UNIT I

Retailing:
The actual term retailing is thought to be derived from the old French word retailler
which means a piece of or to cut up. This implies the breaking of bulk function of the
retailer that is , the acquiring of large amounts of the products they sell and dividing them up
into smaller amounts to be sold to individual consumers.
Definition of Retail Marketing:

Retail marketing is comprised of the activities related to selling products directly to

consumers through channels such as stores, malls, kiosks, vending machines or other fixed
locations.

Any business that directs its marketing efforts towards satisfying the final

consumer based upon the organizations of selling goods and services as a means of
distribution.
Scope of retailing:

Acting as a liaison between the manufacturer and the ultimate consumer, the
retailers major objective is to provide the right products, at the right price and at
the right price.
Retailers are the final distribution channel who links the manufacturer with the
consumers.
To the manufacturer retailer provides the market for selling his products.
Retailing forms a part of marketing mix.
Characteristics of Retailer:
The followings are some of the essential characteristics of a retailer:
He is regarded as the last link in the chain of distribution.
He purchases goods in large quantities from the wholesaler and sell in small quantity to

the consumer.
He deals in general products or a variety of merchandise.
He develops personal contact with the consumer.
He aims at providing maximum satisfaction to the consumer.
He has a limited sphere in the market.

Explain the Evolution of Retail Marketing:

9

Explain the growing importance of the Retail Industry:

Retailing is not only an integral part of our economic structure but also shapes, and is
shaped by ,our way of life.
In recent times, the buying and selling of products has become a much more formalized
and brand dominated activity.
The retail sector is increasingly being viewed as as important activity in the economy and
its impact on society in general is readily acknowledged.
The power of individual retail organizations is growing, they are now comparable with,
and even bigger than, many manufacturers, which is an indication of the growing
dominance of retailers within the supply chain.
Retailers have become significantly more powerful they are more able to exert their
powers over suppliers and stocks only the brands they wish to sell, depending on their
overall retail strategy and supplier relationships.
IMPORTANCE RETAIL OF MARKETING:

Marketing is a vital tool for every retailer, as it identifies current, unfulfilled needs
and wants, which it defines and quantifies.
Marketing determines which target groups the retailer should serve.
Marketing could be seen as delivering an acceptable standard of living.
Marketing can ensure complete satisfaction and sustained customer loyalty.
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 Marketing depends on the efficient co-ordination of consumer prediction, product

development, packaging design and influencing demand through appropriate
communication medium.
What are the factors influencing the growing importance of the Retail sector?
Large and Increasing contribution to GDP.
Economic importance more visible.
Major employer
Retailers as gatekeepers.
Retailers diversifying their activities
Organizations growing on an International scale
Size of operations allowing for supply chain control.
Blurring of areas of retail to include wider area of business activity.
Difference between Retailers & Wholesalers.
Retailers and wholesalers are different in nature and perform distinct functions. Some
specific differences that characterize a retailer are listed below:
The retailers interface with the customer is predominately service based , often with
social interaction and interpersonal sales techniques masking the sophistication of
computer based ordering, stocking and transaction systems.
Retailers sell small quantities of items on a frequent basis unlike wholesalers who sell in
bulk but on a less frequent basis.
Retailers attempt to provide convenience in terms of location , payment and credit
facilities, range of merchandise related to the target in order to provide choice.
Retailers set up in business to trade with the general public whereas wholesalers may
restrict the general public from purchasing from their warehouses.
Retailers normally charge higher unit prices than would a wholesaler.
A retailer pricing policy tends to be simpler than that of the wholesaler with less use of a
discounting structure.
The retailer bears a different kind of risk to the manufacturers and wholesaler.
Explain the Features of Modern Retail Marketing:
According to the Report of the Definition Committee, America Retailing includes all
activities incidental to selling to the ultimate consumer. In the words of Mc Carthy,
Retailing is selling final consumer products to householders.
Researches disclose that the Indian apparel market has some distinctive features that massmarket retailers must accommodate. It has been estimated that India has approximately
11

30,000 readymade garment manufacturing units and around three million people are working
in the industry. It is evident that after IT-ITES it is the retail sector in India that will bring
forth many jobs. It has been estimated that in 2010 2,000,000 jobs will be given by the
retail sector in India. And the retail sector development is remarkable in India for the past
few years. The retail marketings role can be studied by evaluating the factors which make
impact in garment / apparel business. Garment / apparel business is closely related to I)
Quality as per the international standards II) Availability of the product for the
consumers usage i.e.) through marketing and finally III) Fashion Trend.
Brand Name Quality

As the Brand Name implies the quality of the product, Indian companies had already
started giving more attention to create its own brand name to sell their product through retail
marketing. Indian garment /apparel manufacturing exporters have a lot of scope to market
their products in both international and domestic trades successfully. How this can happen is
a million dollar question. But Reliance Food Print, Spencers Daily, Raymonds are the
Indian companies who have successful record in retail business. Indian companies like A V
Birla groups, made waves in the Indian market with its garment brands. A v Birla group
bought the division of Madura Coats Ltd .The Company first launched Louis Philippe in
1989, Van Heusen a year later, followed by Allen Solly and lastly Peter England. Now these
products are being sold through its own retail outlets across India.

