marketing environment consist of the actors and the forces outside
marketing that affect marketing managements ability to build and maintain successful
relationships with target consumers.
Like, Xerox, Companies constantly watch and adapt to the changing environment.
Every manager in an organization needs to observe the outside environment, marketers
have two methods

Marketing Research
Marketing Intelligence
Marketer also spend time with their customers and competitor environments to carefully
studying the environment.

The marketing environment may be broadly divided into two parts:

Micro environment

Macro environment

Microenvironment consists of the actors close to the company that affect its ability to
serve its customers- the company, suppliers, marketing intermediaries, customer
markets, competitors and publics. These actors can be controlled by the company with
its own action, hence are also called Controllable Factors.
Macroenvironment consists of larger societal forces that affects the microenvironment
demographics, economic, natural, technological, political and cultural forces which
cannot be controlled by the company with its own actions, atleast in the short run. So
these are also called Uncontrollable factors.
MICROENVIRONMENT
Marketing success will require building relationships with other company departments,
suppliers, marketing intermediaries, customers, competitors and various publics which
combine to make up the companys value delivery network.
It implies the factors and forces in the immediate environment which affect the
companys ability to serve its market.
1. The Company:
In designing marketing plans, marketing management takes other groups in company
into account groups such as top management, finance, research and development,
purchasing, operations and accounting. All of these interrelated groups form internal
environment. Top management sets the company mission, policies and strategies
marketing managers make decisions within the strategies and plans made by top
management.
Marketing managers must work closely with other company departments. Other
departments have an impact on the marketing departments plans and actions.
2. Suppliers:
Suppliers provide resources that are needed by the company. The company necessarily
should go for developing specifications, searching the potential suppliers, identifying

and analyzing the suppliers and chose those suppliers who offer best mix of quality,
delivery reliability, credits, and warranties at low costs.
Marketing managers must watch supply availability and costs. Supply shortages or
delays, labor strikes, and other events can cost sales in the short run and damage
customer satisfaction in the long run. Rising supply costs may force price may force
price increase that can harm the companys sales volume.
Today, most of the marketers treat their suppliers as partners in creating and delivering
customer value. For example, Home Depot a leading retailer in Unites states works
closely with its army of almost 1200 suppliers.
3. Market Intermediaries:
These are either business houses or individuals who come to the company for
promoting, selling and distributing the goods to the ultimate consumers.
They include resellers, physical distribution firms, marketing service agencies and
financial intermediaries.
a. Resellers are distribution channel firms that help the company find customers or
make sales to them. These include wholesalers and retailers who buy and resell
merchandise. Traditionally, it has not been very difficult for companies to select partner
with resellers, partly because of their strong brand franchise and partly because of the
fragmented and small size of most sellers in the Indian subcontinent. However the
future is going to be very different. In India, manufacturer now face reseller
organizations such Big Bazaar, Pantaloon, Shoppers Stop.
b. Physical Distribution Firms help the company to stock and move goods from their
points of origin to their destinations.
c. Marketing Service Agencies are the marketing research firms, advertising agencies,
media firms and marketing consulting firms that help the company target and promote
its products to the right markets.
d. Financial Intermediaries include banks,
insurance companies and other
businesses that help finance transactions ot insure against risks associated with buying
and selling of goods.
Todays, marketers recognize the importance of working with their intermediaries as
partners rather than simply as channels through which they sell their product. For
Example when Coco Cola signs on as the exclusive beverage provider for a fast food
chain, such Mc Donalds or Subway, it provide much more than just soft drinks.
4. Customers:

Customers are the most important actors in the companys microenvironment.

The target market of the company is usually of the following types:
Consumer Market : i.e individuals and households.
Industrial market : i.e. organizations buying for producing(manufacturing) other
products and services for the purpose of either earning profits or fulfilling other
objectives or both
Reseller market: organizations buying goods and services with a view to sell
them to others for a profit. These may be selling wholesalers and retailers.
Government and the other non-profit market: i.e those buying for goods and
services in order to produce public services.. they transfer these goods and
services to those who need them for consumption in most of the cases.
International market: individuals and organizations of nations other than
homeland who buy for either consumption or for industrial use or for both.
5. Competitors:
No company stands alone in serving and satisfying the needs of a customer market.
The marketing concept states that to be successful, a company must provide greater
customer value and satisfaction than its competitors do.
It is impossible for an organization to develop strong competitive positioning strategies
without a good understanding of its competitors and the strengths and weaknesses of
the competitors. No single competitive marketing strategy is best for all companies.
Each firm should consider its own size and industry position compared to those of its
competitors. Large firms with dominant positions in an industry can use certain
strategies that smaller firms cannot afford. And small firms can develop strategies that
give them better rates of return than large firms enjoy
Three
levels
of
competition
exist.
:
1. Direct competitors are firms competing for the same customers with the similar
products
(ex.
grocery
stores).
2. Competition exists between products that can be substituted for one another (ex.
margarine
for
butter).
3. Competition exists among all organizations that compete for the consumer's
purchasing power (ex. entertainment).
6. Public
A public is defined as any group that has an actual or potential interest in or impact on
a companys ability to achieve its objectives.To build goodwill and to seek favorable
response, it is very much necessary to satisfy the public as well.

There are seven types of Public:

Financial Publics: this group influences the companys ability to obtain funds. Banks,
Investment houses and stockholders are the major financial publics.
Media Publics: This group carries news, features and editorial opinion. It include
newspapers, magazine and radio and television stations.
Government Publics: Management must take government developments into account.
Marketers must often consult the companys lawyers on issue of product safety, truth in
advertisement and other matters. For example, mobilink, advertisements promoting
tourism in Pakistan recognizes the importance of government and general public
Local Publics: This group includes neighborhood and residents and community
organizations.
General Public: a company needs to be concerned about the general publics attitude
towards its products and activities.
Internal Publics: This group includes workers, managers, volunteers and Board of
Directors. Large companies use newsletters and other means to inform and motivate
their internal publics. When employ feels good about company, they spread positive
attitude over to external Publics.
Macro Environment:
It consists of broader forces that not only affect the company but also other factors in
the Micro- Environment. The components of macro-environment are:
1. Political Factors: A firm has to operate within the present political system and
legal framework. Political factor affect economic policy of the country. Political
factors include political philosophy, political stability, party system etc.
2. Economic factors: It consists of economic forces that affect companys cost,
revenues, and profits on one hand and customers purchasing powers and
willingness to spend on the other hand. It includes economic growth rate, interest
rates, inflation rate, stock market , commodity exchange , fiscal policy, monetary
policy , exim policy, industrial and agricultural policy etc.
3. Socio-cultural factors: Social and cultural factors affects consumers tastes and
preferences. People buy or favour those products which suit or complement with
their social and cultural norms, values, traditions and habits. It includes cultural
norms, values, beliefs, rituals, castes, customs, traditions, superstition, family,
opinion leader, reference groups, religion etc.

4. Technological Factors: Technological factors affect the firms production

process, product quality, cost effectiveness, and hence, competitive ability.
Every new technology is a force of creative destruction. New technology compel
old one to exit.
Technological factors includes suitability and availability of technology, pace of
technological change, opportunities for innovation, technological transfer etc.
5. Legal Factors: Marketing decisions are strongly affected by laws pertaining to
competition, price-setting, distribution arrangement, advertising etc. It is
necessary for a marketer to understand the legal environment of the country and
the jurisdiction of its courts. It includes laws related to industry, contract, labour,
consumer etc.
6. Ecological Factors: These factors primarily concern with natural environment.
They are closely related with protection of ecological environment and pollutions
air, water, noise, and soil pollutions. It includes availability and use of natural
resources, pollution and pollution measures, contemporary legal provisions,
world wide effort to protect the environment etc.
7. International environmental factors: In Todays business environment every
marketer is trying to cover the global market and therefore this factor is playing
an important role in the era of liberalization, privatization, and globalization.
International environment variables includes international agencies like WTO,
World Bank, MNCs, Exim policy of different nations, international agreements
etc.

MARKET SEGMENTATION
Market segmentation is dividing a market into distinct groups, with distinct needs ,
characterstics, or behavior who might require separate products or marketing mixes.
In other words, it is the process of taking total heterogeneous market for a pro9duct and
dividing it into several sub-markets or segments ,each of which tend to be
homogeneous in all significant aspects.
Companies today recognize that they cannot appeal to all buyers in the marketplace or
atleast not to all buyers in the same way. Buyers are also widely scattered and too
varied in their needs and buying practices.

Like, P&G a company must identify the parts of the market that it serve best and most
profitably. It must design customer-driven marketing strategies that build the right
relationships with right customers.
4 major steps in Customer driven marketing strategy:
In the first two steps, the company select the customers that it will serve. Market
segmentation involves dividing a market into smaller gr oups of buyers with different
needs, characteristics or behaviors that might require separate marketing mix or
strategies.
Market targeting consists of evaluating each market segments attractiveness and
selecting one or more markets segments to enter.
Decide on value proposition
Segmentation: Divide
the total market into
smaller segments
Targeting: Select the
segment or segments to
enter

Create
value for
targeted
customers

Differentiation: differentiate the

market offering to create superior
customer value
Positioning: Position the market
offering in minds of target

customers

In the final two steps, the company decides on a value proposition-on how it will create
value for target customers. Differentiation involves actually differentiating the firms
market offering to create value for target customers. Positioning consists of arranging
for a market offering to occupy a clear, distinctive and desirable place relative to
competing products in the minds of target customers.

LEVELS OF MARKETING:
1. Undifferentiated Marketing ( or Mass Marketing)
A companys attempt to appeal to the whole market with a single basic marketing
strategy intended to have a mass appeal. In this, a firm might decide to ignore
market segment differences and target the whole market with one offer. This strategy
focuses on what is common in the needs of consumers rather than on what is

different. Company design a product and marketing program that will appeal to the
largest number of buyers.
Single Marketing Mix

One mass market

2. Differentiated Marketing (or Segmented Marketing)

A companys attempt to appeal to two or more well defined market segments with a
marketing strategy tailored to each segments.
Marketing mix 1

Market Segment 1

Marketing mix 2

Market Segment 2

Marketing mix 3

Market Segment 3

Marketing mix 4

Market Segment 4

In this strategy, a firm decides to target several market segments and designs
separate offers for each.
General Motors tries to produce a car for every purse, purpose and personality.
HUL markets eight variants of soaps (personal wash category)
P&G markets six different laundry detergents brands, which compete with each
other on supermarket shelves.
By offering product and marketing variations to segments, companies hope for
higher sales and stronger position within each market segment. But differentiated
marketing also increases the costs of doing business. A firm usually find it more
expensive to develop and produce say, 10 units of 10 different products than 100
units of one product. Developing separate marketing plans for separate segments
requires extra marketing research, forecasting, sales analysis, promotion planning,
and channel management.

3. Niche Marketing
A niche is a more narrowly defined customer group seeking a distinctive mix of
benefits.
The company attempt to appeal to one well-defined market segment with one tailor
made marketing strategy.
In this strategy, instead of going after a small share of a large market, the firm goes
after large share of one or a few smaller segments or niches.

Single marketing mix

Market segment 1
Market segment 2
Market segment 3
Market segment 4
(And so on are recognized but not targeted)

Through concentrated marketing, the firm achieves a strong market position

because of its greater knowledge of consumer needs in the niches it serves and the
special reputation it acquires. It can market more effectively by fine tuning its
products, prices and programs to the needs of carefully defined segments. It can
also market more efficiently, targeting its products or services, channels and
communications programs toward only consumers that it can serve best and most
profitably.
Niches are smaller segment that may attract only one or few competitors.
For example, Nirma started as nicher, selling only low- priced detergent to rural and
semi-urban consumers. Today, it is one of the biggest detergent brands in
India.Today, the low cost of setting up shop on the internet makes it even more

profitable to serve seemingly tiny niches. Small businesses, in particular, are

realizing niches from serving small niches on the web.
For example, Zappos began selling shoes online-only shoes and only online.
Concentrated marketing can be highly profitable. At the same time, it involves higher
then normal risks. Companies that rely on one or a few segments for all of their
business will suffer greatly if the segment turns sour. Or larger competitors may
decide to enter the same segment with greater resources. For these reasons, many
companies prefer to diversify in several market segments.
Differentiated and concentrated marketer tailor their offers and marketing programs
to meet the needs of various market segments and niches. At the same time, they
do not customize their offers to each individual customer.
4. Micromarketing is the practice of tailoring products and marketing programs to
suit the tastes of specific individuals and locations.
It includes:
a. Local Marketing
b. Individual Marketing
Local Marketing: involves tailoring brands and promotions to the needs and wants of
local customer groups cities, neighborhoods and even specific stores.
For example, Wal-Mart customize its merchandise store by store to meets the needs of
local shoppers. Wal-Mart store designers create each new stores format according to
neighborhood characteristics-stores near office parks, featuring ready-made meals for
busy workers.
Individual Marketing
Individual Marketing tailoring products and marketing programs to the needs and
preferences of individual customers. Individual marketing has also labeled one to one
marketing, mass customization, and markets of one marketing.

Mass customization is the process through which firms interact one to one with masses
of customers to design products and services tailor made too individual needs.
Dell creates custom-configured computers.
Hockey stick maker Branches Hockey lets customers choose from more than two dozen
options including stick length, blade patterns and blade curve and turns out a
customized stick in five days.

Bases of Market Segmentation

1.

Geographic Segmentation:
A marketer divides the target market into different geographical units such as nations,
states and regions.
A company may decide to operate in one or a few geographical area, or to operate in all
area but pay attention to geographical differences in needs and wants .
For example Citibank offers different mixes of branch banking services depending on
neighborhood demographics areas
A particular brand can be popular only in North India then North Indian market can be
divided on the bases of zones, villages, cities, climate etc.
For example, Amul was initially marketed in Gujarat.
On a global scale, video game companies create different versions of their games
depending on the world region in which the game is sold.

2.

Demographic Segmentation:
Demographic segmentation divides the market into groups based on variables, such as
age, gender, family life cycle, income, occupation, education, religion and nationality.
Demographic factors are the most popular baes for segmenting customer groups,
customer needs, wants and usage rates often very close with demographic variables.

a. Age and Life Cycle stage: consumer needs and wants change with age. Some
companies use age and Life-cycle segmentation, offering different products or using
different marketing approaches for different age and life cycle groups.

For examples, HDFC Standard Life Insurance has launched pension plans retired
people so that they do not have to depend on any one for their financial needs.
b. Life- Stage: Persons in the same part of the life-cycle may differ in their life stage. Life
stages defines a persons major concern, such as getting married, deciding to buy a
home, sending the child to school, marrying off their children , planning for retirement
and so on.
c. Gender: This segmentation has been used in clothing, cosmetics and magazines. For
example, Barbie a chain of retail stores in India offers clothing only for girls
More recently, many mostly womens cosmetics makers have begun marketings mens
lines. Nivea markets nivea for Men. A neglected gender segment can offer new
opportunities in markets ranging from motorcycles to guitars.
d. Income: The marketer of products and services such as automobiles, clothing,
cosmetics, financial services, and travel have long used income segmentation. Many
company target customer with luxury goods and convenience services. For example, for
a price, luxury hotels provide amenities to attract specific groups affluent travelers, such
as families, expectant moms, and even pet owners.
However, not all companies that use income segmentation target the affluent. For
example, many retailers, such as, Big Bazaar with its tagline Isse sasta aur kahan
successfully target low and middle-income groups.
e. Generation: Each generation is profoundly influenced by the times in which it grows upthe music, movies, politics, and defining events of that period. Members of the same
generation share the same major cultural, political and economic experiences and have
similar outlooks and values. The younger generation plays significant roles, not only as
consumers but also as influencers and initiators.
f. Social Class: It is relatively permanent and ordered division in a society whose
members share similar values, interests and behviours.
3.

Behavioral segmentation:
Behavioral segmentation divides buyers into groups based on their knowledge.,
attitudes, uses, or response to a product. Many marketer believe that bahaviour
variables are the best starting point for building market segments.

a. Occasions: Buyers can be grouped according to the occasions when they get the idea
to buy, actually make their purchase or use the purchased item. Occasion segmentation
can help firms build up product usage.

Example: Coco-Cola promotes its brands as a family drink on occasions like diwali,
Christmas and family outings. Some occasions like Valentine Days were originally
promoted partly to increase the sale of candy, flowers, cards and other gifts.
Occasions
Regular occasion

Seasonal

Special ooccas

Holiday

b. Benefits Sought: A powerful segmentation is to group buyers according to the different

benefits that they seek from the product. Benefit segmentation requires finding the
major benefits people look for in the product class, the kinds of the people who look for
each benefits, and the major brands that deliver each benefit.
For example, Fit and Polish consumers seek a balance between function and stylethey exercise for results but want to look good doing it. Serious sports competitors
exercise heavily and live in and love their activewear- they seek performance and
function.
Thus, each segment seeks a different mix of benefits.
Benefits
Convenience
Speed
Quality

Service

Economy

c. User status: markets can be segmented into nonusers, ex-users, potential users, first
time users, and regular users of a product. Marketers want to reinforce and retain
regular users, attract targeted nonusers and reinvigorate relationships with ex-users.
In India, parents of the bride invest heavily ingifts for their daughter to facilitate the
establishment of a new home for the younf couple. Masters reminds parents thet their
long-lasring foam mattress and pillows will be the ideal gift foe a long and happy life for
their daughter. Through the use of jingles like Meri nanhi pari..Naey Ghar chali, master
attracts young couples-to-be and their parents through its highly emotional message.
Uesr Status
Regular user

Nonuser
Ex-user

Potential user

d. Usage Rate: markets can be segmented into light, medium, and heavy product users.
Heavy users are often a small percentage of the market but account for a high
percentage of the consumption. For example, Burger King targets what it call Super
Fans, (age 18 to 34). They eat at Burger King on average of 16 times a month.
Usage Rate

Light user

Medium user

Heavy user

e. Buyer Readiness Stage: Some people are unaware of the product , some are aware,
some are informed, some are interested, some desire the product and some intended to
buy.
The relative number of consumers at different stages makes a big difference in
designing the marketing program.
f. Loyalty Status: A market can also be segmented by consumer loyalty. Consumers can
be loyal to brands(Colgate), stores(Big bazaar/ Shoppers Stop), Companies (Toyota).
Buyers can be divided into groups according to their degree of loyalty.
i.

Hard core loyals : Consumers who buy only one brand all the time.

ii.

Split loyal : Consumers who are loyal to two or three brands.

iii.

Shifting Loyals : Consumers who shift loyalty from one brand to another.

iv.

Switchers : Consumers who show no loyalty to any brands.

g. Attitude: A consumer can have five attitudes about products i.e. enthusiastic, positive,
indifferent, negative and hostile.

4.

Psychographic Segmentation:

It involves developing sub group identification on the basis of psychological

characteristics. For example, perceptions, attitude, opinions, interests or a combination
of these.
Psychographic segmentation divides buyers into different groups based on social class,
lifestyle or personality characteristics. People in the same demographic group can have
very different psychographic makeup.
________________________________________________________________
Social Class: Lower lowers, upper lowers, working class, middle class, upper,
uppers
Lifestyle: Achievers, Strivers, Survivors
Personality:
Compulsive,
gregarious,
authoritarian,
ambitious
__________________________________________________________________

ADVANTAGES OF MARKET SEGMENTATION

1. Understand potential customers.
2. Pay proper attention to particular areas.
3. Formulate marketing programmes.
4. Select channels of distribution.
5. Understand competition.
6. Use marketing resource efficiency.
7. Advertise the products and launch sales promotion programmes.

MARKET TARGETING:
Market Targeting
Target market consists of a set of buyers who share common needs or characteristics
that the company decides to serve.

Evaluating Market Segments

In evaluating different market segments, a firm must look at three factors:

a. Segment size and growth

b. Segment structural attractiveness
c. Company objectives and resources
The company must collect and analyze data on current segment sales, growth rates,
and expected profitability for various segments.
The companies also need to examine major structural factors that affect long-run
segment attractiveness. For example, a segment is less attractive if it already contains
many strong and aggressive competitors. The existence of many actual and potential
substitute products may limit prices and the profits may limit prices and the profits that
can be earned in a segment. The relative power of buyers also affects segments
attractiveness.
Finally a segment may be less attractive if it contains powerful suppliers who can control
prices or reduce the quality or quantity of ordered goods and services. Even if the
segment has the right size and growth and is structurally attractive, the company must
consider its own objectives and resources. Company may lack the skills and resources
needed to succeed in an attractive segment.

Undifferentiated(Mass) Marketing.
Differentiated (Segmented) Marketing.
Concentrated Marketing
Micromarketing(local
(Niche)
or individual)

Targeting Broadly

Targeting Narrowly

After anlaysing different segments, the firm must select one or many segments to serve.
The firm can select one or more patterns from the following patterns:
1. Single Segment concentration
M1

M2

M3

P1
P2
P3
For
example,
Woodland
Shoes,
Cellular Phones
2. Selective Specialization
M1

M2

M3

P1
P2
P3
For example,
(Dabur)

powder

3. Product Specialization
M1

M2

P1
P2
P3

M3

DENTA

cream

tooth

For example, Mahindra and Mahindra jeeps, Bajaj Auto

4. Market Specialization
M1

M2

M3

P1
P2
P3
For example, Sultan Chand & sons
(Books covering all type of student
needs, school, colleges and institutes).
5. Full Market Coverage

M1

M2

M3

P1
P2
P3

For example, Pepsi, Titan, Bata

Choosing a Targeting Strategy

Companies need to consider many factors which choosing market targeting strategy.
Which strategy is best depends on company resources. When the firms resources
are limited, concentrated marketing makes the most sense. The best strategy
depends on the degree of product variability.

Undifferentiated marketing is more suited for uniform products such as grapefruit or

steel. Products that can vary in design, such as cameras and automobiles are more
suited to differentiation or concentration. The product life cycle stage also must be
considered. When a firm introduces a new product, it may make the most sense.
In the maturity stage of life cycle, differentiated marketing begins to make more
sense.
Another factor is market variability. If most buyers have the same tastes, buy the
same tastes, buy the same amounts, and react the same way to marketing efforts,
undifferentiated marketing is appropriate. Finally, competitors marketing strategies
are important. When competitors use differentiated or concentrated marketing,
undifferentiated marketing can be suicidal. When competitors use undifferentiated
marketing, a firm can gain an advantage by using differentiated or concentrated
marketing, focusing on the needs of buyers in specific segments.
Positioning
Positioning consists of arranging for a market offering to occupy a clear, distinctive and
desirable place relative to competing products in the minds of target customers.
Why Positioning?
Objectives of Positioning:
1. To create a distinctive place of a product or service in the minds of potential
customers.
2. To convey attractiveness of the product or the service to the target market.
3. Place an intangible service within a more tangible frame of reference.
4. Help influence both service development and redesign of existing service.
5. Follow consideration of the competitors possible moves and responses so that
appropriate action can be taken as.

6. To give the target markets the reason of buying your services and then design
the whole strategy.
7. To provide guidelines for the development of marketing mix with each element
being consistent with the positioning.
Positioning Analysis seeks answers to the following questions:
1. What is the current position of the product or service in the mind of the target
customer?
2. What position does the firm want to own i.e., looking for positions or holes in the
market place?
3. How can it be done (select the appropriate approach that will work for the target
market)?

Qualities of a successful positioning:

Creation of a successful position comes from two sources i.e. physical product
differentiation and brand communication.
The following are the qualities that help to make a successful position:1.

Relevance: Often brand managers identify and position the

brand on an attribute, which is different but is relevant for customers.

2.

Distinctiveness: Customers have few needs that are

unfulfilled and the customers have many choices to fill the needs they have. If brands
position lacks distinctiveness, it will be forced to compete on the basis of price and
promotion only.

3.

Coherence: There is a need to integrate all forms of

communication to bring coherence to the brands position.

4.

Commitment: Once a position is adopted, it takes

commitment to stay committed to the position in the face of competitors threat to
ensure the long-term position of the brand in the market.

5.

Durability: The brands position built over a period of time in

consumers mind.

6.

Clarity: A brands position should have clarity so that it will

be easy to communicate and quick to comprehend.

7.

Courage: Adopting a strong position requires clarity of vision

and courage for the brand manager.
POSITIONING PROCESS
Various Steps of developing affective positioning:
1. Market Positioning
2. Psychological Positioning
a. Objective positioning
b. Subjective positioning\
3. Positioning approaches
The positioning process should be dynamic and it must keep pace with the changes
in the marketing environment in including changing needs of the customer and
changing tactics of the competitors.
STEP 1: Market Positioning
It is defined as the process of identifying and selecting markets or segments, that
represents business potential, to determine the criteria for competitive success.
This must be based on the following factors:
1. Thorough knowledge of needs, wants and perceptions of the target market, and

2. Benefits offered by the service offered.

The service provider may have a wish image but as a matter of the fact no image
exists if the customers do not perceive the image of the offering.
The evaluation of the image of the offering perceived by the customer can be used
to identify the crucial elements, which comprise the benefits.
STEP 2: Psychological Positioning:
This step involves the use of communication to convey, the firms or its offerings
identity and image to the target market. It convert the needs into images and
positions the offering in the customers mind. Psychological positioning enables
marketers to create a unique product image with the objective of creating interest
and attracting customers.
For example, two tourist attractions which are dissimilar may be perceived as the
same by a consumer and two similar tourist attractions may be perceived as
different. Marketer make an attempt to control the positioning and do not allow it to
let it happen.
2 kinds of Psychological Positioning:
1. Objective positioning
2. Subjective positioning
Objective Positioning.
The OP relates to the objective attributes of the physical product. It is concerned
with creation of an image of service offering that reflects physical features and
functional features. Usually Psychological positioning is concerned with what
actually is, what exists. e.g Mussorie is mountain.
OP is usually used in the Tourism industry. An attraction or destination which has a
unique features, that feature can be used to objectively position the attraction or
destination to create an image and to differentiate it from the competition.

Degree of Objective positioning depends upon the uniqueness of features. If the

features of an attraction are not unique the objective position will be of lesser
degree.
For example, Many tourist attractions which are promoted with pictures of beaches
or mountains fail to create a distinct image or successfully differentiate the offering.
Subjective Positioning
SP relates to the subjective attributes of the service offering. It is the (mental
perceptions) image

and other

attributes perceived by the tourist and not the

physical aspect of the offering.

For example, For a tourist perceptions about Taj and resulting image may not
necessarily reflect the true state of the Tajs physical characteristics. They may
simply exists in tourists mind and not all the tourists images agree with a particular
perception or image.
STEP 3: Positioning Approaches
There are several approaches to positioning of product and service offerings.
Service marketers may select an appropriate approach from the following positioning
approaches based on the information collected during market positioning and
psychological positioning. Psychological positioning creates as image but positioning
approach completes the picture , using visuals and words, reinforce what the
offering does best and what benefits are offered by it.
1. Positioning by attributes, features or customer benefits:
In this marketer place emphasis on the benefits of the particular featuror attributes of
the offering.
2. Positioning by Price Value
Value for money can be utilized for positioning the offering effectively. In the
international environment price is normally not used for positioning as the customer may

not identify lower price with lower quality. Price value can e exemplified by Malaysia
tourisms positioning statement says

Malaysia gives more natural value i.e it is

projecting not only more value for your money but added benefit of its natural
attractions.
3. Positioning by use of application:
Service offering is positioned on the basis of the reason for its use.
For example, Hotel Inter-Continental, New Delhi positions itself to the meeting
market with meeting place and promises one stop meeting solutions, consistent
standards, attention to detail and personalized service.
4. Positioning according to users or class of users
This relates to consumer segments using a service offering
Airlines target the executive class, the frequent fliers and the tourists.
For example, The Ashok group position itself to corporate world with Conference
venues can help write corporate history and promises attention to the minutest
detail.
5. Position with respect to product class
The positioning could be based on functional benefits as well as symbolic and
emotional benefits. This technique is generally used to associate an offering with
experiences that are unique.
For example, Thailand Tourism positions as holding a convention in Thailand is
:Smooth as silk where sky is the limit.
6. Positioning against competition
This approach is used to meet the competition HEAD ON to bring out differences
between destinations. The international player avoid this approach because it may

involve negative statements about other country or regions. but it is regularly

employed in product and services marketing
For example, Visa cards compete with American Express by examples of places in
the world that do not accept American Express cards only Visa cards are accepted.
7. Positioning by endorsement
It involves use of celebrities or other product successes. Rebok has used Rahul
Dravid for their products.
8. Positioning by quality dimensions
RATER(Reliability, Assurance, Tangibility, Empathy and Responsiveness is usually
used for positioning the services. Firms choose one or combination of more tan one
quality dimensions to position their offering.
a. Reliabily: it refers to ability to perform the service dependably and accurately. First
Flight Couriers Ltd may use Any time Any where First be using reliability
dimensions.
Telecom services, airlines services, banking services cannot stay in game without
reliability.
b. Assurance: Assurance is knowledge, courtesy of employees and their
ability to convey trust and confidence. The insurance health care and
banking usually use this dimension for positioning.
For example: PNB positions itself by conveying trust and confidence by
. The name you can Bank upon
c.

Tangibility: It relates to physical facilities, equipment, personnel and

communication materials. Tangibility is used by hotels, restaurants, tourism
and retailers. As the tangibles of service are highly visible elements, they
must be designed such that they are consistent with positioning approach.For
example, Sahara Airlines has always placed tremendous importance on

customer satisfaction and they have been positioning themselves as High on

achievement by showing the awards won by them in their advertisements.
d. Responsiveness: It relates to willingness o help customers provide prompt
service. At Hotel Radisson every question asked is answered by Yes I
Can! Be it midday or midnight people at Radisson are trained to respond
to the customer needs promptly. Through Responsiveness, they build the
repeat business.
9. Positioning by Physical Evidence: Someone who purchases a service may go
away empted handed but does not go empty headed. They have memories,
and it is the jpb of the service provider to make these memories stay as
possible. The service organizations use physical evidence like advertisements,
brochures, visiting cards etc. to solidify the image of the organization or its
offering in the customers mind. The quality of paper, graphics, colour schemes of
a brochure, building aesthetics, exteriors all are significant in positioning
10. . Positioning by Process: it is defined in term of two variables:
a. Complexity
b. Divergence
Complexity relates to number of steps involved in service delivery.
Divergence relates to latitude or variability f those steps. These two variables play
important role in positioning or repositioning of the services.
For example:
1. An electrician who provides repair services are low in complexity and high in
divergence because each time he repairs, his performance is varying.
2. The car washing service process is low in complexity as well as divergence
because number of steps involved are not too many and also there is hardly any
variability in performance.

Product Classification
A. Durability and Tangibility Classification
a. Non durable goods: Non Durable goods are tangible goods normally consumed in or
few days.
Example: soap, salt and biscuits.
b. Durable Goods: are Tangible goods that can normally be used for many years. For
example, color TV, refrigerator, washing machines and vacuum cleaners.
c. Services are intangibles, inseparable, variable and perishable products
For example: airlines and banking services.

B. Consumer good classification

Consumer products are products and services bought by final consumers for personal
consumption. Marketers usually classify these products and services further based on
how consumers go about buying them.
Consumer products include continence products, shopping products, specialty prod.
And unsought products.
These products differ in the ways consumers buy them.
a. Convenience Products: are consumer products and services that consumers usually
buy frequently, as soon as they feel the need for them, they require minimum or no
planning before the purchase.
Example: detergent, soft drinks, cigrattes, cholocates magazines , fast food etc.
Convenience goods can be further classified into three categories:
1. Staple goods: Consumer [purchase on regular basis
2. Impulse goods: Consumer purchase without any planning or search effort
3. Emergency goods: Consumer purchases on urgent need.

b. Shopping products: are less frequently purchased consumer products and services
that customers compare carefully on suitability, quality, price, and style. When buying
shopping products and services, consumer spend much time and efforts in gathering
information and making comparisons. These are goods that the consumers in the
process of selection and purchase characteristically compares on such bases as
suitability and quality
Examples include furniture, clothing, used cars, jewelry and hotel and air lines.
Shopping products marketers usually distribute their products through fewer outlets that
are known for the quality of their merchandize and provide deeper sales support to help
customers in their comparison efforts. Shopping goods are of two types:
Homogeneous goods, these are similar in quality but different
enough in price to justify shopping comparison.
Heterogeneous goods, these are differ in product feature and
services that may be more important than price.
c. Specialty Products are consumer products and services with unique
characteristics or brand identification for which a significant group of buyers is
willing to make a special purchase effort. They are more expensive than
convenience products and are not purchased frequently.
Examples include specific brands of cars, high priced photographic equipment,
designer clothes, and household appliances like TV, refrigerator and washing
machines and services of medical or legal specialists. Eg: A Mercedes is a
specialty product.
Buyers do not compare specialty product. They invest only the time needed to
reach dealers carrying the wanted products. However, they spend a lot of time in
planning the purchase deciding on the brand and arranging for the money to buy
the product.
Eg cars
d. Unsought products are consumer products that the consumer either does not
know or knows about but does not normally think of buying.
Eg Life insurance, donation for charity and blood donations to hospitals.
By their very nature, unsought products require a lot of advertising, personal
selling and other marketing efforts.
C. Industrial products:

A IP are those purchased for further processing or for use in conducting a

business. Thus distinction between a consumer product and IP is based on the
purpose for which the product is brought.
Three groups of IP and services include
1. Materials and parts
2. Capital item
3. Suppliers and services
Material and parts include raw materials and manufactured materials and parts.
Raw mat consists of farm products (wheat, cotton, fruits, vegetables) and natural
products (fish, crude, petroleum, ore)
Manufactured materials and parts consists of components materials(iron, cement,
wires) and component parts ( small motors, tires, castings)
Capital parts are long lasting goods that facilitates developing or managing the finished
product. They include two groups: installation and equipments
Installation consists of major purchases suh a s builidings( factories , offices) and fixed
equipment includes portable factory equipment and tools (hand tool, lift trucks) and
office equipment (computers. Fax machines , desks) they have a shorter life than
installations and simply aid in the production process
Suppliers and services:
Su[pplierss include operating supplies(lubricants, coal, paper, pensils a). and repair and
maintenance items(paints, nails, ))
Suppliers are the convenience products of the industrial field because they are usually
purchased with a min. of efforts or comparision.
Bus. Services include maintenance and repair services ()windows cleaning, computer
repair) and bus. Advisory services(legal, mgmt consulting, advertising)) such services
are usually supplied under contract.
These are short listing goods and services that facilitate developing or managing the
finifhes product.

Product Levels

In planning its market offering, the market offering, the marketer needs to think through
five levels of the product. Each level adds more customer value and the five constitute a
customer value hierarchy.
I Level - Core Benefit
The most fundamental level is Core Benefit: the fundamental service or benefits that
the customer is really buying. A hotel guest buying rest and sleep, the purchaser of
drill is buying holes. Marketer must see themselves as benefit providers.

Potential Product
Augmented Product
Expected Product
Basic Product
Core Benefit

II Level - Basic Product

At the second level, the marketer has to turn the core benefit into basic product. Thus a
hotel room include a bed, bathroom, towel, dresser etc.

III Level - Expected Product

At this level, the marketer prepares an expected product, a set of attributes and
conditions buyer normally expect when they purchase this product. Hotel guests expect
a clean bed, fresh towel, working lamps, and a relative degree of quiet. Because most
hotels can meet this minimum expectation,
the traveler normally will settle for
whichever hotel is most convenience or least expensive.

IV Level - Augmented Product

At the fourth level, the marketer prepares an augmented product that exceeds customer
expectations. A hotel include a remote control Television set, fresh flowers. Rapid check
in, fine dining and room service.
Today competition essentially takes place at the product
augmentation level. In less developed countries, competition takes place mostly at the
expected product level. Product augmentation leads the marketer to look at the users
total consumption system: the way the user performs the tasks of getting, using, fixing
and disposing of the product.
Some things should be noted about product augmentation strategy:
1. Each augmentation adds cost. The marketer has to ask whether customers will pay
enough to cover the extra cost.
2. Augmented benefits soon become expected benefits, this means that competitors will
have to search for still other features and benefits.