Thus earning a brand name followed by the retail outlets will definitely make the
business succeed. Across India there are some reputed local brands of textile, apparel /
garments exist. Bombay dyeing, S.Kumars, Gwalior Suiting, Genesis, Bombay Rayon, Color
Plus, Denim etc are few examples. Celebrity fashions a Chennai based manufacturer and
exporter in MPEZ has its well known brand name Indian Terrain. The Loot Store the
Mumbai based company has 75 retail outlet stores over 40 cities across India. Nalli Silk
sarees a leading manufacturer and exporter has outlets in various parts of India & offices in
USA and Singapore. Zodiac Clothing Company Ltd , Manufacturers, exporters & retailers of
mens wear; based in Mumbai; employs 3,500 people and has seven manufacturing plants &
50 exclusive Zodiac stores; products: shirts, trousers, ties & accessories.
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Rather dealing with a solitary buyer, Tirupur companies have opportunities to open own
retail outlets or to deal with international retail giants like Wall Mart, Mc Donalds or
national retailers like Shoppers Stop, Big bazaar, Life Style , Pantaloon etc. In order to
make retail marketing successful a garment / apparel producer should have a brand name to
increase their selling rate. Several high-priced international apparel brands were earlier
forced to close shop due to sluggish demand. In India most of the percentage of population
has middle class income. Though a considerable amount of people from this percentage
prefer to buy international brand they purchase these products hardly two times a year. The

most preference would be to Indian well known brands.

Tirupur garments / apparel producers also have an option to tie up with international brands
to enter into foreign market like S Kumars group, which tied up with Italian brand Oviesse
and is in talks with other international brands.
Retail Outlets - Availability
Most of the international companies have their own retail outlets all over the world. For
instance Nike, Adidas, Reebok, Crocodile, Lacoste etc have their own / circuitous retail
outlets in almost all the countries. With the help of their well known brand names they
easily capture the world market and become competitive to the domestic companies.
Brazil, China, and India are the important countries whose large populations and strong
economic growth have made the Multinational retailers invasion. As consumers have
greater disposable income in India, they increasingly spend their money on items beyond
the basic necessities. One of the first categories to feel this change is apparel / garment.
Owing to the fast growth of Indian economy Indian industrialists have awaken lately to
sell their product in global market also.
Renowned for their international quality, Indian garments / apparels have a magnificent
scope in international trade .This is proved as these products are being exported globally
from Tirupur through out the year. Most of the Indian exporters need to depend foreign
buyers in order to sell their product in foreign market since they dont have a reputed
brand name. A foreign buyer is well aware of his local markets requirement that places
orders to the Indian manufacturers based on the consumer behaviors. They purchase
13

apparel / garment from India and use their own brand / label names. This is the high time
to the Tirupur India Apparel industries to test out the possibilities to improve their sales
directly / indirectly in foreign market with the help of retail outlets. By performing retail
marketing especially opening own retail outlets abroad, Tirupur apparel / garment
manufacturing exporters can also dominate the world market seeing as they have
international quality.
Fashion Trend

It is obvious that conducting trade fairs exclusive for garment / apparels both
globally and internally will definitely make a platform to introduce the brand name.
Fashion shows on the other hand plays vital role in brand promotion. Advertisement and
selecting brand ambassadors are also imperative. A well known celebrity can highly drag
the attention of the consumers.

Big retailers like LOBLAWS, COACH, JYSK and WAL MART are Indian
apparel /garment buyers. As a wholesaler / buyer they purchase Indian products
especially ready made garments from Tirupur based companies and sell the same in
foreign market as a retailer. Since the international retailers know the seasonal market
demand very well, they place orders accordingly. Thus retail marketing is not only vital
for international business but also it plays a key role in the domestic trade.
Apart from international promotion, successive retail marketing is very essential because
they are dealing with the customers in a straight line day to day and the retailers can very
well understand the consumer behavior. With over 70% of cotton knitwear exports and
accounting for about $ 2 billion exports and equivalent domestic production, Tirupur is
the future of Indian garments, be it export or local. It is clear that Tirupur holds the future
of India share in global market share .Tirupur is likely to grow by 12% every year which
is good sign for the manufacturers and the buyers as well.

Explain Retailing Marketing Mix:

Retail marketing mix is the term used to describe the various elements and methods required to
formulate and execute retail marketing strategy. Retail managers must determine the optimum
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mix of retailing activities and co-ordinate the elements of the mix. The aim of such coordination
is for each store to have a distinct retail image in consumers mind. The mix may vary greatly
according to the type of market the retailer is in, and the type of product/service

15

Place

Product

Price

Promotion

Product
In general marketing terms, the product decision involves deciding what goods or
services should be offered for sale to a particular group of customers. An important aspect
of this element of the mix is new product development. As technology and tastes change,
products become out of date and inferior to those of the competition, so companies must
update products with features that customers value or completely replace the product.
Market leadership can change as new products are developed that give greater benefits
than old ones. For example, the Sony Walkman was the market leader in portable music
players. Following its launch, the Apple iPod soon outsold the Walkman as it offered the
advantages of being able to download music and hold thousands of songs on a much
smaller device. From the first iPod, Apple has developed a product range to cater for
diverse customer needs.

Price
Price is a key element of the marketing mix because it represents, on a unit basis, what
the company receives for the product or service that is being marketed. It is the only element of
the marketing mix that creates revenue, while all of the other elements represent costs. For
example, expenditure on product design (product), advertising and salespeople (promotion) and
transportation and distribution (place) all cost money.
Place
Place considerations involve decisions concerning the distribution channels to be used
and their management, the locations of outlets, methods of transportation and inventory levels to
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be held. The objective is to ensure that products and services are available in the proper
quantities, at the right time and place.
Distribution channels consist of organisations such as retailers or wholesalers through
which goods pass on their way to customers. Producers need to manage their relationships with
these organisations well because they may provide the only cost-effective access to the
marketplace. They also need to be aware of new methods of distribution that can create a
competitive advantage. For example, Dell revolutionised the distribution of computers by selling
direct to customers rather than using traditional computer outlets.
Promotion
Retailers constantly communicate with their customers using a variety of methods and
approaches. Retail promotions involve the management of elements of the promotional mix,
which include advertising, sales promotions, digital and direct marketing, personal selling,
sponsorship and public relations.

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UNIT II
BUYING :
Buying is an important function. Business concerns and consumers spend more time in
buying goods. Buying includes the determination of ones need, finding out the source of supply,
the making of business connections, the negotiating of prices and other terms and conditions and
the transfer of title from the seller to the purchaser.
Kinds of buyers
1. Manufacturers and businessmen :
Manufacturer purchase goods for production. The manufacturer must be
intelligent buyers. They must collect the market information of the
purchasing goods. They must have the technical people to get the best
equipment and machinery.
2.Middlemen:
There are two types of middlemen. They are wholesalers and retailers. They buy
goods for sale. Wholesalers buy large quantities. They sell the product to the manufacturers or
retailers. The retailers buy small quantities and sell them to the ultimate consumers.

They must estimate the demand.

They must know the sources of supply

They must know the market news.

3.consumers :
The consumers are the persons who buy things for their own satisfaction. Consumers buy
small quantities of goods for their needs. Buying of consumers depends upon their income. The
buying behavior of consumers is influenced by cultural, social, personal and psychological
factors.

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ELEMENTS OF BUYING :
1.planning of purchase :

Preparation of budget.

Fixing the rate nof turnover

Accounting for changes in fashion and prices

A. preparation of budget:
The manufacturer should forecast with reasonable amount of accuracy the probable sale
in a given period of time in the future.it is the management that estimate the probable sale during
a given period. The management decides the required rate of production to meet the estimate
sales.
Budget is prepared for normally one year and forecast on the basic of the past
purchase and salea record. It is a money budget. There is a close relation between purchase
budget and sales budget.
B.fixing the rate of turnover:
profit is the measuring rod of the success or failure of an enterprise. sale determines the
profit. hence, profit depends on sale, profit is also determined by the rate of turnover.
C.Accounting for changes in fashion and price :
Fashions are changing day by day. It is the most uncertain. The standard of living of the
people in all the countries is increasing. Hence people require changes in each and every thing.
That is the reason why fashions and taste changes.
The price-line trend can be classified in to three. They are falling price, stable price and
rising price. Generally producers and middlemen wish rising trend in prices. So that they can
make profit.

2.CONTACTUAL :

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It is a sub-function of buying. It is concerned with the location and determination of

sources of supply. The buyers maintain contact with the suppliers. Hence it is called the
contractual function. When selecting the supplier, the buyer may consider the efficiency
financial resources and reputation of the supplier.
The buyer must gave first preference to the local supplier, if he gives fair and competitive
terms. Suppliers must be honest and fair in their dealing. The best suppliers charges reasonable
prices and offer best services to his customer.
3.Assembling :
Assembling is the most important sub- function of buying. Assembling or concentration
is the collection of goods from different sources of supply and making them available at the time
they are needed and at the place they are wanted.
4.Negotiation :
The buyer has to buy the product after deciding the factors which we have explained.
Buyer invests money on the product which he buys. Hence he must get maximum benefit from
his investment. Before buying a product, he must know the concessions nlike trade discount, cost
of transport, time of delivery etc.,
5.contractual :
When the terms and conditions are finalized between the buyer and the seller, they enter
in to a contract or the buyer gives the order to be executed by the seller.

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ASSEMBLING:
Assembly means the seeking out of the sources of supply, buying
wisely as to quantity, quality and variety and making commodities available when
and where they are wanted.
ADVANTAGES OF ASSEMBLING:
1. Economy in the transportation and handling:
By performing the assembling function, goods are collected in bigger
lots and can be transported from one place to another economically. Besides,
handling charges are also reduced to a minimum.
2. Facilitates grading:
Grading of the goods can also be made economically since bulk
volume of goods are assembled in one place. For purpose of grading, costly
machines and equipments can also be employed. But employment of such
equipments is impossible in case of smaller lots.
3. Economic processing:
Like grading, processing of large quantities leads to an economy in
processing costs.
4. Widening of the market:
Market for assembled goods is enlarged. Retailer and wholesalers
from different places can meet their requirements from the assembling centers.

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5. Reasonable price:
Assembling also helps to get a variety of goods in the market at
reasonable prices.
Needs for Assembling:
1. Goods which are produced by numerous small producers or
manufacturers scattered over a wide area such as agricultural goods.
2. Non-standardised goods and those goods which vary widely in
quality.
3. Goods that is seasonal in regard to their supplies.
Problems in assembling:
1. It requires greater skill, experience and knowledge.
2. The task of assembling is further complicated when the producers are
scattered over a very wide area and the products are seasonal in nature.
3. Assembling requires well developed means of transportation and
communication.
4. The markets should be wellorganised. If not assembling shall become a
difficult task.
5. There are a large number of middlemen who often induce in manipulating
the marketing mechanism.

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Selling:
Selling is most characteristic feature of the modern marketing system it is
important not only for increasing the profit of a businessman but also for making
the goods and services available to the consumers.
Definition;
Selling in its broad sense, aims not just as making sales but also finding
buyers, stimulating demands and the providing of advice and service to buyers.
Elements of selling:
1. Product planning and development:
Product planning is the process of selling. Unless the policies
regarding the product are decided in advance, marketing shall not be effective.
Product planning is concerned with the determination of the precise nature of the
product.
2. Contactual Function:
This function involves the finding out and tracing out or locating the
buyers. This function involves the following steps:

Making a choice between limited or widely spread market.

Making a choice between large buyers and small buyers.
Findings out the potential buyers in market determined.
Making actual contact with the potential buyers, establishing
relationship with them and maintaining the relationship ever.

3.Creation of demand:
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According to clark & clark, demand creation refers to all special efforts to
stimulate a desire for goods with the ultimate objectives of sale at a point.
1.Advertising :
It is an impersonal approach. By advertising we meanall the
activities involved in presenting to a group of persons a non-personal, oral or
visual, openly sponsored message regarding a product.
2. Sales promotion:
Sales promotions are those activities which supplement and coordinate the personal sales and advertisement. Sales promotions are a group of
activities. For example, display, demonstration, samples, exhibitions, show-rooms
etc.
3. Personal selling:
Of the various methods of demand creation, personal selling is the
oldest and popular method of creating and stimulating demand.
4. Customer services:
Customer services include assistance and advice to customer on such
matters as product installation, operation, maintenance and repair. By providing
superior customer service facilities, a seller may be able to obtain the patronage of
a number of buyer in the face of strong competition.