V Level - Potential Product

At this level, all the possible augmentations and transformations the product might
undergo in the future. Here is where companies search for new ways to satisfy
customers represent an innovative transformation of the traditional hotel product.
Successful companies add benefits to their offering that not only satisfy customers but
also surprise and delight them. Delighting is a matter of exceeding expectations.
PRODUCT MIX
Customers decision to buy a product is potentially influenced by:
1. Range
2. Style
3. Presentation of the product
And all manufacturing and service organizations offer a variety of different products and
services. Marketers policy decisions may be approached from the following possible
levels:

1. Product item
2. Product Line
3. Product Mix
Product item is a specific model, brand or size of product a company sells.
Product Line is a groupof products that are closely related because they function in a
similar manner, are sold to the same customer groups, are marketed througyh the same
typwes of outlets, or fall within a given price ranges.
For example, Nike produce s several lines of athletic shoes and apparel.andMarriott
offers several lines of Hotels.
The major product line decision involves product line length the number of items in the
product line.
Product line length is influenced by company objectives and resources. For example,
one objective might be to allow for upselling. Thus, BMW wants to move customers up
from 3-series models to 5- and 7- series models.
Another objective might be to allow cress-selling. Hewelett-Packard sells printers as
well as cartridges.
Product Mix: Product mix consists of all the different product lines a company offers.
A company product mix has a certain width, length, depth and consistency.

For Example: P&G

________________________PRODUCT

MIX

WIDTH______________________________

Detergents

ToothPaste

Ivory stone 1930

Bar Soap

Gleem (1952)

Disposal Diapers

Ivory (1879)

Pampers

(1961)
Tide(1946)

Crest (1955)

Kirks (1885)

Cheer (1950)

Lava (1893)

PRODUCT

Dash(1954)

LINE

Oxydol(1954)

Zest (1952)

LENGTH

Bold(1965)

Safeguard (1963)

Gain(1966)

Luvs (1976)

Camay (1926)

Coast (1974)

Era (1972)

Oil of Olay(1993)

1. Width of Product Mix: refers to how many different product lines the company
carries. Table above shows product mix width of 4 lines. In fact, P&G produces many
additional lines.
The product width could be narrow and wide. As an example Project Management
Institute of India only offers course on Project management whereas IIT, New Delhi
offers courses on engineering, management, Research and pure sciences. Firs choose
of offer wide or narrow product or services lines on the basis of organizational
objectives and capabilities and market expectations.

2. Depth of Product Mix: average Number of products items within each products
lines. In other words, the depth is measured by assortment of sizes, colours, models,
prices, and quality offered within each product line.
For example, if crest comes in three sizes and two formulations (regular and mint)crest
has depth of six. The average depth of P&G product mix can be calculated by averaging
the number of products within brand group.
3. Length of product mix refers to the total number of items in the mix. In above table
it is 20. Average length of a line is 5. Which is total length by the number of lines.
4. Consistency of the product mix is the relationship amongst product line in terms of
their sharing the end use, distribution outlets, consumer group(s) and price range.
Generally a consistent mix is easily manageable compared to inconsistent one.
In consistent mix environment the firms concentrate on marketing and service delivery
expertise, create a string image and generate solid interpersonal relationships.
Excessive consistency in product mix may lead to limited product or service product
assortments.
P&G product lines are consistent insofar as they are consumer goods that go through
the same distribution channels. The lines are less consistent insofar as they perform
different functions for the buyers.
PRODUCT INNOVATION
A product or a service which is profitable today cannot be tomorrow or at some future
time. It is either replaced by another one or it degenerates into profits less price
competition. The underlying reason is that the market is highly dynamic. Therefore, a
management places emphasis on product innovation and in modern
times the watch word for management has been innovate or die.

It is necessary due to following factors:

1. Market Changes:
The market is dynamic and therefore existing products and product lines prove
inadequate for meeting buyer demand. Sophisticated buyers buy products tailored to
their individual needs rather than the total markets generalized needs. Market changes
have been rendered possible with the development and growth of new media of
communication the ease of reaching this media and the changes in fashion therefore, to
avoid their products going out of markets, the

manufacturer emphasis on product

innovation.
2. Changes in Technology:
It has not widened the existing markets existence, through the creation of entirely new
products. For example, not only the market for portable radio has extensively widened
but that for record players as TV has also become feasible. Large amount of money is.
Therefore being spent in technical research so that product innovation become must.
3. Profit less Price competition:
Normally, the competitive forces in the modern system do not permit the continuance for
a long time of a firm if it does not produce new products or make improvements in the
existing products. The experience shows that markets for mature or dying products are
highly competitive. Therefore, not only to escape profit less price competition, but also
for satisfying customer expectation, manufacturer engage in continuum product
innovation.
4. Consumer Preference:
With the passage of time, the existing product may not be liked at all by the buyers,
which means that they become obsolete. This has been the result with the horse driven
Tanga have been replaced by cars and bikes. The greater the variety of products placed
by a firm, the smaller is the chance of going that product out of the market.
5. Other factors:

a. A company may develop new products to utilize the basic materials it is already
making or to utilize waste or scrap from present production.
b. A co. may add new products to even out sales fluctuation resulting from seasonal
or cyclical factors,
c. It may seek new products to counteract the highly erratic buying behavior
of certain customers. Such as government buyers.

DIFFUSION OF INNOVATIONS
Diffusion of Innovations is a theory that seeks to explain how, why, and at what rate new
ideas and technology spread through cultures.
In 1962 Everett Rogers, a professor of rural sociology published Diffusion of
Innovations. In the book, Rogers synthesized research from over 508 diffusion studies
and produced a theory for the adoption of innovations among individuals and
organizations.
The book proposed 4 main elements that influence the spread of a new idea: the
innovation, communication channels, time, and a social system. That is, diffusion is the
process by which an innovation is communicated through certain channels over time
among the members of a social system.
Element

Definition

Innovation

Rogers defines an innovation as "an idea, practice, or object that

is perceived as new by an individual or other unit of adoption"

Communication
channels

A communication channel is "the means by which messages get

from one individual to another"

Time

"The innovation-decision period is the length of time required to

pass through the innovation-decision process". "Rate of adoption
is the relative speed with which an innovation is adopted by
members of a social system".

Social system

"A social system is defined as a set of interrelated units that are

engaged in joint problem solving to accomplish a common goal".

The Adoption Process: The adoption process as the mental process through whch an
individual passes from first hearing about an innovation to final adoption.
Stages of Adoption:

Awareness

Interest

Evaluation

Trial

Adoption

The five stages are:

1. Awareness: At this stage the individual is exposed to the innovation but lacks
complete information about the product.
2. Interest: At this stage the individual becomes interested in the new idea an
seeks additional information about the product.
3. Evaluation: At the evaluation stage the individual mentally applies the innovation
to his present and anticipated future situation , and then decides whether or not
to try it.
4. Trial: The individual makes full use of the innovation.
5. Adoption: At this stage the individual decides to continue the full use of the
innovation.

Rogers defines an adopter category as a classification of individuals within a social

system on the basis of innovativeness. In the book Diffusion of Innovations, Rogers
suggests a total of five categories of adopters in order to standardize the usage of
adopter categories in diffusion research. The adoption of an innovation follows an S
curve when plotted over a length of time. The categories of adopters are: innovators,
early adopters, early majority, late majority, and laggards

Innovators:

Innovators are the first individuals to adopt an innovation. The first 2.5% of adopters are
called "Innovators. Innovators are willing to take risks, youngest in age, have the highest
social class, have great financial lucidity, very social and have closest contact to
scientific sources and interaction with other innovators. Risk tolerance has them
adopting technologies which may ultimately fail. Financial resources help absorb these
failures. They are willing to tolerate initial problems that may accompany new products
or services and are willing to make shift solutions to such problems.

Early Adopters:
This is the second fastest category of individuals who adopt an innovation. These
individuals have the highest degree of opinion leadership among the other adopter
categories. Early adopters are typically younger in age, have a higher social status,
have more financial lucidity, advanced education, and are more socially forward than
late adopters. More discrete in adoption choices than innovators. Realize judicious
choice of adoption will help them maintain central communication position.

Early Majority:
Individuals in this category adopt an innovation after a varying degree of time. This time
of adoption is significantly longer than the innovators and early adopters. Early Majority
tend to be slower in the adoption process, have above average social status, contact
with early adopters, and seldom hold positions of opinion leadership in a system
They have three principles in the adoption of new technology:

When it is time to move, lets move all together. This principle defines why
adoption increases so rapidly in the diffusion process and causes a landslide in demand.

When we pick a vendor to lead us to the new paradigm, let us all pick the same
one. This principle explains which firm will become the market leader.

Once the transition starts, the sooner we get it over with, the better. This
principle shows why the transition stage occurs rapidly

Late Majority:
Individuals in this category will adopt an innovation after the average member of the society.
These individuals approach an innovation with a high degree of skepticism and after the
majority of society has adopted the innovation. They are very price sensitive and require
completely preassembled, bulletproof solutions Late Majority are typically skeptical about an
innovation, have below average social status, very little financial lucidity, in contact with
others in late majority and early majority, very little opinion leadership.

Laggards:
Individuals in this category are the last to adopt an innovation. Unlike some of the previous
categories, individuals in this category show little to no opinion leadership. These individuals
typically have an aversion to change-agents and tend to be advanced in age. Laggards
typically tend to be focused on traditions, likely to have lowest social status, lowest
financial fluidity, be oldest of all other adopters, in contact with only family and close friends,
very little to no opinion leadership.

NEW PRODUCT DEVELOPMENT

A firm can obtain new products in two ways.
1. Acquisition by buying a whole company a patent or a license to produce
someone else product.
2. New product development means original products, product improvements,
product modifications and new brands that the firms develops through its own
research and development efforts.
New Product Development Process

To create successful new products, a company must understand its consumers , ,

markets and

competitors and develop products that deliver superior value to

customers. It must carry out strong new product planning and set up a systematic,
customer driver new product development process for findings and growing new
products.

Idea Generation

Business
analysis

Idea
Screening

Product development

Concept development
Marketing strategy development
& Testing

Test Marketing

Commercialization

MAJOR STAGES IN NEW PRODUCT DEVELOPMENT

A. IDEA GENERATION

A company generates hundreds of ideas, even thousands in order to find a few good
ones. For example, IBM held an Innovation Jam a kind of online suggestion box
in which it invited IBM and customer employees worldwide to submit ideas for new
products and services. The mammoth brainstorming session generated some 46000
ideas from 150000 people in more than 160 countries over three days. Since the
Jam fest, however IBM has whittled down to only 10 products, businesses, and
services that it plans to develop.

Major source of new product ideas include:

1.

Internal Idea Sources

Using internal sources , the company can find new ideas through formal research and
development.
Idea may originate from:
1. Sales personnel
2. Marketing personnel
3. Research and development
4. Production department
5. Employees suggestion system

For example: Cisco has set up an internal wiki called Idea Zone or I Zone through which
any Cisco employee can propose an idea for anew product or comment on or modify
Someone else proposed idea. Since its start, I Zone has generated more than 400
business ideas, and another 10000 people have added to those ideas. Cisco selects
ideas that draw the most activity for further development.

So far 12 I Zone ideas have reached the project stage and four new Cisco business
units have been formed.
2.

External Idea Sources:

Companies can also obtain new product ideas from any of a number of external
sources. For example, distributor and suppliers can contribute ideas. Distributors are
close to the market and can pass along information about consumer problems and new
product possibilities. Suppliers can tell company about new concepts, techniques, and
materials that can be used to develop new products.
Competitors are another important source. Companies watch competitors ads to get
clues about their new products.. they buy competing new products, take them apart to
see how thy work, analyze their sale and decide whether they should bring out a new
product of their own. Other sources include :

Trade magazines, shoes and seminars, government agencies. Advertising agencies, ,

marketing research firms, university and commercial laboratories, and inventors.
The most important source of new product ideas is customer themselves. The company
can analyze customer questions and complaints to find new products that better solves
consumer problems. For example, Indian car customers were looking for a spacious,
fuel efficient, and affordable personal car in India The Indica around this customer
need. Within week of its launch in 1999, the company received 115000 bookings. In two
years, the Indica became the largest selling car in its segment.

B. IDEA SCREENING

the purpose of idea generation is to create a large number of ideas. the purpose of the
Succeeding stages is to reduce that number. The first idea reducing stage is idea

screening, which helps spot good ideas and drop poor ones as soon as possible. The
main intention of this phase is only to eliminate unsuitable ideas as quickly as possible.
Screening criteria are established a evaluative standards in new product development.
They provide a unity of purpose and a perspective for new product planners.

Screening criteria usually concern themselves with three factors markets, products,
and finances. More frequently used market criteria are: market size, market growth,
market positioning, distribution features etc.

One marketing expert proposes an R-W-W (real, win, worth) new product screening
framework that asks three questions:

1. Is it real? Is there a real need and desire for the product and will customers buy
it? Is there a real need and desire for the product and will customers buy it? is
there a clear product concept and will the product satisfy the market?
2. Can we win? Does the product offer a sustainable competitive advantage? Does
the company have the resources to make the product a success?
3. Is it worth doing? Does the product set the companys overall growth strategy?
Does it offer sufficient profit potential?
The company should be able to answer yes to all R-W-W questions before
developing the new product idea further.

C. CONCEPT DEVELOPMENT AND TESTING

An attractive idea must be developed into a product concept.
A product concept is a detailed version of the idea stated in meaningful consumer
terms.

This is concerned with measuring customers reactions to the idea or concept of the
product. In fact, it is a kind of research, in which the product idea is screened before
investing any money, time, labour making the prototype product.
The idea of a product with as many details as possible is made known to the
customers either verbally or through the use of suitable blueprints. The response of
the customers is checked and only if it is found encouraging, then the development
of product prototype taken up.
For instance, when the rest of the world had largely gone for synthetic detergent bar
as a concept, because in India most of the people do not use washing machines or
even buckets and are accustomed to using a bar to rub on the fabric.
Concept testing can tell whether the product is likely to be a success or not. To
achieve better results, however, the product concept should include the finished
product itself with all details, viz., packaging, price range, the brand name, etc.on
the basis of these details, interviews are conducted to collect the opinion of the
would be purchasers.
Limitation:
1. some risk of disclosing the companys plans to competitors.
2. respondent may overstate their interest and encourage unsound development
3. findings may be misleading, if the test is not carried out properly.

D MARKETING STRATEGY DEVELOPMENT

Marketing strategy development, designing an initial marketing strategy for
introducing product to the market.
The marketing strategy statement consist of three part:

Marketing strategy statement 1: Describe the target market, the planned

valur proposition, and the sales, market share, and profit goals for the first few
years.

Marketing strategy statement2 : outlines the produts planned price,

distribution, and the marketing budget for the first year.

Marketing strategy statement3: describe the planned long-run sales, profit

goals, and marketing mix strategy.

E, BUSINESS ANALYSIS

BA involves a review of the sales, costs and profit projections for a new product to
find out whether they satisfy the company objectives. If they do, the product can
move to the product development stage,
To estimate sales, the company might look at the sales history of similar products
and conduct market surveys. It can then forecast management can estimate the
expected costs and profits for the product, including marketing, R&D, operations,
accounting and finance costs. The company then uses the sales and costs figures to
analyze the new products financial attractiveness.
F. PRODUCT DEVELOPMENT
If the product concept passes the business test, it moves into product development.
Here, R&D or engineering develops the product concept into a physical product. The
product development step, however, now calls for a large jumps in investment.
The R&D department will develop and test one or more physical versions of the
product concept. R&D or engineering develop the product concept. R&D hopes to
design a prototype that will satisfy and excite consumers and that can be produced
quickly and at budgeted costs. Developing a successful prototype can take days,
weeks, months, or even years depending on the product and prototype methods.
G. TEST MARKETING:

If the product passes concept and product tests, the next step is test marketing, the
stage at which the product and marketing program are introduced into realistics market
settings. Test marketing gives the marketer experience with marketing the product
before going to the great expense of full introduction. It lets the company test the
product and entire marketing program- targeting, and positioning strategy, advertising
advertising, distribution, pricing, branding and packaging and budget levels.
When introducing a new product requires a big investment, when risks are high, or
when management is not sure of the product or marketing program, a company may do
a lot of marketing.
When use test marketing, consumer products companies usually choose one of three
approachs:
1. Standard Test Market:
Using standard test markets, the company finds a small number of representative
test cities, conducts a full marketing compaign in these cities, and use store
audits, consumer and distributor surveys. The results are used to forecast
national sales and profits, discover potential product problems and fine tuning the
marketing program
Drawbacks of standard test market:
1. They can be costly and may take a long time.
2. Competitors can monitor test market results by cutting their prices in test
cities, increasing their promotion, or even buying up the product being
tested.
Despite these disadvantages, standard test markets are still the most widely used
approach.
2. Controlled Test Markets:
Several research firms keep controlled panels of stores that have agreed to carry new
products for a fee. Controlled test marketing system such as ACNielsens scantrack and

Information Resource Inc. (IRI) BehaviourScan track individual consumer behavior for
new products from the television set to checkout counter.

In each behavior scan market, IRI maintains a panel of shoppers who report all of their
purchases by showing an identification card at checkout in participating stores. And by
using a handheld scanner at home to record purchases at non participating stores.
Controlled test markets, such as BehaviourScan, usually costs less than standard test
markets. Also, because retail distribution is forced in the first week of the test, controlled
test markets can be completed mush more quickly than standard tset markets.

3.

Simulated Test Markets:

Companies can also test new products in a simulated shopping environment

environment. The company or research firms shows ads promotions for a variety of
products, including the new product being tested, to a sample of consumers. It gives a
small amount of money and invites them to a real or laboratory store where they may
keep the money or use it to buy items. The researches note how many consumers buy
the new product and competing brands.
This simulation provides a measure of trial and the commercials effectiveness against
competing commercials. The researchers then ask consumers the reasons for their
purchase or non purchase. Some week later they interview the consumers by phone to
determine product attitude, usage, satisfaction, and repurchase intentions.

H COMMERCIALIZATION

Test marketing gives management the information needed to make a final decision
about whether to launch the new product. If the company goes ahead commerciazilation
introducing the new product into the market it will face high costs. The company
may need to build or rent a manufacturing facilty and in the case of a major new
consumer packaged good, it may spend hundreds of millions of dollars for advertising,
sales promotion and other marketing efforts in the first year.

The following activities are usually undertaken during this stage:

1. Completing final plans for production and marketing.
2. Initiating coordinated production and selling programmes and
3. Checking results at regular intervals.

The company launched a new product must first decide on the introduction timing.
Next, the company must decide where to launch the new product in a single location,
a region, the national market or the international market

Product Life Cycle

All products and services have certain life cycles. The life cycle refers to the period
from the products first launch into the market until its final withdrawal and it is split
up in phases. During this period significant changes are made in the way that the
product is behaving into the market

Introduction Stage:
The introduction stage starts when the new product is first launched. Introduction takes
time, and sales growth is slow..
In this stage, as compared to other stages, profits are negative or low because of the
low sales and high distribution and promotion expenses. Much money is needed to
attract distributors and build their inventories. Promotion spending is relatively high
to inform consumers of the new product and get them to try it. because the market is not
generally ready for product refinements at this stage, the company and its few
competitors produce basic versions of the product. These firms focus their selling on
those buyers who are the most ready to buy.
Growth Stage:
If the new product satisfies the market, it will enter a growth stage, in which sales will
start increasing quickly. Attracted by the opportunities for profit, new competitors
will enter the market. They will introduce new product features, and the market will
expand. The increase in competitors leads to an increase in the number of

distribution outlets, and sales jumps just to build reseller inventories. Prices remain
where they are or fall only slightly. Companies keep their promotion spending at the
same or a slightly higher level. Educating the market remains a goal, but now the
company must also meet the competition.
Profits increase during the growth stage as promotion costs are spread over a large
volume and as unit manufacturing costs fall. The firm uses several strategies to sustain
rapid market growth as long as possible.
It improves product quality and adds new product features and models. It enters new
market segments and build distribution channels.
In growth stage, the firm faces a trade off between high market share and high current
profit. By spending a lot of money on product improvement, promotion, and distribution,
the company can capture a dominant position.

Maturity Stage:
At some point, a product sales growth will slow down, and the product will enter into
maturity stage. This maturity stage normally lasts longer than the previous stages.
The slowdown in sales growth results in many producers with many products to sell. In
turn, this overcapacity leads to greater competition. Competitors begin making down
prices, increasing their advertising and sales promotion, and upping their product
development budgets to find better versions of the product. These steps lead to drop in
profits.
To meet changing consumer needs, marketer should modify the market, product and
marketing mix.

1. In modifying the market, the company tries to increase the consumption of the
current product. It may look for new users and new market segments.

For example, Moov was successfully positioned for homemakers in the age group of 30
40 years as a backage reliever. After establishing itself in this market, the company
turned its attention to the male segment of the same age group for the same purpose.
For a new market, a company may reposition

the product, offering a modified or

altogether different promise.

2. The company might also try modifying the product changing characteristics such
as quality, features, style, or packaging to attract new users and to inspire more usage.
It can improve the product styling and attractiveness. It might improve the products
quality and performance its durability, reliability, speed and taste.

3. The company can try modifying the marketing mix improving sales by changing
one or more marketing mix elements. The company can offer new or improved services
to buyers. It can cut prices to attract new users and competitors customers. It can
launch a better advertising campaign or use aggressive sales promotion trade deals,
cents-off, premium and contests.

Decline Stage:
The sales of most product forms and brands eventually dip. The decline may be slow or
rapid depend upon the nature of the product. Sales may come to zero or they may drop
to a low level where they continue for many years. This is the decline stage.

Sales decline for many reasons, including technological advances, shifts in consumer
tastes and increased competition. As sales and profits decline, some firms withdraw
from the market.

Companies need to pay more attention to their aging products a firms task is to identify
those products in the decline stage regularly reviewing sales, market shares, costs, and
profit trends. The, management must decide whether to:
a. Maintain the product
b. Harvest the product
c. Drop the product

Management may decide to maintain its brand without change, in the hope
that competitors will leave the industry, or management may decide to
reposition the brand in hopes of moving its back into the growth stage of the
product life cycle.

Management may decide to harvest the product, which means reducing various
costs(plant and equipment, maintenance, R&D, advertising, sales force) and hoping that
sales hold up. If successful, harvesting will increase the company profits in the short
run. Or management may decide to drop the product from the line.
Hence, proper understanding of a products life cycle, can help a company to
understand and realize when it is time to introduce and withdraw a product from a
market, its position in the market compared to competitors, and the products success or
failure.

PRICE
Price is that monetary value that one has to forego in order to acquire a product or
service.
Or, Price may be defined as the exchange of goods or services in terms of money.

Objectives of Pricing:
1. Target return (ROI): When a businessman invests capital in a business he
calculates the probable return on his investment. A certain rate of return on
investment is aimed. Then the price is fixed accordingly. This objective of pricing
is also known as pricing for profit.
2. Market share: The target share of the market and the expected volume of sales
are the most important consideration in pricing the product. Some companies
adopt it as main pricing objective so as to maintain or to improve the market
share towards the product.
3. To meet or prevent competition: Generally producers are not in a haste to fix a
price at which the goods can be sold out. One has to look to the prices of rival
products and the existing competition and then made the proper price policy so
as to enable to face the market competition.
4. Profit maximization: Profit maximization can be enjoyed where monopolistic
situation exists. The goal should be to maximize profits on total output rather than
on every item. The scarcity conditions offer chances for profit maximization by
high pricing policy.
5. Stabilise price: It is a long-term objective and aims at preventing frequent and
violent fluctuations in price. The prices are designed in such a way that during
the period of depression the prices are not allowed to fall below a certain level
and in the boom period , the prices are not allowed to rise beyond a certain level.
6. Customers ability to pay: The prices that are charged differ from person to
person, according to his capacity to pay.
7. Resource mobilization: The products are priced in such a way , that sufficient
resources are made available for the firms expansion , development, investment
etc.
Factors affecting pricing decisions:
A. Internal factors:
i.

Top level management: Overall top management philosophy and

practice have direct impact on pricing decisions. Price of the product may
be high or low may be fixed or variable; or may be equal or discriminative
depends on top level management.

ii.

Elements of marketing mix: price decision must be linked with product,

promotion and place of distribution so as to consider the effect of price on
these elements of marketing mix.

iii.

Degree of product differentiation: The higher the product

differentiation , the more will be the freedom to set the price , and the
higher the price will be.

iv.

Cost: For fixing up the price management has to consider development

cost ,production cost , marketing cost etc.

v.

Stages of product life cycle: Pricing depends upon the stage in which
companys product is passing through.

vi.

Brand image and reputation in the market: Brand image and reputation
adds value to the product and therefore company with reputed and
established brand charges high price for its products.

B. External factors:
i.

Demand for the product: Price is set at a level at which there is the
desired impact on the product demand. Company must set price
according to purchase capacity of its buyers. Price is kept high when
demand is high and price is kept low when demand of the product is low.

ii.

Competition: To face competitors, defeat them or to prevent their entry by

effective marketing strategies is one of the basic objective of organisation,
therefore, pricing decision is taken accordingly.

iii.

Buyers behavior: Consumer behavior includes the study of social,

cultural, personal and economic factors related to consumers. The key
characteristics of consumers provide a clue to set an appropriate price for
the product.

iv.

Government rules and restrictions: A company cannot set its pricing

policies against the rules and regulations prescribed by the government.

v.

Seasonal effects: Certain products have seasonal demand. To balance

the demand or to minimize the seasonal fluctuations the company
changes its price level and pricing policies.

vi.

Economic Conditions: This includes inflationary or deflationary

conditions; depression , recovery or prosperity condition influences the
demand to a great extent and a manager has to plan the pricing policy
according to economic conditions.

Process of Pricing:
Step 1: Selecting the pricing objectives
The company first decides where it wants to position its market offerings. The clearer a
firms objectives , the easier it is to set price . Five major objectives are: Survival,
maximum current profit, maximum market share, maximum market skimming, and
product quality leadership.
Step 2: Determining Demand
Each price lead to a different level of demand and therefore will have a different impact
on a companys marketing objectives. In this company analyses:
Prices sensitivity, demand estimation and price elasticity of demand.
Step 3 : Estimating Cost
The company wants to charge a price that covers its cost of producing , distribution ,
and selling the product , including a fair return for its efforts and risk. In this stage
company considers the following:
i.

Types of cost and level of production

ii.

Accumulated production

iii.

Target costing

Step 4: Analysing competitors Cost, Prices and Offers

Within the range of possible prices determined by market demand and company costs,
the firm must take competitors cost, prices and possible price reactions into account. If
the firms offer contains features not offered by nearest competitors, it should evaluate
their worth to the customer and add that value to the competitors price. If the
competitors offers contain some features not offered by the firm, the firm should
subtract their value from its own price.
Step 5: Selecting a pricing Method
By summarizing customers demand schedule, the cost function and competitors prices ,
the firm can select a price. Costs set a floor to the price and competitors prices and the
price of substitutes provide an orienting point. Customers ability to assess unique
features establishes the price ceiling.
Companies select a pricing method that includes one or more of the above three
considerations.

Pricing methods can be: Mark-up pricing, Target return pricing, perceived value pricing
etc.
Step 6: Selecting the final Price
Pricing methods narrow the range from which the company must select its final price. In
selecting that price, the company must consider additional factors, including the impact
of other marketing activities, company pricing policies, gain and risk sharing pricing and
the impact on other parties.

Pricing Methods:
1. Mark-up Pricing Method: This method is also known as cost-plus pricing. In this
method standard (or profit margin) is added to the product costs. This method is
widely used in all types of business in which company has necessary data to
estimate various costs and sales volume.
Selling Price = Unit Cost/ (1- Desired mark - up)
2. Perceived value pricing method: In this price is based on the consumers
perceived value of the product. Consumers views on price are given priority.
Company takes consumers perception of value as a key to set the price, and not
its own cost and objectives. Manager explains the customers about total offers
including core product, expected product and product related services.
3. Going Rate Pricing Method: This is also known as competitive parity method. In
going rate pricing method , the company gives less attention to its own costs ,
objectives or product demand. But pricing decision largely based on competitors
prices. The company may charge the same, more or less than competitors.
4. Target Return Pricing: It is one of the cost oriented method where the firm
determines the level of price at which it can get target return on investment. In
this , return on investment is taken as a base for price determination. Mostly
Government companies , public utilities co-operative societies and other similar
organisation uses this method of pricing.
5. Break even Analysis: It is a managerial tool that establishes relationship
among costs, volume of sales and profits. It is also known as cost-benefit
analysis. Under this method attempts are made to find out volume of sales at
which total costs are just equal to the sales revenue , which is the break-even
point . Therefore, at this point there is no profit, no loss for the company.

When sales revenue exceeds the total costs, the result is profit and when sales
revenue is less than total costs, the result is loss.
BEP = Fixed cost / (Selling price variable cost)

Pricing Strategies

A)

A.

New Product Pricing Strategies

B)

Product Mix Pricing Strategies

C)

Price Adjustment Pricing Strategies

New Product Pricing Strategies:

These strategies are for products in the Introductory stage of the product life
cycle
Pricing strategies usually changes as the product passes through its life cycle.
Introductory stage is especially challenging.
They can choose between two broad strategies:
1. Market Skimming pricing
2. Market-penetration pricing

1. Market skimming pricing:

Many companies that invent new products set high initial prices to skim revenues
layer by layer from the market. Sony frequently uses this strategy, called market
skimming. When Sony was introduced the worlds first High definition television
(HDTV) to the Japanese Market in 1990, the high tech sets cost $43000. These
televisions were purchased only by customers who really wanted the new technology
and could afford to pay high price for it. Sony rapidly reduced price over the next several
years to attract new buyers. By 1993 a 28 inch HDTV the cost a Japanese buyers just

over $6000. In 2001, a Japanese consumer could buy a 40-inch HDTV for about $2000,
a price that many more customers could afford.

Market Skimming makes sense only under certain condition:

1. The product quality and image must support its higher price and enough buyers must
want the product at that price.
2. The costs of producing a smaller volume cannot be so high that they cancel the
advantage of charging more.
3. Finally, competitors should not be able to enter the market easily and undercut the high
price.
2. Market Penetration Pricing
Companies set a low initial price in order to penetrate the market quickly and
deeply to attract a large number of buyers quickly and win a large market share. The
high sales volume results in falling costs, allowing the companies to cut their prices
even further. For example, Dell used penetration pricing to enter the personal computer
market, selling high quality computer products through lower cost direct channels. Its
sales soared when HP, Apple and other competitors selling through retail stores could
not match its prices.
Bank Alfalah Limited used penetration pricing for irs credit cards to boost its success in
the highly competitive credit card market in Pakistan.

B. Product Mix Pricing Strategies:

The strategy for setting a product price has to be changed when the product is a part of
product mix. In this strategy, a firm looks for a set of prices that maximize the profits on
the total product mix.

There are 5 product mix strategies:

1. Product Line Pricing:
Companies usually develop product lines rather than single products.
In product line pricing, management must decide on the price steps to set between the
various products in a line. The price steps should take into account for differences
between the products in the line. They should account for differences in customer
perceptions of the value of different features.
For example, Bata offer an entire range of footwear in India, from premium European
Collection and Hush Puppies brands that are priced at about Rs 2499 to ordinary
leather shoes for Rs 749. Bata also has collection of chappals and sandals. For women,
it offers a wide range of footwear from fashionable footwear for parties to the regular
ones for everyday use. Bata also have Childrens section from economy to premium.
2. Optional-Product Pricing:
Many companies use optional-product pricing offering to sell optional or accessory
products along with their main product. For example, a car buyer may choose to order a
GPS navigation system and Bluetooth wireless communication. Refrigerators come with
optional ice makers.
General Motors normal pricing strategy was to advertise at a base price to pull people
into showrooms and then to devote most of the showroom space to showing option
loaded cars at higher prices.
3. Captive Product Pricing
Companies that make products that must be used along with the main product are using
captive product pricing. Example of captive products are razor blade cartridges, video
game and printer cartridges. Producers of the main products (razors, video game
consoles and printers) often price them low and set high markups on the supplies.

For example, Gillete sells low priced razors but makes money on the replacement
cartage and storage case for under Rs. 200. But once you have bought the razor, you
are committed to buying replacement cartridges at about Rs 750 an eight pack.
Companies use captive product pricing must be careful- consumer trapped into buying
expensive supplies may come to resent the brand that attentive them.
4. By Product Pricing
Producing products and services often generates by-products. If the by products have
no value and if getting rid of them is costly, this will affect the pricing of the main
product. Using by product pricing, the company seeks a market for these by products to
help offset the costs of disposing of them and to help make the price of the main
product more competitive. The by products themselves can even turn out to the
profitable. For example, papermaker MeadWestvaco in US has turned whar pnce
considered chemical waste into profit making products.
MeadWestvaco created a separate company, Asphalt Innovations, which creates useful
chemical entirely from the by products of MeadWestvaco,s wood processing activities.
In fact, Asphalt Innovations has grown to become the worlds biggest supplier of
specialty chemicals for the concrete industry.
5. Product Bundle Pricing
Using product bundle pricing, sellers often combine several of their products and offer
the bundle at reduced price. For example Fast food restaurants bundle a burger, fries
and soft drink at a combo price.
Price bundling can promote the sales of the products consumers might not otherwise
buy, but the combined price must be low enough to get them to buy the bundle.

C. Price Adjustment Strategies:

Companies usually adjust their basic prices to account for various customer differences
and changing situations.

There are seven price adjustment strategies:

1. Discount and Allowance Pricing:
Most companies adjust their basic price to reward for certain responses, such as early
payment of bills, volume purchases, and off season buying. The price adjustments
called discounts and allowances can take many forms.
Forms of Discount:
a. Cash Discount: a price reduction to buyers who pay their bills promptly. A typical
example is if a payment is due within 30 days, the buyer can deduct 2 percent if the bill
is paid within 10 days.
b. Quantity discount: is a price reduction to buyers who buy large volumes. Such
discounts provide an incentive to the customer to buy more from one seller, rather than
from many different sources.
c. Seasonal discount: is a price reduction to buyers who buy merchandise or services
out of season.
Allowances are another type of reduction from the list price.
a. Trade-in-allowance: are price reductions given for turning in an old item when buying a
new one. These allowance are most common in automobile industry but are also given
for other durable goods.
b. Promotional allowances : are payments or prices reductions to reward dealers for
participating in advertising and sales support programs.

2. Segmented Pricing:
In Segmented Pricing, the company sells a product or service at two or more prices,
even though the difference in price is not based on differences in costs.
Several forms:

a.

Customer segment pricing: in this pricing, different customers pay different prices for
the same product or services. For example, Museums may charge a lower admission
for students and senior citizens.

b.

Product form pricing: different versions of the product are priced differently but not
according to differences in their costs. For ex. 1 liter bottle of mineral water may cost Rs
13 at local supermarket. A 5 liter bottle of the same mineral water brand sells for a
suggested retail price of Rs 55, and its half liter easy to carry bottle is available at about
Rs 10. The water is all from the same source, but the price varies disproportionately
with the quantity.

c.

Location Pricing: a company charges different price for different locations, even the
cost of offering each location is the same. For example, theatres vary their seat prices
because of audience preferences for certain locations and state universities charge
higher tuition for out of sale students.

d.

Time pricing: Firm varies its price by the season, the month, the day, and even the
hour. For example, Resorts give weekend and seasonal discounts.

3. Psychological Pricing:
Price says something about the product. For example, many consumers use price to
judge quality. A bottle of perfume that costs Rs 4000 may contain only Rs 400 worth of
scent, but some people are willing to pay Rs 4000 because this price indicate
something special.
In psychological pricing, sellers consider the psychology of prices and not simply the
economics. For example, consumer usually perceive higher-priced products as having
higher quality. When they can judge the quality of a product by examining it or by calling
on past experience with it, they use price less to judge quality. But when they cannot
judge quality because they lack the information or skill, price becomes an important
quality signal.