5. Packaging

24

Packaging is also a method which can attract consumers attention at

the time of purchase. The packages can also furnish the consumers with needed
information about the product and can provide entire push on the consumer desire
to buy.
4. Negotiating:
This function involves settling the terms of sale such as price,
concessions such as discount, form of delivery, quality and quantity, time and
method of payment etc.,
5. Sales contract:
The last element in the selling function is called the contractual
function. Once the parties enter in to a normal sale contract, the sale is complete
and the title is naturally transferred from the seller to the buyer.
FUNCTIONS OF RETAIL MARKETING:
In the process of acting as a link between the wholesaler (or the
manufacturer) and the consumer, a retailer performs many functions:
1. Buying and Assembling:
It has been said that a retailer stocks wide variety of products to meet the
requirements of a large number of customers. For this purpose, the retailer has to
assemble products of different manufacturers from different wholesalers through
the process of buying. In buying these products he has to be cautious. He has to
find out the best and cheapest source of supply. Then he has to select only such of
the goods offered which would suit the need of his customers. He must purchase
only in quantities enough to meet the demands of his customers.

25

2. Warehousing and storing:

Products thus assembled have to be stored by the retailer so that they are
held in reserve stocks out of which consumers requirements are met without any
interruption by selling in small quantities.
3. Selling:
The ultimate purpose of retailing business is to sell these products to the
consumers. Though a retailer is sometimes referred to as buying agent of
consumers, producers and manufacturers regard retailer as a means of dispersing
goods to the market and drawing income into their hands so that they can continue
their business of production.
4. Assumption of Risk:
The retailer has to bear the risk of physical deterioration of goods and fall in
value. A retailer has to stock goods in anticipation of demand from his customers.
This stock must always be sufficient to meet any demand from the customers. This
fact involves risk to the extent of the stocks held by any retailer. Firstly, the
products stored are subject to the usual risks of flood and other natural calamities.
Secondly, there are the risks of flood and other natural calamities. Secondly, there
are the risks of spoilage and deterioration due to the very nature of goods. Then
there is the risk of change in fashion. Fickle mindedness of the consumers and
human tendency to like change in life together make loss of value through change
in style and fashion - a very real risk to a retail trader.

5. Grading and Packing:

26

Retailers have to sort out in different lots goods or products left ungraded by
the producer or the wholesaler. Also, they must make arrangements for proper
packing of goods which are sold loose.
6. Financing:
Often retailers have to grant credit to consumers. Credit sale in effect means
facilitating the flow of products through the marketing channel to its ultimate goal.
Thus retailers contribute in financing the marketing process.
7. Supply of Market Information:
Retailers, being in touch with the consumers, are most favourably situated to
study consumers' ehavior, changes in the tastes, fashions and demand etc. Thus
they collect valuable information pertaining to the problems of marketing.
8. Advertising:
Retailers display goods in their stores.

TRANSPORTATION

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Meaninig:
Transportation plays a very important role in the economic development of a nation.
Transportation helps the growth and distribution of wealth. It develops trade and commerce.
Definition:
According to Lionel Robbins,Transport industries which undertake nothing more
than the mere movement of persons and things from one place to another, have constituted one
of the most important activities of men in every stage of advanced civilization.
Classification of Transport
The means of transport can be classified into 3 main divisions and they are called
the medium of movement
1. Land transport
2. Water transport
3. Air transport

Mode of
transport

Land

Water

1. Land Transport

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Air

Is the oldest one & very important to each and every person. Without land
transport nothing can be done. LT can be divided into 4: they are pathways, roadways, railways
and other ways consist of tramways and pipe lines.
Road Transport

It is the oldest system. It occupies a prominent place. The road is in every truth
one of the great fundamental institutions of mankind. A people without roads will be people
without intercourse with the outside world-without the attributes of civilization.
2. Water Transport

Is cheaper when compared to other modes of transport. It is cheap because there is

no need for highways or railways lines. It is the oldest means of transport. It was used for bulky
goods and low grade goods in the olden days. It also carries bulky goods over long distances,
much longer than railways. It is the water transport which leads to the discovery of several
continents.
Merits of water Transport :
1.
2.
3.
4.
5.
6.
7.

cheaper
bulk carriage
safer
feeder
international trade creator
No congestion
Suitable for certain Areas

Demerits :
1.
2.
3.
4.
5.

Low speed
limited areas are served
Not dependable
Political and international problems
longer journey Required

3.Air Trasnport
The airway transports passengers mail and also goods. It is helpful in times of
emergency like flood, earthquakes and war. Air travel has gained speed and it is quite safe.
Hence it is suitable for passenger and mail. The invention of jumbo jets has revolutionized the air
travel all over the world.
Merits of Air Transport:

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1.
2.
3.
4.
5.
6.
7.

speed
regular and comfortable
absence of obstacle
safer
suitable for valuable goods
suitable for perishable goods.
Emergency remedies.

Demerits of Air transport:

1.
2.
3.
4.
5.

costly
not safer
Suitable to only costly goods
not flexible
limited capacity

UNIT III

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STORAGE:
Storage can be defined as one of the marketing functions, involving
preservation of goods between the times of consumption. It is a process of holding
and preservation of goods from their production time to the consumption time.
There must be a gap between the time of production and the demand for it as long
as the production continues.
Storage is the function of safeguarding the excess products for future
consumption in seasons of scarcity. Storage creates time utility. Storage of goods is
essential in the marketing process. It equalizes the price in marketing. Under the
modern era, storage is a major function of marketing.
Situations require storage
1. Seasonal production, but uniform consumption.
2. Uniform production, but seasonal consumption.
3. Protection of goods.
4. To maintain balance between demand and supply.
ADVANTAGES:
1. Almost all the farm products produced seasonally are in demand
throughout the year and as such producers have to store them.
2. Some types of goods are demanded seasonally and their production is
uniform. The goods must be stored in order to effect timely supply to
meet heavy demands.