4. Promotional Pricing:
Companies temporarily price their products below list price and sometimes even below
cost to create buying excitement and urgency. A seller may simply offer discounts from
normal prices to increase sales and reduce inventories.
a.

Special event pricing: sellers use this pricing in certain seasons to dtaw more
customers. Example, EsselWorld offers a number of attractions and special events to
attract more visitors on 31 December every year.

b. Cash rebates: manufacturer sometimes offer cash rebates to consumers who buy the
product from dealers within specified time, the manufacturer sends the rebate directly to
the customer. For example, Future group, organize shopping festivals that offer
assured gifts to shoppers who shop at their retail outlets during given period.
5. Geographical Pricing:
A company decide how to price its products for customers located in different parts of
the country or world. It depend upon the organization whether they charge uniform price
at every location or different price at different location. Organization can set different
price in different zones.
6. Dynamic Pricing :
Traditionally prices were set by negotiation between buyers and sellers. Fixed price
policies setting one price for all buyers is relatively modern idea that arose with the
development of large scale retailing at the end of the nineteenth century in the United
States. Today, most prices are set this way. However, some companies are now
reversing the fixed pricing trend. They are using dynamic pricing adjusting prices
continually to meet the characteristics and needs of individual customers and situations.
Internet has affected pricing.In many cases, there is regular changes in the prices that
web sellers set for their goods. Such as eBay, consumers negotiate the final prices they

pay. Still other companies customize their offers based on the characteristics and
behavior of specific customers.

7. International Pricing:
Companies that market their products internationally must decide what prices to charge
in the different countries in which they operate. The price that a company should charge
in a specific country depends on many factors, including
1. economic conditions,
2. competitive situations,
3. laws and regulations and
4. development of the wholesaling and retailing system.
Consumer preferences and perceptions also vary from country to country.
Or the company may have different marketing objectives in various world markets,
which require changes in pricing strategy.
Ex: Oral-B toothbrush selling for $ 2.49 in US may cost $10 in china.
Distribution Channel

Goods are produced by a manufacturer for the user or the ultimate customer. The
customer is the ultimate target for a marketer. The customer purchases goods only
when it is available in the market. The availability of

the product depends on the

efficacy of distribution channel. Therefore distribution channel plays a significant role in

the marketing activities.
According to William J. Stanton, a distribution channel for a product is the route
taken by the goods as they move from the producer to the ultimate customer.

Producers

Intermediari
es

Consumer

Distribution Channel is a set of independent organizations that help make a product or

service available for use or consumption by the consumer or business user. Distribution
channels are also called marketing channels because they are not only concerned with
the physical distribution goods but also with their promotion, selling and marketing.
Objectives of Distribution Channels:
1.
2.
3.
4.
5.

Availability of product in the target market.

Smooth movement of the product from the producer to the customer.
Cost-effective and economic distribution
Information communication from the producer to the consumer.
Supplies several products and in suitable assortments, as required by the

consumers. (matching segments of supply with segments of demand)

6. Breaks the bulk and caters to the small size needs of the consumers
7. Take care of the various flows involved in distribution: (forward, backward, and 2
way process)
a. Physical flow of products (Forward flow)
b. Title/ ownership flow (forward flow)
c. Risk flow
(both way flow)
d. Negotiation flow (both way flow)
e. Payment flow (backward flow)
f. Information flow (both way flow)
g. Promotion flow. (forward flow)

How a distributor effects an economy of effort.

a. Number of contacts
M*C = 3*3 = 9
M= manufacturer

b. number of contacts
M+C = 3+3= 6
D= Distributor

C= customer

FUNCTIONS OF MARKETING CHANNELS

1. Information:
Gathering and distributing marketing research and intelligence information about
actors and forces in the marketing environment needed foe planning and aiding
exchange.
2. Promotion:
Developing and spreading persuasive communications about an offer.
3. Contact:
Finding and communicating with prospective buyers.
4. Matching:
Shaping and fitting the offer to the buyers needs, including activities such as
manufacturing, grading, assembling and packaging.
5. Negotiation:
Reaching an agreement on price and other terms of the offer so that ownership
or possession can be transferred.

6. Physical Distribution:
Transporting and storing goods.
7. Financing:
Acquiring and using funds to cover the costs of the channel work.
8. Risk taking:
Assuming the risks of carrying out the channel work.
Factors in Choice of Distribution

A large number of middlemen are available through which a product can be distributed.
Each middlemen involves some cost which enters into the price of the product thet the
ultimate consumer has to bear. If a wrong choice of distribution channel is made, it will
lead to increase in the distribution cost which will lead to either lowering down of profits
or increasing the cost of the product to the customer.

Choice of
Distribution
Channel

Product
Price
Promotion

Profitability/cost
to the customer

Fig: Effect of Choice of Distribution Channel on business and consumer

The choice of appropriate channels of distribution is not a simple job. While taking a
decision in this regard, management should carefully consider the following factors:
A.
B.
C.
D.
A.

Market Considerations
Product Consideration
Company Consideration
Middlemen Consideration

Market Consideration:
The nature of market is the key factor influencing the choice of channels of distribution.
The following features of the market should analyzed to determine the channels.

1. Consumer or industrial market:

If the product is for industrial market or industrial users, i.e channel of distribution will be
a short one. Since industrial users purchase in large quantities, they can purchase
directly from the producers or manufacturers, i.e. there is no need of retailers. The
manufacturer can establish contacts with the industrial users by sending his agents. But
in case of product for the consumer retailer may have to be included in the channel of
distribution.
2. Number of potential customers:
A large potential market is likely to put weigh in favour of the use of middlemen. If the
number of customers is relatively small, the manufacturer may be able to sell directly by
using his own sales force as customer handling would not be difficult.
3. Size of the order:
Direct selling is convenient and economical where customers place order in big lots as
in case of industrial goods. But where the product is sold in small quantities, middlemen
are used to distribute such products.
4. Buying habits of customer:
The customer buying habits like
the time he is willing to spend
the preference for personal attention and
the preference for one stop shopping
affect the choice of distribution channels.
For example, cigarette are purchased in one and two and rarely in packets.
5. Geographical concentration of the market :
Where prospective customers are located in a particular geographical region, direct
selling is more feasible than it would be, if the market were spread over the whole
country. Use of wholesaler and retailers may become essential to sell the product to the
widely dispersed consumers or industrial users.
B. Product Consideration
The type and nature of the product influences the number and type of middlemen to be
chosen for distributing the product.
Important factors with regard to the product are as follows:

1. Unit value: if the unit value of the product is lower and the turnover is higher, the
channel of distribution will be longer. For instance product like cosmetics, stationary and
small accessory equipment are distributed through agents, wholesalers and retailers.
Product of high value like jewellery and industrial machines are sold directly to the
users.
2. Product line: a manufacturer manufacturing several products in the same line will sell
directly or through retailers since it is economical. But a manufacturer with only one item
may have to use wholesalers and retailers to sell his product.
3. Standardised product: Standardised products can be distributed through longer
channels because their brand names are very popular. But custom made and
unstandardised products can more easily be sold directly by the producers to the user.
4. Technical nature: Industrial products which are highly technical, say air conditioners
and super computers, are often distributed directly to the industrial users. The
manufacturer of such a product can appoint sales engineers who can explain the
product to the potential customer and provide presale and after sale service to them.
But consumer products of technical nature are
generally sold direct and through retailers. This is because of the fact that consumer
products are sold in large number and it is not feasible for the manufacturer to provide
after sale service to the consumer as in case of television sets and refrigerators.
5

Bulk and Weight: bulky and heavy goods are distributed direct to users in order to

minimize the physical handling of the product because transportation of such a product
involves huge cost.
6. Perishability: the producers of perishable products generally sell directly to the
consumers or sell through the middlemen who have the special storage facilities.
Manufacturer of non-perishable commodities

have a wider choice in the channel

selection.
C. Company consideration
The nature and size of the business firm have an important impact on the selection of
channels of distribution. Following important factors are considered :

1. Volume of production: a big manufacturer may find it more profitable to sell directly to
the customers through his sales force. If he is manufacturing a wide range of products,
he may sell his products by opening retail outlets in different parts of the country. But a
small manufacturer with only a small number of items cannot afford to sell directly
because of his small scale operations.
2. Financial resources: a financially strong company can distribute products by
employing its own sales force and opening retail outlets. But a financially weak
company which cannot invest money in distribution will have to use middlemen to sell its
output.
3. Experience and competence of management: if a company management is having
sufficient experience and know how to market its products, preference should be given
to distribute products directly. A company lacking this ability and experience will often
rely heavily on middlemen to do the marketing job.
4. Services provided to the cannels: a manufacturer can find good retailers only if the
marketing department undertakes sufficient advertising. Some manufacturer of technical
products undertake to provide after sale service . such manufacturer can also reputed
retailers for selling its products.
5. Desire for control of channels: a manufacturer who wants to control the distribution of
his product will select a short channel of distribution. He may do so even though the
distribution cost is hirer if he feels that the marketing department can give aggressive
promotion to the product.
D. Middlemen Consideration
1. Availability of desired middlemen: a manufacturer will rely on the middlemen if they
operate according to his desire. The marketer may not entrust product to a middlemen
who is carrying competitive products. In such a case, it may prefer to open branches to
sell products directly.
2. Financial ability: a large manufacturer will generally select those middlemen who are
financially strong, can provide credit facilities to the customers, and pay their bills to the
manufacturer regularly and promptly.
3. Sales potential : a manufacturer will general select a channel offering the greatest
potential sales volume over the long-run though it is very difficult to access which
channel will generate the largest sales volume.

4. Cost: the manufacturer also consider the cost of selling through alternative channels. it
does not mean that a middlemen charging high cost would be excluded from
consideration. A manufacturer may select6 even a high cost charging middlemen who
provides man services to the customers which are not provided by other middlemen.
This would provide added value to the customer.
5. Competition and legal constraints: many times the manufacturer are compelled to
use the same channels of distribution which are been used by the competitor.
Government regulations also affect the choice of middlemen.
For instance, a pharmaceutical company can market its product through licensed
chemists only.

LEVELS OF CHANNELS

Companies can design their distribution channels to make products and services
available to customers in different ways. Each layer of marketing intermediaries that
performs some work in bringing the product and its ownership closer to the final buyer is
a channel level. Because the producer and the final consumer both perform some
work, they are part of every channel.
The number of intermediary levels indicate the length of a channel.
There are two type of Marketing Channel Systems:
1. Vertical Marketing System (VMS)
2. Horizontal Marketing system (HMS)
Vertical Marketing system
It refers to a distribution channel structure in which the producer, wholesalers, and
retailers act as unified system. One channel member owns the others, has contracted
with them or has so much power that they all co operate. The primary channel
participants are retailers, wholesalers and the manufacturer. The vertical marketing
channel system can be represented as:

R
Producers
Retailer
Its simply a
channel in which
members at
different levels
(hence, vertical)
work together in a
unified way
(hence system) to
accomplish the
work of the
channel

Wholesaler

consum
er

Horizontal Marketing System

It refers to a channel arrangement in which two or more companies at one level join
together to follow a new marketing opportunity. By working together companies can
combine their capital, production capabilities or marketing resources to accomplish
more than any one company could. In working along with others, a company might join
hands with competitors or non-competitors.
For example: McDonalds places express versions of its restaurants in wal-marts
stores. McDonalds benefits from Wal-Marts heavy store traffic and wal-mart keeps
hungry shoppers from needing to go elsewhere to eat.
For example, coco cola and nestle formed a joint venture to market ready to drink coffee
and tea worldwide. Coke provided worldwide experience in marketing and distribution of
beverages and Nestle contributed two established brand names Neascafe and
Nestea.
Distribution channels are usually of two kinds:
1. Direct Marketing Channel (or zero level)
2. Indirect marketing Channel
Direct Marketing Channel:

Producer
0 level
Consumers
This type of channel has no intermediaries. The company sells goods direct to
consumers. For example; Eureka Forbes and Amway sell their products door to door,
through home and office sales parties and on the web;
Dell sells direct via the telephone and the internet.
Indirect Marketing Channel:
These channels contains one or more intermediaries. The business marketer can use
its own sales force to sell directly to business customers. Or it can sell to various types
of intermediaries, who in turn sell to these customers. Consumers with even more levels
can sometime be found, but less often.
From the producers point of view, a great levels of numbers means less control and
great channel complexity, moreover, all of the institutions in the channels are connected
by several types of flow. These include the physical flow of product, the flow of
ownership, the payment flow, the information flow, and the promotion flow. These flows
can make even channels with only one or few levels very complex.
Indirect marketing channel may further classified in the following categories:
1. One Level Channel
In this type channel there is only one intermediary between producer and consumer.
This intermediary may be retailer or a distributor.
The number of intermediary levels indicate the length of a channel.

Producer
Retailer
Consumer

1 level

If the intermediary is a distributor, this type of channel is used for specialty products like
washing machines, refrigerators or industrial products.

Producer
Distributor

1 level

Consumer

2. Two-Level Channel
This type of channel has two intermediaries, namely, wholesaler/distributor and retailer.
Producer
Wholesaler/Distributor
2 Levels
Retailer
Consumer
3. Three- Level Channel
This type of channel has three intermediaries, namely distributor, wholesaler and
retailer. This pattern is also used for convenience products.
Producer
Distributor
Wholesaler
3 Levels
Retailer
Consumer
4. Four-Level Channel

This type of channel has four intermediaries , namely, Agent, Distributor, Wholesaler
and Retailer. This is somehow similar to the previous two. This type of channel is used
for consumer durable products also.
Producer
Agents
Distributor
Wholesaler
Retailer
Consumer

4 Levels

CONSUMER MARKETING CHANNEL

Producer

Producer

Producer

Wholesaler

Consumer

Retailer

Retailer

Consumer

Consumer

BUSINESS MARKETING CHANNEL

Producer

Producer

Producer
Manufacturers
Representatives or
Sales branch

Business
Business Distributor
Distributor
Business
Customer

Business customer Business customer

CHANNEL DESIGN DECISION

In designing marketing channels, manufacturer struggle between what is ideal and what
is practical. A new firm with limited capital usually starts by selling in a limited market
area.

In smaller markets, the firm might sell directly to retailers, in large markets, it might sells
though distributor. In one part of the country, it might grant exclusive franchises, in
another, it might sell through all available outlets.
Marketing channel design calls for analyzing consumer needs, setting channel
objectives, identifying major channel alternatives, and evaluating them.
ANALYZING CONSUMER NEEDS
Designing the marketing channel starts with finding out what target consumers want
from the channel.

Do consumers want to buy from nearby locations or are they willing to travel to

more distant centralized locations?

Would they rather but in person, by phone, or online?
Do they value breadth of assortments or do they prefer specialization?
Do consumers want many adds-on services (delivery, repairs, installation), or will
they obtain these elsewhere?

Providing higher levels of service results in higher costs for the channel and higher
prices for consumers. The company must balance consumer needs not only against the
feasibility and costs of meeting these needs but also against customer price preference.
SETTING CHANNEL OBJECTIVES
Companies should state their marketing channel objectives in terms of targeted levels
of customer service. Usually a company can identify several segments wanting different
levels of service the company should decide which segments to serve and the best
channels to use in each case. In each segment, the company wants to minimize the
total channel cost of meeting customer service requirements.
The company channel objectives are influenced by

Nature of the company

Its products
Its marketing intermediaries
Its competitors
And the environment.

For example, the companys size and financial situation determine which marketing
functions it can handle itself and which it must give to intermediaries. Companies selling
perishable products may require more direct marketing to avoid delays and too much
handling.
IDENTIFYING MAJOR ALTERNATIVES
When the company has defined its channel objectives, it should next identify its major
channel alternatives in terms of types of intermediaries, the number of intermediaries,
and the responsibilities of each channel member.

Types of intermediaries
A firm should identify the types of channel members available to carry out is channel
work. Most companies face many channel member choices. For example, initially Dell
sold directly to final consumers and buyers only through phones and internet marketing
channel. It also sold directly to large corporate, institutional, and government buyers
using its direct sales force. However to reach more consumers and to match
competitors such as HP, Dell now sells indirectly through retailers such as E-Zone, Big
Bazaar, and Walmart. It also sells indirectly through value added resellers,
independent distributor and dealers who develop computer systems and applications
tailored to the special needs of small and medium-sized business customers.
Number of Marketing Intermediaries:
Companies must also determine the number of channel members to use at each level.
Three strategies are available :
1. Intensive distribution
2. Exclusive distribution
3. Selective distribution
Producers of convenience products and common raw materials typically seek intensive
distribution. a strategy in which they stock their products in as many outlets as possible.

These products must be available where and when consumers want them for ex:
toothpaste, paan masala, cigrattees, candy and other similar items.
Ex: HUL, coco-cola, Nestle
Exclusive distribution: in which the producer gives only a limited numbers dealers the
exclusive right to distribute its products in their territories. ED id the distribution of luxury
automobiles and prestige womens clothing.
For example: Rolex watches are typically sold by only a handful of authorized dealers
in any given market are.
Between intensive and exclusive distribution lies selective distribution: the use of more
than one, but fewer than all, of the intermediaries who are willing to carry a companys
products. Most television, furniture and home appliance brands are distributed in this
manner. For example, whirlpool and general electric sell their major appliances through
dealer networks and selected large retailers
Responsibilities of Channel Members
The producers and intermediaries need to agree on the terms and responsibilities of
each channel member. They should agree on price policies, conditions of the sale,
territorial rights, and specific services to be performed by each party. The producer
should establish a list price and a fair set of discounts for intermediaries.
For example, Mc Donalds provides franchisees with promotional support, a
record keeping system, and general management assistance. In turn franchisees must
meet company standards for physical facilities and food quality, cooperate with new
promotion programs, provide requested information, and buy specified food products.

EVALUATING MAJOR ALTERNATIVES

Each alternative should be evaluated against economic, control and adaptive criteria.
Economic criteria: a company campares like sales, costs, and profitability of different
channel alternatives. What will be the invested required by each channel alternative,
and what return will result?