31

3. Certain types of goods are to be preserved in the store, as the inherent

quality increases. For example rice, tobacco, wine, honey.
4. When goods are manufactured they must be transported. For this they
must be stored near the market to avoid delay in transportation.
5. Storage is always essential for essay transportation arrangement.
6. Production is always in anticipation of demand. So, the produced goods
must be preserved in safety and free from deterioration.
WAREHOUSES
The place , where the goods are stored is known as warehouse.warehouse
implies a house for wares. Wares means products. A warehouse or a godown is a
room or a building for the accumulation of goods,possessing facilities to perform
other market functions.a

warehouse must provide a better view and a clear

differentiation chart regarding the articles stored.

DIFFERENCE BETWEEN STORAGE AND WAREHOUSE
storage
1. It is generally located near the

Warehouse
1. It is always located near the market.

factory.
2. Its aim is for personal use.
3. Additional marketing functions

2. Its aim is for commercial purpose.

3. Allied marketing functions such as

cannot be performed.

grading, standardization, blending,

4. It gives facility for stocking raw

mixing, packing etc are performed.

4. It is meant for final products.

materials and finished products.

5. It is only a holding place.

5. It holds the goods as a distribution

centre.

Classification of warehouses:

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1. Public warehouse:
It is used by the public. The operation system and rates of rent are
regulated by the government. It function on commercial line. It gives facilities of
scientific storage. Private warehouses are rarely constructed, because of heavy
expenditure on construction. The warehouses are equipped with the modern
machineries.
2. Private warehouse:
It is owned by private and large business houses such as manufacturer,
wholesalers, retailers etc. they own and operate for their own use. This type of
warehouse is rarely found because of the high cost on construction. It may be
within the factory building or a separate building or near the market place.
3. Special commodity warehouse :
Goods, produced to be stored may require varying types of storage facility.
This type of warehouse gives storage facilities only for a particular commodity.
That is the warehouse, where fishes, perishable produces are stocked, is not
suitable for wool, cotton etc.,
4. Refrigerated warehouse:
Cold storage is of recent development in the field of warehouses. Perishable
goods such as eggs, fruits, meat, milk, apple etc. Require cold storage facilities
during the peak season for a longer period and they are released to the market,
where there is a demand.
5. General merchandise warehouse:

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This is the most common type. It provides facility to all kinds of goods. No
special facilities are required as all commodities are stored. It is a place of store for
manufactured, semi-manufactured and raw materials until they are required by the
manufacturers, distributors, retailers, consumers etc., this is located in the
distribution centres.
Definition of standardizations:
Standardization is the process of formulating and applying rules for an
orderly approach to a specific activity for the benefit and with the co-operation of
all concerned and in particular for the promotion of optimum over all concerned
and in particular for the promotion of optimum overall economy taking due
account of functional conditions and safety requirements
Types of standards
1. Quantity standard:
Weights and measures are the standards usually used for the
determination of quality. Standardization of weights and measures and
enforcement of them are under the responsibility of central and state government
and local bodies. The standard weight and measures are kilogram, metre, litre.

2. Standards of size and measurement:

This is important as far as the manufactured goods are concerned. The
standards are determined on the basis of the size of the products. For example,
ready-made garments, shoes, thread, nut, bolt, pipe etc. such products are
purchased or sold on the basis of size and measurements.

34

3. Quality standards:
This is a standard which is difficult to be established. This standard depends
on the prescription of consumers and users. However branding, product
differentiations, positive quality etc. Is the basis for standardization.
Standards may be positive or negative. Positive standards refer to the
expressed qualities or specifications in the product. Negative standards refer to the
asence of the expressed qualities in the product.
2. Grading:
Established standards are commonly known as Grade . In the words of
clark & clark, grading means the divisions of products in to classes made up of
units possessing similar characteristics of size and quality
Kinds of grading:
1. Fixed grading:
Fixed grading refers to sorting out of goods on the basis of
standards(size,qualityetc.,.)already set to be followed from year to year.

2. Variable grading:
Variable grading refers to varying standards for goods from year to year.

DIFFERENCE BETWEEN STANDARDIZATION AND GRANDING

Standardization
1.It is fixed before grading

Grading
1.It follows standardization
35

2.It is a process of fixing standards

2. It is a process of separating the goods

3.It is a mental process

4. It is applied in agricultural as well as

on the basis of quality.

3. It is a physical process.
4. It is applied in agricultural products.

manufactured goods.
5. It is meaningless without grading.

5.It is not possible without

6. ISI stands for standardization.

standardization
6.AGMARK stands for grade

3. Inspection:
To know the effectiveness of grading, it is necessary to have a check.
Inspection or check aims to test the goods. In order to determine the
characteristics. For example oranges or apples are sorted according to standards
fixed. In case of wheat, rice, butter etc., a sample which is representative of the
groups, is drawn and examined to determine the standards.
4. Labeling:
Some types of identification of grades is necessary for the buyer to know the
characteristics of the product. It is confirming the work of grading. A label may be
a piece of paper containing printed statement or a metal imprinted; it may be a part
of package or attached to it, indicating the price, contents, name, place, quality,
ownership etc., of a product.