Control issue: Using intermediaries usually means giving them some control over
marketing of the product, and some intermediaries take more control than others. The
company must prefers to keep as much control as possible.
Adaptive criteria: channels involves long term commitments, yet the company wants to
keep the channel flexible so that it can adapt to environmental changes. Thus, a
channel involving long term commitments should be greatly superior on economic and
control grounds.

DESIGNING INTERNATIONAL DISTRIBUTION CHANNELS

International marketers face many additional complexities in designing their channels.
Each country has its own unique distribution system that has evolved over time and
changes very slowly. These channel systems can vary widely from country to country.
Thus, global marketers must usually adapt their channel strategies to the existing
structures within each country.
Sometimes custom and government regulation can greatly restrict how a company6
distribute products In global markets. For example, it wasnt an inefficient distribution
structure that caused problems for Avon in China its was restrictive government
regulations. Fearing the growth of multilevel marketing schemes, the Chinese
government banned door to door selling altogether in 1998, focusing Avon to abandon
its traditional direct marketing approach and sell through retail shops. The Chinese
government recently gave a warn and other direct sellers permission to sell door to door
again, but the permission is tangled in a web of restrict.
Channel Management Decisions
Once the company has reviewed its channel alternatives and decided on the best
channel design, it must implement and manage the chosen channel.
Marketing channel management deals with selecting, managing and motivating the
individual channel member and evaluating their performance over time.

Selecting Channel members

Producers vary in their ability to attract qualified marketing intermediaries. Some
producers have no trouble signing up channel members. For example, when Toyota first
introduced its Lexus line in the United States, it had no trouble attracting new dealers.
But when Timex when tried sell its inexpensive watches through regular jewelry stores,
most jewelry stores refused to carry them. Because of rapid growth of mass
merchandising, its was a wiser decision from timex to get its watches into massmerchandise outlets.
Company wants to evaluate each channel members years in business, other lines
carried, growth, and profit record, cooperativeness and reputation.
If the intermediaries are sales agents, the company will want to evaluate the number ,
size and quality of salesforce if the intermediary is a retail store that wants exclusive or
selective distribution the company will want to evaluate the storess customers ,
locations and future growth potential.
Managing and Motivating Channel members
Once selected, channel members must continuously managed and motivated to do their
best. The company must not sell only through the intermediaries but to or with them.
Most companies sees their intermediaries as first lone customers and partners. They
practice strong partner relationship management PRM for long term partnership with
channel members. This creates a value delivery system that meets the needs of both
company and its marketing partners.
In managing its channels , a company must convince distributors that they can succeed
better by working together. For example; Procter and Gamble, works closely with Big
Bazaar and Wal mart to create superior value for final consumers. The two jointly plan
merchandising goals and strategies, inventory levels and advertising and promotion
programs.

Just as they use CRM (Customer relationship management ) software systems to help
manage relationships with important customers, companies can now use PRM SCM
Supplier chain management software to recruit, train, organize, manage, motivate, and
evaluating relationships with channels partners.

Evaluating Channel Members

The producers must regularly check channel member performance against standards
such as sales quota, average inventory levels, customer delivery time, treatment of
damaged and lost goods corporation in company promotion and training programs, and
services to the customer. The company should recognize and reward intermediaries
who are performing well and adding good values for consumers. Those who are
performing poorly should be assisted.
Marketing Logistics and Supply Chain Management
In todays global marketplace, companies must decide on the best way to store, handle,
and move their products and services so that they are available to customers in the right
assortments, at the right assortments, at the right time, and in the right place. Logistics
effectiveness has a major impact on both customer satisfaction and company costs.
Nature and importance of Marketing Logistics
Marketing logistics also called physical distribution involves planning,implementing,
and controlling the physical floe of goods, services, and related information from points
of origin to points of consumptions to meet customer requirements at a profit. In short, it
involves getting the right product to the right customer in the right place at the right time.
Marketing Logistics involves noy only outbound distribution (moving products from the
factory to resellers and ultimately to customers) but also inbound distribution (moving
products from suppliers to the factory) and reverse distribution (moving broken,
unwanted or excess products returned by consumers or resellers.).
That is, it involves entire Supply Chain Management managing upstream and
downstream value added flow of materials, final goods and related information among
suppliers, the company, resellers and final consumers.
Companies today are placing greater emphasis on logistics for several reasons.

1. Companies can gain a powerful competitive advantage by using improved

logistics to give customers better service or lower prices.
2. Improved logistics can yield tremendous cost savings to both the company and
its customers.
3. The explosion in product variety has created a need for improved logistics
management.
Goals of the Logistics System
Some companies state their logistics objective as providing maximum customer sevice
at the least cost. Unfortunately, no logistics system can both maximize customer service
at the least costs.
The goal of marketing logistics should be to provide a targeted level of customer
service at the least cost. A company must first research the importance of various
distribution services to customers and then set desired levels for each segment. Th
objective is to maximize profits, not sales.

Major Logistics Functions

1. Warehosing:
A company must decide on how many and what types of warehouses it needs and
where they will be located. The company might use either storage warehouses or
distribution centers.
Distribution centers are designed to move goods rather than just store them. They are
large and highly automated warehouses designed to receive goods from various plants
and suppliers, take orders, fill them effectively and deliver goods to customers as
quickly as possible.
For example, Wal Mart operate a network of 112 huge US distribution centers and
another 57 around the globe.
Warehousing has seen dramatic changes in technology in recent years. Outdated
materials-handling methods are steadily being replaced by newer, computers and
scanners read orders and direct lift trucks, electric hoists, or robots to gather goods,
move them to loading docks, and issue invoices.
2. Inventory Management:

Managers must maintain the delicate balance between carrying too little inventory and
carrying too much. With too little stock, the firm risks not having products when
customers want to buy. To remedy this, the firm may need costly emergency shipments
or production. Carrying too mush inventory results in higher than necessary inventory
carrying costs and stock obsolescence.
Many companies have greatly reduced their inventories and related costs through just in
time (JIT)logistics system. With such system, producers and retailers carry small
inventories of parts or merchandise, often only enough for a few days of operations.
New stock arrives exactly when needed, rather than being stored in inventory until being
used. JIT system require accurate forecasting along with fast, frequent and flexible
delivery so that new supplies will be available when needed.
3. Transportation:
The choice of transportation carries affects the pricing of products, delivery performance
and conditions of goods when they arrive all of which will affect customer
satisfaction.in shopping goods to its warehouses, dealers and customers , the company
can choose among five main transportation modes:
a. Truck: trucks have increased their share of transportation steadily and now account for
nearly 35 % of total cargo ton miles (more than 60 % of actual tonnage).
Trucks are highly flexible in their routimg and time schedules, an they can usually offer
faster service then railroads. They are efficient for short hauls of high value
merchandise.
b. Railroads: railroads account for 31% of total cargo ton miles moved. They are one of
the most cost effective modes for shopping large amount of bulk products coal, sand,
minerals and farm and forest products over long distances.
c. Water carriers: which account for about 11 % of cargo ton miles, transport large
amounts of goods by ships and barges on US coastal and in land waterways. The cost
of water transport is very low for shipping bulky, low value, non perishable products
such as sand, coal, grain, oil, metallic ores, water transportation is the lowest mode and
may be affected by weather.
d. Air carries: transport less than 5% of a nations goods, they are an important
transportation mode. although rates are much higher than rail or truck rates, but
airfreight is ideal when speed is needed or distant markets have to reached.
e. Internet: inter carries digital products from producer to customer via satellite, cable or
phone wire. Software firms, the, media, music companies, and education all make use

of internet to transport digital products. The internet holds the potential for lower product
distribution costs.
Logistics Information Management
Companies manage their supply chain through information. From a logistics
perspective, information flows such as customer transactions, billing shipment and
inventory levels, and even customer data are closely linked to channel performance.
The company wants to design a simple, accessible, fast, and accurate process for
capturing, processing and sharing channel information.
Information can be shared and managed in many ways but most sharing takes place
through traditional or internet based electronic data interchange (EDI),
the
computerized exchange of data between organizations. Wal mart for example,
maintains EDI links with almost all of its 91000 suppliers.
Integrated Supply Chain Management
This concept recognizes that improved logistics requires teamwork in the form of close
working relationships across functional areas inside the company and across various
organizations in the supply chain. Companies can achieve logistics harmony among
functions by creating cross functional logistics teams, integrative supply manager
positions, and senior level logistics executives with cross functional authority. Channel
partnerships can take the form of cross company teams, shared projects and
information sharing systems. Today, some companies are outsourcing their logistics
functions to third party logistics (3PL) providers to save costs, increase efficiency, and
gain faster and more effective access to global markets.

Promotion
Promotion is an important part of the marketing mix of a business enterprise.
Promotion includes all those activities which are aimed at creating or stimulating
demand.
Promotion is a marketing activity which is aimed at informing, persuading, and inducing
the customer to buy goods or services.
Promotion is a communication from sellers to buyers in the market in as much as it tries
to instil into consumers minds images (through advertising, personal selling, sales
promotion, publicity, public relation) that make them buy the product.

The marketing manager cannot design his promotion strategy unless it is decided what
products are to be sold, what is their price and what distribution channels are to be used
for selling. Once these decisions have been made, he is ready to determine his
advertising, sales promotion, personal selling, and publicity programmes for reaching
the target market.

Corporate
objectives

Marketing
objectives

Marketing
strategy:
products,
pricing,
distribution

Promotion:
advertising,
sales
promotion,
personal
selling

C
U
S
T
O
M
E
R
S

Sales

Promotion programmes aimed at present and potential customers result in sales. Sales
volume provides feedback for marketing objectives and marketing strategies includeing
promotion strategy and indicate feedback for marketing objectives and marketing
strategies including promotion strategy and indicate the need for adjustments in them
for the achievement of sales targets.

Objectiives of Promotion:

1. To provide information: the main purpose of promotional activities is to inform

the prospective customer about the availability, characteristics, and main use and
alternative uses of particular product.
Exampl: Pepsi: Yeh dil mange more
Maggi sauce: its different
The ultimate objective is to inform the prospective customers and differentiate
offer.
2. To stimulate demand: promotional activities create awareness and build
consumer interest in new products and new technology.

Example: Surf : Sasti chhez aur achi cheez mein farq hota hai
Onida : Neighbours envy, owners pride
The initial objective is to receive sales calls, to purchase now, encourage
switching to your brand, build brand preference, change perception, attitude,
belief about product/brand/company.
The ultimate objective is to stimulate demand.
3. To differentiate the product: promotional helps in differentiating a particular
product of the firm from competing products of other firms. A business firm can
supply data revealing hoe its product compares with other products
4. Act as a Reminder: initial objective is to remind about the need and availability
of product, where to buy, keeping top of mind slot, showing presence during off
seasons.
Example: Lux: Filmstars soap
Colgate: ring of confidence
Ultimate objective is to stabilize demand and stay in competition.
5. To highlight the utility of product: promotion helps in letting the people know
the utility of the new product. It also tells them how the concerned product will be
helpful in satisfying their specific demands.
6. To counter competition and stabilize sales: in the modern age of competition
it is amn important purpose of promotional activities to fight competition by
reassuring the customers about the quality and price of the product. This is also
intended to stabilize sales volume in the long run.
The initial objective is to provide better product, unique product, better availibilty,
multiple uses. And the ultimate objective is to provide product utility and
superioirity and product differentiation.
7. To build image: promotional activities such as Public relations, advertising,
sales promotion may be used to build favourable public image of the firm.
The initial objective is to build favourable image regarding technology, service,
quality.
The ultimate objective is to stabilize sales volume.

Promotional Objectives

1 To provide information: the main purpose of promotional activities is to inform

the prospective customer about the availability, characteristics, and main use and
alternative uses of particular product.
Exampl: Pepsi: Yeh dil mange more
Maggi sauce: its different
The ultimate objective is to inform the prospective customers and differentiate
offer.
2 To stimulate demand: promotional activities create awareness and build
consumer interest in new products and new technology.
Example: Surf : Sasti chhez aur achi cheez mein farq hota hai
Onida : Neighbours envy, owners pride
The initial objective is to receive sales calls, to purchase now, encourage
switching to your brand, build brand preference, change perception, attitude,
belief about product/brand/company.
The ultimate objective is to stimulate demand.
3 To differentiate the product: promotional helps in differentiating a particular
product of the firm from competing products of other firms. A business firm can
supply data revealing hoe its product compares with other products
4 Act as a Reminder: initial objective is to remind about the need and availability
of product, where to buy, keeping top of mind slot, showing presence during off
seasons.
Example: Lux: Filmstars soap
Colgate: ring of confidence
Ultimate objective is to stabilize demand and stay in competition.
5 To highlight the utility of product: promotion helps in letting the people know
the utility of the new product. It also tells them how the concerned product will be
helpful in satisfying their specific demands.
6 To counter competition and stabilize sales: in the modern age of competition
it is amn important purpose of promotional activities to fight competition by
reassuring the customers about the quality and price of the product. This is also
intended to stabilize sales volume in the long run.
The initial objective is to provide better product, unique product, better availibilty,
multiple uses. And the ultimate objective is to provide product utility and
superioirity and product differentiation.

7 To build image: promotional activities such as Public relations, advertising,

sales promotion may be used to build favourable public image of the firm.
The initial objective is to build favourable image regarding technology, service,
quality.
The ultimate objective is to stabilize sales volume.

ADVERTISING
Advertising is an important tool of promotion. Advertising is a non personal
presentation of an idea or a product (whereas personal selling or salesmanship help in
promotion).
Advertising has acquired great importance in the modern India characterized by tough
competition in the market and fast changes in technology, and fashion and taste of
customers. Advertising is the dissemination of information converting an idea, product or
service to induce action in accordance with the intent of the advertiser.
According to William J. Stanton, Advertising consists of all the activities involved in
presenting to an audience a non-personal, sponsor-identified, paid for message about a
product or organization.
Advertising is any paid form of non-personal presentation and promotion of ideas,
goods or services of an identified sponsor.
Features of Advertising:
1. It is a paid from of communication: advertisements appear in newspapers,
magazines, television or cinema screens because the advertiser has purchased
some space or time to communicate information to the prospective customers.
2. It is a non personal presentation of message: there is no face to face direct
contact with the customers. It is a non personal form of presenting products and
promoting ideas and is complementary to personal selling.

3. The purpose of advertising is to promote idea about the products and

services of a business: it is directed towards increasing the sale of the products
and services of a business unit.
4. Advertisement is issued by an identified sponsor: Non disclosure of name of
the sponsor may lead to distortion and manipulation. Advertisement should
disclose or identify the sources of opinions and ideas it presents.

OBJECTIVES OF ADVERTISING
1. To introduce a new product by creating interest for it, among prospective
customers.
2. To support personal selling programmes eg: Eureka forbes.
3. To reach people inaccessible to salesman.
4. To enter a new market or attract a new group of customers
5. To fight competition in the market and at increase the sales. Eg coke and pepsi.
6. To enhance the goodwill of the enterprise by promising better quality products
and services.
7. To improve dealer relations.
8. To warn public against imitation of an enterprises products.

FUNCTIONS OF ADVERTISING
1. Promotion of Sales
2. Introduction of new product
3. Creation of good public image
4. Mass production
5. Research
6. Education of People
7. Support to Press

IS ADVERTISING A SOCIAL WASTE ????

Advertising is often criticized as a wasteful activity and an unnecessary evil. Its critics
offer the following arguments :
1. Multiplies the needs: advertising multiplies the needs of the people by inducing them
to buy even those things which are not required by them. Since an advertisement is
continuously repeated, it creates a desire in the mind of the public to buy the advertised
product.
2. Makes the product more costly: the amount of money spent by an advertiser on his
products advertisement is added to the distribution cost of the product. Thus, the
customers have to pay more for the product advertised.
3. Increase in demand at the cost of another manufacturer:

advertising does not

always increase the demand of the product. When the demand is in elastic, advertising
shifts demand from one producer to another. That means a large amount of money
spent on advertising by an manufacturers goes waste.
4. Creates brand monopoly: advertising may lead to monopoly of a brand. It is argued
that a big manufacturers who can afford large amount of money on advertising can
create brand monopoly and eliminate the small producers.
5. Every advertisement is not creative: a large number of advertisements either escape
the attention of the people or are ignored b them. this leads to waste of money spent on
advertisement.
6. Undermines moral value: sometime advertisements make the people start bothering
for appearance and design of the product rather than physical utility. Some advertisers
also use indecent language and photographs to advertise their products which is highly
objectionable from the societys point of view.

7. Corrupt the minds of youngster: it is felt that advertisement can corrupt the minds of
youngsters. Yung minds run the risk of being carried away by the advertisements
promoting, smoking, wine etc.
Despite its drawbacks, advertising is a necessary marketing activity in the present
business environment. It is not a social waste. It enables a manufacturer to introduce
his products in the market and sell them. Advertising helps in educating the people
regarding new uses of various products. It also strengthens the freedom of choice of the
people. It sustains the press and gives employment to people. Advertising increases the
standard of living of the people by informing them about the availability of new products.
MEDIA OF ADVERTISEMENT
A manufacturer or a trade can make use of the following advertising media to spread his
message to the people:
A. PRESS ADVERTISING
Press advertising i.e advertising through newspaper, magazines, journals etc. is
commonly used by modern businessman. Advertising is an important source of finance
for the press or print media. Because of advertising is an important source of finance
for the press media.
1. Newspaper Advertising: newspaper reading is a common habit among most of the
educated people Therefore, newspaper can be used as a medium of advertisement with
great advantage.
While selecting a newspaper for advertising purpose, an advertiser has to
take into consideration:
the strength of circulation
the class of readers it serve
the geographical over which it is popular and
the cost of space

Merits:
1. large circulation and a single advertisement in newspaper can reach a
large number of people.
2. An advertiser can repeat his advertisement either daily or weekly
because newspapers published daily.
3. Newspaper provide flexibility in advertising in the sense that
advertisement campaign can be initiated and stopped quickly.
Demerits:
1. The life of newspaper is very short.
2. It is successful only when the people to be communicated the message
are literate.
3. It is scarcely used for coloured advertisement. The advertisements are
generally black and white. This makes difficult to identify the project.
2. Magazine Advertising:
Magazine or periodicals are an excellent medium of advertisement when a
high quality of printing in colour is desired. Magazine advertisements can be
directed towards a particular class of people. Thus, marketers can avoid
wasteful expenditure on advertising.
Merits:
1. Magazines are read more carefully and at greater leisure. Advertising
through magazines is more effective.
2. The life of magazine advertisements is longer. Because they can
preserved for a long period of time and are read time and again.
3. Since advertisement copy is presented in a coloured form, it creates a
better image of the product advertised.