Explain the functions of Retailing:

36

1. Financing : Though it is considered as an ancillary function of

marketing, its importance in the present day economy cannot be under
estimated. It is difficult to carry on smooth marketing without the
availability of adequate and cheap finance.It has been rightly
remarked that money or credit is the lubricant that facilitates the
operation of the marketing machine as modern marketing requires
vast resources.
There are various kinds of finance required: Short-term finance,
Medium-term finance, Long-term finance etc. There are various
sources of marketing finance too. For example a marketing
organization gets credit from institutions, Commercial banks, co
operative credit societies, Govt.agencies etc. to tide over seasonal
difficulties.
2. Risk-taking: Risk is a danger of loses, arising out of unforeseen
circumstances in the future. There are innumerable risks which a
marketing enterprise has to face in the process of marketing goods.
These risks may arise on account of social hazards such as
theft,burglary,bad debts,wares etc. Or it may occur during the course
of transportation. It may also be due to decay, deterioration and
accident, or due to fluctuations in the prices of the commodity due to
changes in their supply and demand. The various risks are termed as
place risk, time risk, physical risk etc.

37

Some of these risks may be totally avoided or reduced by careful

handling. Some others may be easily shifted to insurance companies
and some others must be shouldered.
3. Standardisation and Grading: Standard is a specification. The
standards

are

generally

determined

on

the

basis

of

colour,weight,quality and other special or general features of a

product. Buyers and sellers always prefer to have certain
predetermined standards for the products. This will relieve buyer and
seller from examining the product and thus wasting time. That is why
standardization has now been accepted as an ethical basis of
marketing.
The word grade is very often used as a synonym for standard. But
standard is a broad term and established standards are known to be
grades. Therefore, it is said, the grading begins where standardization
ends. Thus grading is the process of sorting the standardized product.
Grading enables to have a comparison of quality and price. This will
help to have uniform price in all markets.
4. Market Information: Modern marketing requires a lot of information
accurately, adequately and promptly. This information becomes the
basis for many decisions in marketing. It is the only source through
which a seller today could know the tastes and preferences of
customers.

Retail Market Information

38

Detailed retail market knowledge to help you size an opportunity, segment the
market effectively, target the right people and arm yourself with everything you
need for informed decision making.
The basis of Martecs market information is our retail database of over 34,000
executive level retail contacts and over 7,000 retail companies, coupled with the
reports we produce on specific topics, such as multi-channel retailing and our
annual IT in Retail reports on the systems used by the leading 150 UK retailers.
In addition we carry out bespoke studies using a mixture of desk research,
telephone and face to face interviews to size your market and identify the best
opportunities. We also use telephone and desk research to identify potential leads
e.g. systems being used and replacement plans.
Many vendor clients use our research to inform their plans and also as a means of
achieving very positive PR coverage.

Business risk bearing

Some risk in the business can be insured. If the risk can be calculated, it is
called insurable risk, for example the owner can calculate the value of the
stock and insure it against fire damage.

The insurance will help to cover financial losses from certain business risks.

Insurance helps to carry the risk. This is known as pooling risks.

39

Businesses that face possible risk, pay a set amount of money to the
insurance company. This is called an insurance premium.

The insurance premiums are put into a central pool.

Should the business suffer insurable losses, it will receive compensation

from the central pool of funds.

Losses due to the fact that there is no demand for the product that the
business sells, is uninsurable risk.

There is a risk of loss or damage from the time goods are produced until they are
sold. A well-run business will keep a tight rein on how stocks and finances are
managed to minimise possible risks. Insurance is cover against possible loss.
Should an event resulting in loss not occur, the premiums are not paid back. Should
disaster strike, the insurance company will compensate the business if it is covered
for the event. The amount paid out in the insurance claim will be determined by the
provisions of the insurance policy. However, not all risks can be insured. The
following will be covered by insurance: fire, theft, goods in transit, employee
fraud, life insurance for partners in a partnership. The premiums that the company
would be required to pay, are determined by the degree of risk involved.

(UNIT IV)
What do you mean by consumer behavior? Or Define consumer behavior?
Consumer behavior may be defined as that behavior exhibited by people in
planning, purchasing and using economic goods and services. Consumer behavior
is an integral part of human behavior and cannot be separated from it. In fact, it is a
sub set of human behavior.

40

Consumer behavior is the act of consuming or using a good and service. In

its broadest sense, consumer behavior or buyer behavior is the process by which
individual decide whether what, when, where, how and from whom to purchase
goods and services.
Explain the Buying Decision Process?

Problem Recognition
Consumers recognize a problem based on physical cues, stimulus response or a
need. For example, a customer could smell fresh bread and realize she is hungry or
she could have a broken pair of glasses and know she needs a new pair. Visual
clues trigger problem recognition. For example, a beverage in a clear container
shows when it is getting low, or a sticker in a car window reminds customers when
it is time for an oil change.
Information Search
Customers in the information search stage of the buying process look for
solutions to their problems or needs. They remember what types of purchases
solved a similar problem in the past. Customers also discuss their needs with
friends and relatives to see what solutions they may suggest. For more expensive
purchases, customers may read reviews, look through newspapers or research the
product online.
41

Alternative Evaluation
Consumers evaluate their purchase options based on product attributes, such as
technical specifications, through subjective factors, such as brands, and through
personal experience, such as sampling or testing products. Consumer and company
reviews can influence a consumer's product evaluation.
Purchase Decision
A consumer's decision to purchase something includes where to buy, when to
buy and whether to buy. For routine goods such as groceries, consumers may
simply go to their favorite grocery store, but for electronic purchases, they may
browse multiple stores. They will evaluate each merchant based on prior
experience with the store, special offers and whether they can return the product
easily. A store that's visually appealing, has helpful sales associates and offers
specials and discounts influences a buyer.
Post-Purchase Behavior
After making a purchase, a consumer mentally ranks her purchase satisfaction.
She will evaluate if she liked the store, if she enjoys the product and the quality of
the product. This evaluation determines whether the customer will purchase the
product or brand again and whether it would be from the same store. Customers
who are happy with their purchases and feel they received a quality product at a
good price, will become repeat customers and will tell others.
Explain the implications of Retailing in Buyer behaviour?
Retail has developed rapidly over the past few decades , led by a marketing thrust
which has created diversity of supply, focused on important consumer segments
and stimulated high level of demand . Within this development marketing has often
concentrated more on improving the product than understanding the consumer and
the complexity of their decision process.
42

What do you mean by buying motives? Or explain buying motive. What are
the factors influencing buying motives?(Influence of group and
Individual Factors)
Motives refers to thought, urge, strong feeling, emotion, drive etc. They
make a buyer to react in the form of a decision. Motive induces a consumer to
purchase a particular product. The stimulated desire is called a motive.
Factors influencing buying motives:
The buying motives of a consumer are influenced by the following factors.
1.