Demerits:
1. Very costly
2. Circulation of magazine is generally smaller as compared to the
newspaper.
3. Magazine advertisements are to be prepared and sent for publication well
in advance. It is not possible to make the last minute change in the
advertisement copy.
B. OUTDOOR ADVERTISING
Its purpose is to gain the attention of the people at busy roads and markets. It
includes the use of poster displays, Bill board, electric or electronic display, and
vehicular display.
1. Poster display: Posters are fixed on walls of buildings, bridged and other public places.
It is also quite common to write slogans and other message about the products in bold
letters on the walls to attract the attention of the people even from a long distance.
2. Bill Board Displays: Painted or bill board displays involve the advertisements directly
painted on the boards meant for this purpose. They are quite big in size and are fixed at
outstanding locations like busy markets and crossings. They are also erected on tops of
ridges and important buildings.
3. Electrical Displays: it involves the use of electric electronic lights or neon tube to
attract the attention of people, particularly during night. Generally a short message is
illuminated in tubes of different colours so that it is conspicuous and attractive. Electrical
displays are fixed at heavy traffic consumer centers.
4. Vehicular Displays: it has become a fashion these days to use modes of public
transport for advertising. The space outside and inside the buses railway carriages and
other vans may be hired by the businessmen to spread their messages. Vehicle give
mobility to the message.

Merits of OUTDOOR ADV.

1. It is highly flexible and low cost medium.
2. It is very useful for advertising consumer products because posters etc, can be
displayed at various crowded centres.
3. Outdoor advertisements attracts quick attention and requires very less time and effort
on the art of the readers.
Demerits of OUTDOOR ADV.
1. It cant carry long messages as posters, hoarding etc are read by the people at a
glance.
2. It has a low retention value because people donnt devote special time to read
message.
3. It distracts the attention of the passers by and may even cause accidents on the busy
roads.
C. FILM ADVERTISING:
Films are an important medium of advertisement. Business concerns usually get a short
motion picture prepared and distribute it to different cinema houses for displaying it
before the commencement of the regular shows or during the periods of intermission.
In it advertiser explain the features, uses and superiority of the product. But film
advertisement can be adopted only by the well established firms. Since it involves high
cost.
Merits of Film Adv:
1. Very effective since it combines spoken words and visual presentation of the
picture.
2. It helps in selective advertisement. A trader can advertise his products in the
from where he wants to attract the customers.

areas

Demerits of Film Adv:

1. Usually ignored by people when they are busy in talking.
2. Its effectiveness is limited as only a few people are present in the hall before the start of
the features film and during the interval.

D. RADIO ADVERTISING
Radio adv. Are gaining greater popularity these days. Advertisements are broadcast
from the transmitting stations of the commercial service All India and FM Radio and
picked up by the receiving sets owned by the public. Radio advertisements are normally
broadcast along with popular programmes of music
Merits Of Radio Advertising:
1. Carry an effective appeal and cover numerous listeners of different tastes.
2. Reach the illiterate people who cannot read the newspapers and magazines
3. It provide selectivity (market segmentation) to some extent because advs. Can be
included in different programmes meant for different types of people.
4. Very much suitable for the promotion of mass scale consumer goods.
Demerits Of Radio Advertising:
1. Detailed message cannot be announced over radio. People may not remember the
message.
2. It is non-visual so impact of illustrating the product is not possible.
3. Sometime the message is not understood properly by the listeners properly.
E. TELEVISION ADVERTISING:

It is the fast growing medium of advertisement because of huge expansion of electronic

media and cable network. It makes its appeal through both the eye and the ear.
Products can be demonstrated as well as explained as in film advertisements.
Advertising may take form of short commercials and sponsored programmes.
Merits of Television Adv:
1. Very effective since it combines spoken words and visual presentation of the picture.
2. It helps in selective advertisement. A trader can advertise his products in the areas from
where he wants to attract the customers.
Demerits of Television Adv:
1. Usually ignored by people when they are busy in talking.
2. Costly medium
3. Once it is presented its back reference is not possible.
F. DIRECT MAIL ADVERTISING
It is the most selective of all the advertising media. It is used to send the message
directly to the customer. For this purpose, the advertiser has to maintain a mail list
which can be expanded or contracted by adding or removing names from the list.
Adv that are sent by direct mail may be in the form of circular letters, calendars,
booklets and catalogues.
Circular letter: are sent to the prospective customers to inform them about the merits of
the product and to create their interest in the product.
Booklets and catalogues: contain information about the products advertised. Information
about the term of sale and prices of different varieties of the product is given to the
prospective customer through catalogues.
Merits of Direct Mail Advertising:
1. It has a personal appeal since it is addressed to a particular person.

2. It maintains secrecy in advertising. Competitors donot get the information about the
advertised material.
3. Flexibility in advertising. the message and mailing can be revised whenever the need
arises.
4. Most selective medium of advertisement.
5. It provide detailed and illustrated information about the product to the prospects.
Demerits of Direct Mail Advertising :
1. The coverage of direct mail advertisement is limited.
2. It is not possible to get the names and addresses of all the prospects when the
advertisement material should be sent by mail.
3. Its effectiveness is doubtful as it does not create a mass appeal.

G. WINDOW DISPLAY:
Window display is an on sight method of advertising. goods can be exhibited in
artistically laid out windows at the shop fronts or at important busy centers like railway
stations and bus stops. The retailers also organize attractive display with the retailers
since it helps in informing the customers about the types of goods available with them.
the main objective of window display is to draw the attention of the public and arouse
their interest in the product displayed.
Window display creates the demand for the product. Window display acts as silent
salesman. Articles should be arranged in a systematic way and if possible price tags
should also be attached with the articles. It is better if window displays are changed
regularly to make the customers look at the displays every time they visit the shop.

H. SPECIALITY ADVERTISING:
Many business firms offer specialty articles to the present and prospective customers.
These articles may be diaries, pen holders, desk trays, key chains, purses, paper

weights, cigarette cases and calendar. the name and address of the advertiser is printed
in or inscribed on the specialty items. They also bear the brand name of the firm. Since
these articles are of daily use, they have greater capacity to remind their users about
the brand name of the firm offering such articles.
CHOICE OF ADVERTISING MEDIA
In order to choose the appropriate media or advertising, the following factors should
be taken into consideration:
1. Nature of Product:
Nature of product to be advertised has an important bearing on the medium of
advertisement. Products should be classified into two broad categories:
a. Consumer goods: can be advertised in newspaper, magazines, radio and
television and through outdoor displays.
b. Industrial goods: can be advertised profitably in a specialized trade,
technical and professional journals.
2. Nature of Market:
Nature and extent of market can be determined by various factors like
geographical region, size of population and purchasing power of population. The
market may be either local or national.
Film advertising and outdoor advertising are more suitable for Local
products.
Newspapers are the most suitable for advertising products which can be sold
throughout the country.
3. Objectives of Advertising:
The objective of advertising programme are very important very important to
determine the choice of advertising media. The objectives may be introduction of

new product, to increase demand of an existing product, or to avoid competition

by the rivals. If advertising is not to be carried on a mass scale to have big impact
in the short and long run a combination of various advertising media may be
chosen. Sometimes advertisements are inserted in the newspapers and
magazines to complement the readers in order to enhance the goodwill of the
advertiser.
4. Circulation of Media:
If the media have greater circulation, the message of the advertiser will reach a
larger number of people. It may be mentioned that newspapers have the widest
circulation, but other media have limited and selective circulation.
5. Financial Consideration:
The cost of advertising media is important consideration and it should be
considered in relation to
a. The amount of funds available and,
b. The circulation of media.
In the first instance, the amount of funds available may dictate the choice of a
medium or a combination of media of advertisements and secondly, the
advertiser should try to develop some relationship between the cost of the
medium and its circulation. The cost benefit analysis will enable the advertiser
to take right decision in regard to selection of the advertising media.
6. Type of Audience:
If the message is conveyed to illiterate or less literate people, radio, television,
cinema advertisement will serve the purpose in a better way. Newspaper,
magazines, displays and direct mail may be used to convey the message to the
educated people. Since different languages are popular in different regions,
advertisements in different language may be given to popularize the product.

7. Life of advertisement:
Outdoor display and magazines and direct mail have sufficiently longer life but
the life of newspaper, radio, and television advertisements is very short unless
they are repeated regularly. Therefore, the advertiser should also take into
consideration the duration for which he wants to create the impressions in the
minds of the prospective customers.
8. Media used by Competitors:
The choice of advertising media also depends upon the media used by the
competitors. If a product is being advertised in a newspaper, the producer of its
substitutes will find it better to advertise them in the same newspaper. This
practice has become more common these days in order to fight competition in
the market.

PERSONAL SELLING OR SALESMANSHIP

Personal selling is an important method of selling. It is the process of assisting and
persuading a prospective buyer to buy a product in a face to face situation. it involves
direct and personal contact between the seller or his representative with the prospective
buyer.
According to Pederson and Wright, Salesmanship is the process whereby the seller
ascertains and activates the needs or wants of the buyer and satisfies the needs or
wants to mutual continuous advantage of both the buyer and the sellers.
Personal selling involves face to face contact between the seller and the prospective
customer with an intention of selling some products. It is the art of representing an offer
that the prospect appreciates the need for it and that a mutually satisfactory sales
follows.
Features of Personal selling

1. Salesmanship involves persuation of customer

2. Salesmanship involves winning buyers confidence

3. Salesmanshipinvolves providing information

4. Salesmanship aims at mutual benefit.

PERSONAL SELLING PROCESS

It involves following steps:
Pre-Sale
Preparation

Prospecting
Identifying
and
Qualifying

Follow Up

Closing the
sale

Approachi
ng

Handling
of
Objections

Sales
Presentation

Demonstrati
on

1. PRE-SALE PREPARATION:
The first step in personal selling is the preparation of sales persons. The sales
persons must be properly selected, trained and motivated for the job. They must
have well knowledge regarding product, the market, and techniques of selling.
They should also have knowledge about the motivation and
behavior of the prospects that they are going to meet for the purpose of selling
their products. They should also be well informed about the nature of competition
and nature of competitors products.
2. PROSPECTING, IDENTIFYING AND QUALIFYING:
The planning work which is essential in eliminating non-buyers is called
prospecting. The most important part of the entire selling process lies in locating
the most promosing prospects.

IDENTIFICATION OF PROSPECTS: every sales person should try to collect

information about the potential customers from all available sources.

Some of the sources and technique employed for finding prospects are as
follows:

a. Current customers: the current satisfied customers act as one of the best
source od prospective customers. Besides they are also easier to attract
while selling additional goods and services.
b. Referrals of Satisfied Customers: sales person ask the existing satisfied
customers for names of relatives, friends or business associates who might
need similar product or service. When the sales person contacts these
prospects for sale they provide further information or referrals regarding more
potential customers.
c. Centre of Influence: this technique is based on referrals by a person, who
has information about other people of an influence over them. Such a person
can help a sales person to identify good prospects. Some of the categories of
people to whom such people belong are housewives, local politicians ,
bankers etc.
d. Spotters/Sales trainees: sometime a company employees sales trainees
specifically for helping the sales persons identify the prospects. The sales
trainees are referred to as spotters. This greatly helps in reducing the time
and effort required for qualifying a prospect by the sales person alone.
e. Cold canvassing: this technique basically involves calling on a potential
customer without any prior appointment. Here, the sales person just goes in
and introduces himself to the prospect and inquires about the need of the
product or service by the prospects . but this technique involve a lot of time
and effort as a large number of calls so not materialize.
f. Directories: Directories are an abundant source of finding potential
customers. Besides regular telephone directories, membership directories of
trade associations and professional societies etc are good source for
prospects
g. Mailing List: certain organizations compile lists of persons and organizations
for direct mail advertisers, pamphlets etc. such list can also be employed to
identified sales prospects.
h. Trade Shows, Exhibitions etc: more and more companies have started
participating in trade shows, exhibitions etc since not only can they advertise
and promote or sell their product but can also gain valuable market
information about customers and prospective buyers.
QUALIFYING THE PROSPECTS:

For a successful sales presentation the following things regarding the prospect
should be kept in mind:
1. He has clear and well defined need for the product and services
2. He has adequate financial resources to pay for it
3. He is in a position to buy large enough a quantity to result in a profitable sale
4. He has the authority to make a decision.
These factors which one has to consider in order to qualify a prospect can be
summarised in the acronym MAN i.e

oney: the ability to pay for a product or service

uthority: the authority to make a commitment on his sown

eed : the need for the product or services exists

3. APPROACHING:
Before calling on the prospects the sales person should try to get information
about their nature and behavior. He should try to get information about their
nature and behavior. He should try to ascertain what products or brands they are
using.
The sales person must introduce himself and his product to the prospective
customers before he does anything else. He should not try to be over clever and
play with nerves of the prospective customers. He should be very polite while
approaching the prospects so that he does not have much difficulty at the time of
presentation.
4. SALES PRESENTATION:
Sales presentation is done mainly to show that

the sales person has a good

understanding of the prospects needs and the presentation is all about explaining to the
consumer how the products meet their requirements. When the sales person arrives to

deliver the pitch should be well dressed and should have an understanding and helpful
attribute towards the prospective consumer. He should also posses excellent
communication skills.
Categories of Presentation:
1. Fully Automated: this is based on a highly structured approach and is usual done with
the help of films or slide projections. It is mostly used to sell intangibles services like life
insurance to rural or semi urban prospects.
2. Semi Automated:

in this approach the sales person takes help of brochures or

literature and keeps on adding his comments where necessary. It is useful in selling
pharmaceuticals products.
3. Memorised: in this type of presentation, the company message is presented y the sales
person with a few changes.
4. Organised: this is the most popular and effective sales presentation. Here, the sales
person is given a complete flexibility of words has to follow the company prepared
outline or check list, the prospect is taken through the four stages : attention, interest,
Desire, Action (AIDA) to a purchase decision.
5. Unstructured : this is the problem solving approach of presentation. Here the
prospects and sales person get together to explore the problems and find solutions
such presentations are not too well focused and much time is wasted. Therefore, need
a experienced sales persons who can quickly clear the doubts and complaints of the
customers.
Approach:

Introductory Approach: here the sales person introduces himself and his company to
the prospect.

Product Approach: here the sales persons hands over the product to the prospects for
examination after briefly explaining it to them.

Consumer Benefit approach: In this approach the sales person starts the sale by
informing the prospect for examination after briefly explaining it to him.

Referral Approach: the sales person can give the name of a present satisfied customer
to the prospect as a reference during the meeting.

5. Demonstration :
it is the core of the selling process. There are two stages of demonstration, first invoves
a description of the features and benefits of the product and an explanation of how its
works. The second stage is the actual demonstration itself. This process is mainly
directed at converting the prospect into a customer.
An effective product demonstration should be:
1. Well prepared and referred
2. Should be design to give a hands on experience with the product.
6. Handling of Objections
After demonstrating and explaining the product, its featurs, price and benefits, the
salesmen should entertain queries from the prospect. A good salesman should realize
that it is the golden opportunity to convince and persuade the prospect. The salesman
should not loose patience if the customer puts many queries and takes time in reaching
any decision.
7. Closing the sale
After having dealt with the customers objections comes the stage when the sales
person asks for the order. Unless the sale takes place the entire process is a wasted
effort. Hence, it is important for the sale to materialize.
A few of the effective closing techniques are :
1. Action Close: here the sales person takes an action that will complete the sale like
negotiating for supplying financial assistance to the prospects

2. Gift Close: the sales person provides an added incentive on immediately buying the
product.
3. Benefit Close: here the sales person restates the benefits of the product in order to
elicit a positive response from the prospect.
4. Direct Close: it is a simple technique and is most appropriate if the buyer is showing
strong positive buying motives , the sales person gives a summary of the major points
of the presentation and directly asks for the order,
5. Alternative close: this technique provides the customer with alternatives with regard to
the product like a black or red colored one or payment on cash or credit basis.
6. Objection close: if an objection is the major hurdle in the way of making sales, the
sales person should try to gain a commitment from the buyer that if the objection is
removed he will buy the product.
Thus the close is the most important part of the selling process since all the efforts and
presentation comes down to this moment.
8. FOLLOW UP
after a successful close the sales person has to ensure that the product is delivered at
the desired location and at an appropriate time. Sometime the customer may desire
some minor modifications in the product or service to suit their particular need, the
customer should also be trained how to operate the product properly and safely.
Even after the formalities have been completed the delivery of effective after sale
services are equally important. Sending letters notes, call, greetings etc are good ways
of keeping in touch with customers. Some companies also send customers company
newsletters etc. to keep them well informed. The sales person should keep in touch with
customers and keep them informed about the latest products and services.
PUBLIC RELATION

PR is another important marketing tool. Not only must the company relate it
constructively to its customers, suppliers and dealers, but it must also be related to a
large set of interested publics.
PR department perform the following five activities i.e not all of which directly support
marketing objectives:
1. Press Relation:
The aim of press relations is to place newsworthy information into the news
media to attract attention to a person, product , service or organization.
2. Product Publicity:
Product pub. Involves various efforts to publicize a specific product.
3. Corporate communication:
This activity covers internal and external communication and promotes
understanding of the organization.
4. Lobbying:
It involves dealing with legislators and government officials to promote or defeat
legislation and regulation.
5. Counseling:
Counseling involves advising management about public issues and company
positions and image.

Marketing Public Relation as Publicity

The old name of marketing public relations as publicity, which was seen as the task of
securing editorial as opposed to paid space in print and broadcast media to promote a
product place or person. But MPR goes beyond simple publicity by contributing to the
following tasks:
1. Assist in the launch of a new product.

2. Assist in repositioning a mature product

3. Build up interest in a product category
4. Influence specific target groups
5. Defend products that have encountered public problems.
6. Build the corporate image in a way that projects favourably on it products.