Culture:

Buying motives are very often controlled by cultural attachments and sentiments.
For e.g. certain section of the society remains as vegetarians as they attach
importance to cultural values.
2.

Socio economic backgrounds:

This is a very powerful factor that supports the purchasing decision. Here income
and class are two factors involved. For e.g. the buying habit of industrial workers
will be totally different from that of the agricultural consumers. Similarly, the
pattern of purchase by a rich man and a poor would be opposite in nature.

3.

Comfort and convenience:

Most people like to be easy going. They simply like to do everything the easy way
and in comfort. This motivates the consumers to buy certain goods like motor,
cars, vacuum cleaners, washing machine, water coolers etc.
4.

Fashion:

43

The change in fashion is another factor, which influences buying motive. It is just
an imitation of others. E.g. A cine actor with a new fashion dress imitate the others
(fans) to use the same dress.
5.

Health and physical well being:

Many persons purchase health foods, vitamin tablets, medicines etc., to maintain
their health and physical well - being.
6.

Safety needs:

Security requirement of a consumer determine buying motives. This category

includes physical security, economic and social security, protection etc. E.g. Bank
accounts, LIC policies, membership in a health scheme etc.
7.

Vanity:

Everybody whether it may be women or men likes to be admired by others. They

like to be important in the society. They spend more money, time and effort on
their personal appearance. Hence, vanity as a powerful motive that can be used by
the marketer to design their product.
8.

Curiosity:

If any product is newly introduced into the market at the first instance, people may;
have curiosity to know about its usage etc. This may also be one of the buying
motives.

What is product classification? Explain it. (Or) classify the product into
consumer & industrial goods with example.
I. Durability and tangibility:
Products are classified into three groups, according to durability and tangibility.

44

a. Non durable goods: These are tangible goods consumed in one or few uses.
They are consumed quickly and purchased frequently. They are made available in
many locations, the margins are less and advertising is heavy.
b. Durable goods: These are tangible goods that normally survive many uses. E.g.
Refrigerator. They require more personal selling and service, command a higher
margin and require more seller guarantees.
c. Services: These are intangible, inseparable, variable and perishable products.
They require more quality control, supplier credibility and adaptability. Example,
haircut.
II. Use:
Consumer goods:
Consumer goods are further classified into the following :
a. Convenience goods: These are the goods that the customer usually purchases
frequently, immediately and with minimum efforts.
Characteristics:
o Customer does not feel like putting extra efforts to go at
different places and compare the prices for these goods.
o The customer is also ready to accept one of the several brands
available.
o These goods have low unit price, are not bulky and not greatly
affected by fad & fashion.
o Marketer must ensure the wide and rapid distribution of such
products.
So direct selling is not possible. They are further divided into
staples consumer purchases this on regular basis. E.g. grocery

45

impulse goods they are purchased without any proper planning. E.g.
chocolates, magazines.
emergency goods these are purchased when a need is urgent. E.g.
umbrella during rainy season.
b. Shopping goods: These are the goods for which consumers want to compare
quality, prices and sometimes style in several stores before making a purchase. E.g.
furniture, clothing etc.
characteristics:
The process of searching and comparing continues as long as the
customer believes that the potential benefits from a better purchase
more than offset the additional time and effort spent in shopping.
Shopping goods manufacturers require fewer outlets.
To facilitate comparing, manufacturer prefers to put such items near
by competing stores.
The image of the store carrying the shopping goods is equally or more
important than the manufacturers image. Shopping goods are further
divided into
Homogeneous shopping goods: the quality is similar but prices are different.
Heterogeneous shopping goods: the product features and services are more
important than the price.
c. Specialty goods: these are the goods with unique characteristics or brand
identification for which a sufficient number of buyers are willing to make a special
purchasing effort. E.g. cars, stereo.
Characteristics:

46

Customers are not bothered about comparison but they are

ready to travel far to buy one.

-

Buyers invest time to reach the dealers carrying the wanted

Usually, there will be one retailer per area and they are very

Both manufacturer & retailer jointly take up advertising.

products.
important.
d. Unsought goods: Consumers usually do not know about such product and they
must be made aware about the product to buy it. E.g. Life Insurance,
Encyclopedias. They require advertising & personal selling efforts.
Industrial goods :
Industrial goods are classified in terms of how they enter the production process
and their relative costliness. They are generally divided into the following
categories:
a. Raw materials: These are the business/industrial goods that become part of
another tangible prior to being processed in any way. It includes goods that are
found in their natural state, e.g. minerals, land, product of the forests & seas.
Agricultural products such as cotton, fruits or livestock and animal products
including milk egg. The marketing of both these group of raw materials is
different. E.g .the supply of raw material (natural) is limited, its quantity cannot be
increased and there are a few great producers.