Objectives of PR and Publicity

1. Build awareness: PR can place stories in the media to bring attention to a

product service person organization to idea.
2. Build credibility: PR can add credibility by communicating the message in an
editorial context.
3. Stimulate the sales force and dealers: PR can help boost sale force and

dealer

enthusiasm. Stories about a new product before it is launched ill help the sales

force

sell it to retailers and Consumers.

4. Hold down promotion costs: PR costs less than direct mail and media
The smaller the companys promotion budget , the stronger is the

advertising.

case for using PR

to gain share of mind.

Major Tools of PR and Publicity

1 Publications:
Companies rely extensively on communication materials to reach and influence target
markets. these include annual reports, brochures, articles, audio visuals materials and
company newsletter and magazines. Company newsletters and magazines can help
build up the company image and convey important news to target markets. Audio
visuals material such as films, slides, and video and audio cassettes are coming into

increasing use as promotion tools. The cost of audio visual material is usually greater
than the cost of printed material but so is the impact.
2 Events:
Companies can draw attention to a new products or there company activities by
arranging special events. These include news conference, seminars, outings, exhibits,
contests and competitions, anniversaries, and sport and culture sponsorships that will
reach the target publics.
3 News:
One of the major tasks of PR professionals is to find or create favorable news about the
company, its products, and its people. New generation require skills in developing a
story concept, researching it and writing a press release. But the PR persons skill must
go beyond news preparing stories. Getting a media to accept press releases and press
conferences call s for marketing and interpersonal skills. A good PR media director
understands the press need far stories that are interesting and timely. The media
director needs to build favorable relations with editors. The more the press cultivated,
the more likely it is to give more and better coverage of the company
4 Speeches:
They are another tool for creating product and company publicity. Increasingly, company
executives must face questions from media or give speeches at trade association or
sales meeting. These prearranges can build the companys image
5 Public Service activities:
Companies can improve public goodwill by contributing money and time to good
causes. a large company may typically ask executives to support community affairs
where their offices are situated. In other instances, companys may donate a certain
amount of money to specify cause out of consumer purchases.
6

Identity media:

Normally a companys materials acquire separate looks which creates confusion and
misses an opportunity to create and reinforce a corporate identity. In an over
communicated society , companys have to compete for attention. They should strive to
create a visual identity that the public immediately recognizes. The visual identity is
carried by the companys logos, stationeries, brochures, signs, business forms,
business cards, buildings, uniforms , and dress codes.

SALES PROMOTION
It is an important method of promotion which supplements personal selling and
advertising efforts.
Sales promotion includes all short term incentives, generally organized on a
temporary and for local basis, and designed to stimulate immediate purchase and
to move sales forward more rapidly than would otherwise occur, and to effect higher
demand.
According to American Marketing Association, Sales Promotion includes those
marketing activities , other than personal selling, advertising, and publicity that stimulate
consumer purchasing

and dealer effectiveness such as displays, shows and

expositions, demonstration and various non recurrent selling efforts not in the ordinary
routine.
Several factors have contributed to the rapid growth of sales promotion , particularly in
consumer market are:
1. Internal Factors
2. External Factors
INTERNAL FACTORS:
1. Promotion is now more accepted by top management as an effective sales
tool.
2. Product managers are under greater pressure to increase their current sales.

EXTERNAL FACTORS:
1. The number of brands have increased
2. Competitors use promotions frequently
3. Many brands are seen as similar
4. Consumers are more price oriented
5. Advertising efficiency has declined because of rising costs, media clutter and
legal restraints.

OBJECTIVES OF SALES PROMOTION

1. Introduce new products in the market through educating people.
2. Attract new customers by offering attractive gifts etc
3. Increase sales during the slack season
4. Create goodwill among the presents as well as prospective customers.
5. Create good public image of the product and the firm.

BENEFITS:
1. Spreads information
2. Stimulates Demand
3. Customer Satisfaction
4. Create Product Identity
5. Performance Appraisal or Marketing Control.

CRITICISM OF SALES PROMOTION:

1. No real incentives
2. Shoddy products are passed off

3. Temporary Nature of schemes.

TYPES OF SALES PROMOTION PROGRAMMES

Broadly classified into:
1. Consumer Sales Promotion Programmes
2. Dealers Sales Promotion Programmes

Consumer Sales Promotion Programe:

Sales promotion directed towards the consumers may be conducted either to increase
the consumerss knowledge of the product regarding its use or it may be conducted to
attract new customers.
Dealers Sales Promotion Programe:
The products are often sold through retailers and wholesalers. In such cases,
promotional activities are consuctes to induce the dealers to keep a large stock with
them. These activitis might include extra cash or trade discount on the basis of orders
placed. They are also known as Trade Promotion
Techniques of Sales Promotion:
A Consumer Sales Promotion Schemes
1. Distribution of Samples:
It is an expensive but a powerful tool of sales promotion. Many marketer offer free
samples of their products to the selected people in order to popularize their products.
The sample may be delivered door to door , offered in retail stores or fairs. This device
is suitable for introducing new products such as soaps, drugs, cosmetics, perfumes, tea
etc. since distribution of samples is costly, this device is confined to those products
which are likely to create repeated sales.

2. Discount or Price Off:

In order to increase sale, many producers introduce price off offer to the customers. The
product is offered is offered at aa price lower than the normal price.
For example, fans, coolers and refrigerators may be offered 20% to 30% off price.
3. Coupons Discount:
Coupon is a certificate that entitleds its holder to a specified saving on the purchse of
a specified product. Coupons may be issued by the manufacturers either directly by
mail or through the dealers the coupons are also issued through newspapers and
magazines.
The holder of the coupons can go to the retailers and get the product or service at the
cheaper price.
4. Premium or Gift offer:
It is an offer of a certain amount of product at no cost to the cutomers who buy a
specified quantity of a product or a special pack thereof.
3 types of premium offer:
a. With pack premium: marketer pack some gift inside the product package. The gift
create lure to buy the product.
Example: Lux launched a scheme in which a gold pendant was put inside it.
b. Free in mail premiums:in this, the customers do not get immediate benefit at the time
of making a purchase. For example, Customer required a wrapper or some proof of
purchase or multiple purchases to claim the benefit. For instance a company making
chocolate the kids to send specially marked wrappers to claim gifts.
c. Container Premium: it is very popular with the marketers of products like milk additive,
jams, now even with detergents and soaps.marketer devise special special containers
for packsging which could be used by the customer for some use.

Example: Bournvita
4 Quantity Deals:

Seller devise special package which gives extra quantity of the

product to buyer at the same price. These deals come in the form of buy three get one
free offer for beauty soaps like Nirma, Lux, No. 1 and 50 gram extra free offer of Fena
or 555 detergent bar.
5 Quiz Contests: there may be customers contest, salesmen contest, and dealer
contsest. Contest for consumers is held on the subject of writing a slogan on the
product. Such slogan centres around the questions as to linkings of a customer for the
product, or formulation of new advertising idea for the product.
Ex: the contest may also be for entering the Dekh Bhai Rave and filling up simple
questions, as done by Bajaj Auto for its new scooter Rave. Such contest held through
radio, TV, newspapers , magazines etc.
6 Fairs and Exhibitions: businessman can demonstrate their products explaining their
special features and usefulness. they can also distribute free literature to introduce their
firm and products to the public. This devise of sales promotion is very popular in India
and the developing nations
7 Displays of Products: it is an on sight method of publicity. Goods can be displayed
artistically laid out windows at the shopfronts or at important busy centres like railways
stations and bus stops. Window display is very popular with the retailers since it helps in
informing the customer the types of good available with them.
8 Free Offer: recently, several companies have been using free offers to promote their
products. Example, Tooth Brush free with Toothpaste, VCR free with the purchse of a
53 cms TV.
9 Exchange offer: exchange of old goods with new is the purpose of this offer. Example,
Two wheeler companies like Bajaj Auto, LML Ltd, and Kinectic Honda have made use of
this promotional techniques by offering to purchase old scooters and sell new scooters.
Example: Titan Watches

B Trade Promotion Schemes:

Sales promotion activities are generally directed at the customers but if such activities
are directed at trade partners or channel members like distributors, wholesalers or
retailers then it is called as trade promotion. The basic purpose is to build push in the
channels so that they sell the manufacturers products with great enthusiasm.
Trade promotion is carried out by the manufacturers by providing various incentives to
trade partners or intermediaries to make them work for the success of their brands.
Various Techniques are:
1. Dealer premium: certain premium are offered to the retailer certain units of the
products are given free to the retailers for keeping large stocks of goods or increasing
the sales. In addition to dealer premiums, the other sales promotion activities may also
be undertaken.
2. Advertising Material: it is usual practice with many producers of goods to supply
advertising material to their dealers eg sign boards,banners , shelf sign etc For
example: Pepsi , Coke, Rose Brand Atta etc
3. Store Demonstration: under it, sales personnel of the manufacturer carry out special
demonstration of their products for the benefits of dealers and consumer. The objective
is to educate dealers and consumers about qualities of the product, how it is to be used
and so on.
4. Special Displays: During trade fairs, or exhibitions, special displays and shows of the
companys
5. Special Discounts: During the promotion campaign, a manufacturer may offer special
discounts on purchase made by the retailers Such a campaign may be called price off
scheme or off list. Special discounts increase the profit margin of the dealer who gets
encouragement to push up the sales of the product.

6. Push Money: the dealers may be given a specific amount of money to push the sales
of the manufacturers products. Cash reward is given for pushing the product among the
buyers when there is tough competition in the market.
7. Allowances: an allowances is a compensation in cash or kind given to dealer for
proving certain services to the manufacturer such as
giving a special shelf space to manufacturers brand
arranging special displays of the manufacturer brand.
Retailers may be given marketing research allowance for collecting the desired
information from the customers for the benefit of the manufacturer.
8. Contests: many manufacturer hold contests of the retailers for the purpose of trade
promotion. Sales targets are fixed for the retailers. If they exceed the target, they are
given certificates of appreciations and prizes such as two free air tickets to Hongkong
and back or world tour at the cost of the manufacturer
10 Novelties: on the eve of festivals like Diwali or New Year many

manufacturers give

novelty items to their trade partners. These might include wall clocks, wrists
watches, diaries, pen sets, small bags, etc. such item carry the brand to the
prompted and the name of the manufacturer.

PULL vs. PUSH STRATEGY

The purpose of any promotional activity is to inform, to persuade, and to suggest to act
as per the communication that is dissected from the manufacturer, retailer, or marketer.
The promotion can be directed in two ways- towards middlemen or towards end-users.
When promotion is directed at middlemen, it is known as push strategy and when it is
directed at end users it is known as pull strategy.
PUSH STRATEGY: The product is pushed into the middlemen by carrying trade
promotion (quantity discounts, rebates, gifts, vacations etc. ) through field staff. The

promotional activity has the effect of encouraging intermediaries to push more

merchandise. Thus, it primarily aims at benefiting the manufacturer and retailer through
increased sales. However, this strategy has slow impact on the demand creation
particularly for consumables and consumer goods.
Thus, Sylvania and Laxman can sell its industrial fans, lights through this strategy. But
selling fans for homes by following the push strategy might be undesirable because of
intense competition by Cromption Greaves, Usha, Bajaj etc.

Produce
ractivities

Producer marketing activities

Retailers

Reseller

marketing
Consume

and
Wholesaler

(personal
selling,
trade,
promotion,
personal selling, advertising, sales
promotion, other)

rs

other)

PUSH STRATEGY

PULL STRATEGY:
The strategy aims at the end users through advertising and sales promotions (samples,
coupons, economy packs etc.). these also include sponsorships like Pepsi the cricket
independence Cup 1997.
The promotional strategy persuades the customer to ask intermediaries to provide them
with a particular product. If the pull strategy is effective, consumers will then demand the
product from channel members who will in turn demand it from producers. Thus, a pull
strategy, consumer demand pulls the product through the channels. The strategy
is so fast that the moment advertisement comes up, consumer is expected to move for
acquiring any consumable product. Thus, the strategy requires distribution channels to
keep the product before advertisement reaches the prospect.
For example, when Volform (a sauce from voltas ) was advertised on television, the
product was not available at retail shelves. However, when the manufacturer reinforced
the distribution, there was no advertisement to inform the consumer that the product
was available. The product failed because of poor marketing strategy.

Demand

Producer

Retailers
and
wholesalers

Demand Consumers

Producer marketing activities (consumer advertising, sales promotion,

other)

PULL STRATEGY
Some industrial goods companies use only push strategies, some direct marketing
companies use only pull. However, most large companies use some combination of
both. For example, Amul uses mass media advertising and consumer promotions to pull
its products and a large sales force and trade promotions to push its products through
the channels. In recent years, consumer goods companies have been decreasing the
pull portions of their mixes in favor of more push. This has caused concern that they
may be driving short run sales at the expense of long term brand equity.
Companies consider many factors when designing their promotion mix strategies.
Including type of product/market and the product life cycle stage. For example, the
importance of different promotion tools varies between consumer and business
markets. Business to consumer companies usually pull more putting more of their
funds into personal selling, followed by sales promotion, advertising, and public
relations. In general, personal selling is used more heavily with expensive and risky
goods and in markets with fewer and larger sellers.

Basis

Push strategy

Target Group

Distributors,
Wholesalers End users
and Retailers

Purpose

Product selling

Primary
suitability

Pull strategy

Demand creation

product Industrial goods, consumer Consumer

durables,
durables
consumer goods

Product availability
consumer
Promotional Efforts

to Already available

Need reinforcement
product failure

else

Advertisement

Specific magazines
trade journals

like TV,
newspaper,
target magazines

radio,

Sales promotion

Dealer
contests,
trade Discount
coupons,
rebates,
discounts, economy packs, contests,
vacations, gifts
samples

Personal selling

Meeting dealers for sales Meeting consumers

call
sales calls

Speed of promotion for Slow

demand creation

for

Fast

RETAILING MARKETING DECISION

Retailers are always searching for new marketing strategies to attract and hold
customers.
Retailers face major marketing decision about segmentation and targeting, store
differentiation and positioning, and the retail marketing mix.

Retail Strategy
Retail
segmentation
and targeting

Store
differentiation
and positioning

RETAIL STRATEGY

Retail Marketing
Mix
Product and
service
assortment
Retail prices
Promotion
Distribution
(location)

Create value for targeted retail customers

Segmentation:

Facilitates right choice of target market

Facilitate effective tapping of the chosen market

Makes the marketing effort more efficient and economic

Helps identify less satisfied segments and concentrate on them.

Example, When HCL entered PC market, they segment total market on the basis of
income group then identified and select Below Rs 10000/month income group.
Titan Watches also provide a lot of brands of watches for Rich, Middle, Lower group.
Titan provide Dash for Kids segment
Raga for City women
Sonata for rural segment
Targeting:
Targeting means selecting one or more than one segment from total market to provide
goods and services.
Adidas: target women segment in India for product.
Motorola: Now there is no existence of Motorola in industry but when Motorola entered
they initially concentrated on one segment i.e Business market
But after certain period they picked multiple segments into its target market
1. Mass market: so that Motorola will reach to every common person.
2. Business market
3. Tech savy up market(multimedia enabled offers) like Razr V3, designer set for the up
market and tech savvy customer price Rs 31995 at the starting level.
Positioning:
Successful retailers define their target markets well and position themselves strongly.
Positioning consists of arranging for a market offering to occupy a clear, distinctive
and desirable place relative to competing products in the minds of target
customers.

Objectives of Positioning:
8. To create a distinctive place of a product or service in the minds of potential
customers.
9. To convey attractiveness of the product or the service to the target market.
10. Place an intangible service within a more tangible frame of reference.
11. Help influence both service development and redesign of existing service.
12. Follow consideration of the competitors possible moves and responses so that
appropriate action can be taken as.
13. To give the target markets the reason of buying your services and then design
the whole strategy.
14. To provide guidelines for the development of marketing mix with each element
being consistent with the positioning.
For example, Big Bazaar promises the lowest possible prices to its customers
through its tagline isse sasta aur kahan?
Dominos Pizza, positioned themselves as product will reach within 30 minutes
at customer place.
RETAIL MARKETING MIX
Product assortment and Service decision:
Product assortment: retailers should differentiate the retailer while matching target
shoppers expectations.
I Strategy: is to offer no other competitors carries such as store brands or national
brands on which it hold its exclusively. Example, Rolex watches
II Strategy: in order to differentiate, a retailer can obtain exclusive rights to carry a well
known designers labels alongwith its own private label lines.

Example: shopper stop carry national brand like Peter England, Van Heusen, Arrow and
also carrying private label brands like Stop and Kashish.
Service Mix: it can help to set one retailer apart from another .
Example, some retailers invite customers to ask questions or consult service
representatives in person or via phone or keyboard. Retailers can provide toll free
number or membership cards. For example Retailers like Westside and pantaloons are
providing membership cards
Home Depot offers a diverse mix of services to do-it-yourself
Store atmosphere: it is an important element in reseller product. The retailer wants to
create a unique store experience on that suits the target market and moves customers
to buy.
For example: Apple store design is clean, simple. The store invites shoppers to stay a
while use the equipment and seek up all the exciting new technology.
Todays successful retailer carefully consider every aspect of the consumer store
experience, down to music, lightning and even the smells.
Bright light create excitement
Softer light create mellow mood.
Price decision: a retailer price policy must fit its target market and positioning, product
and service assortment and competition. All retailers would like to charge high markups
and achieving high volume BUT the two seldom go together.
Most retailers seek either high markups on lower volume (most speciality stores )
OR low markups on higher volume (like discount stores).
Promotion Decision: retailers use any or all of the promotion tools, advertisements,
Personal selling, sales promotion, public relation, direct marketing.
Advertisements: Newspaper, magazines, radio, TV, and on the internet.
Personal selling: how to greet their customer, meet customers needs, and handle their
complaints.
Sales Promotion: Demonstrations, displays, contests. Visiting celebrities.

Public relations: press conferences and speeches, store openings, special events,
newsletters, magazines, and most retailers have to set up web sites, offering customer
info. And other features and often selling merchandise directly.