Characteristics of raw materials:

47

 Prices are normally set up by

supply & demand, approximating the

conditions of perfect competition. Producers have little or no control over

prices.
Because of their great bulk, low unit value & the long distances between
producer & business user, transportation is an important consideration.
Due to these factors, natural / raw materials are frequently marketed directly
to the user.
There is very little branding or other product differentiation of this type of
product.
Markets of natural raw materials rarely advertise.
Characteristics of agricultural raw materials:
The producers are mostly small, located at some distance from their markets.
Supply is largely controlled by the producers, but it cannot be increased or
decreased rapidly.
The product is perishable and is not produced uniformly throughout the year.
b. Fabricating materials and parts: They become part of the finished product
after being processed to some extent. The difference between raw materials and
fabricating materials is that raw materials are not at all processed whereas
fabricating materials are somewhat processed. E.g. flour being part of bread.
Fabricating parts are assembled with no further change in their form. E.g. zipper in
clothing.
Characteristics:
- They are purchased in large quantities.
- Buying decisions are based on price & service provided by the
seller.

48

- Sometimes to ensure timely supply, order may be placed a year or

more in advance.
- They are mostly marketed directly from producer to user.
- Branding is not very important.
c. Installations or capital items: These are the manufactured products that are an
organizations major, expensive and long lived equipments. E.g. large generators,
blast furnace for steel mills etc. Differentiation from other category of business
goods is that they directly affect the scale of operation in an organization
producing goods or services.
Characteristics:
- Each unit sold represents a large rupee value.
- Generally each unit is made to the buyers detailed specification.
- Much presale & postsale servicing is necessary.
- No middlemen are used.
- Promotion is through personal selling.
- High caliber, well trained sales force is required.
d. Accessory equipments: These are tangible products that have substantial value
and are used in an organizations operations. E.g. small power tools, fork lift trucks
etc. They do not become a part of the finished product nor do they have an impact
on an organizations scale of operations.
Characteristics:
- Use of middlemen largely depends on the rupee value of each
order.
d. Operating supplies: Business goods that are characterized by low dollar value
per unit & aid in an organizations operations without becoming part of the
finished product are called operating supplies. E.g. lubricating oil, pencils &
stationary items etc.
49

Characteristics:
They are low in unit value.
They are bought by many different organization.
Are distributed widely.
Middlemen are used for distribution purpose.
Competing products are quite standardized, there is little
brand insistence, hence price competition is normally stiff.
Explain the Buyer Behaviour Model:
The essence of the model is that it suggests consumers will respond in particular
ways to different stimuli after they have 'processed' those stimuli in their minds. In
more detail, the model suggests that factors external to the consumer will act as a
stimulus for behaviour, but that the consumer's personal characteristics and
decision-making process will interact with the stimulus before a particular
behavioural response is generated.

50

Black box model of consumer buying behaviour

It is called the 'black box' model because we still know so little about how the
human mind works. We cannot see what goes on in the mind and we don't really
know much about what goes on in there, so it's like a black box. As far as consumer
behaviour goes, we know enough to be able to identify major internal influences
and the major steps in the decision-making process which consumers use, but we
don't really know how consumers transform all these data, together with the
stimuli, to generate particular responses.
What is stp? Explain it. (or) what is segmentation? What are the bases of
segmentation? Or explain how segmentation benefits a marketer in targeting
their customers.
STP Marketing: Since a company cannot serve all the customers in a broad
market such as computers and soft drinks, the company needs to identify the
market segments that it can serve more effectively.
Segmentation identify and profile distinct groups of buyers who might
require separate product or marketing mixes.
Targeting select one or more market segments to enter
Positioning establish and communicate the products key distinctive
benefits in the market.

51

MARKET SEGMENTATION:
It is the process of disaggregating the total market for a given product into a
number of sub-markets. The heterogeneous market is broken up in the process into
a number of relatively homogeneous markets..
Benefits of market segmentation:
Market segmentation helps the marketing man to distinguish one customer
group from another in the given market.
It enables him to decide which segment of the market should form his target
market.
It helps to develop the marketing program on a predictable and reliable
basis.
The product mix, the distribution mix, the promotion mix and the pricing
policy that suits the particular customer group can be easily achieved.
Marketing efforts become more efficient and economical.
It helps to assess how far the existing offers in the market from competitors
match the need of the customer segment.
It helps in spotting out relatively less satisfied segments and uncovered
segments.
Segmentation Approach: The segmentation can be practiced at any of the
following levels:
a. Segment marketing: it consists of a large identifiable group within a market
with similar wants, purchasing power, geographical location, buying attitudes or
buying habits. E.g. car manufacturers can concentrate on any one segment of the
following car buyers basic transportation, high performance, luxury or safety.
Assumptions:

52

 Each segments buyers are quite similar in wants and needs yet no two
buyers are alike.
The company should provide flexible offering providing a naked
solution common to all and options that are additional features for
which the customer should pay extra if they opt for it.
b. Niche marketing: A niche is more narrowly defined group typically a small
market whose needs are not well served. Niches are identified by dividing a
segment into subordinates segments or by defining a group seeking a distinctive
mix of benefits.
Assumptions:
Segments attract large number of competitors but niches attract only one
or two.
Niche marketers understand their customers need well, so the customers
are ready to pay the premium
Characteristics of an attractive niche:
The customers in the niche have a distinctive set of needs.
They are ready to pay a premium to the firms that best satisfy their needs.
There is no chance for much competition.
Nicher gains certain economies through specialization.
Niche has size, profit and growth potential.
c. Local marketing: Tailoring the products according to the needs & wants of a
local customer group ( trading areas, neighborhoods etc). according to this
approach, National advertising is a waste as it fails to address local needs.
d. Individual marketing: this is the ultimate level of marketing, i.e., customized
or one to one marketing. Business to business marketing today is customized, in

53

that a manufacturer will customize the offer, logistics, communications and

financial terms for each major account.

Patterns of market segmentation:

If the customers are asked to rank different product attributes, three different
patterns of segmentation emerge:
i.

Homogenous preference: all the customers want roughly the same

preference in the product attributes mentioned. It means the existing brands
will be similar and cluster around the middle scale of both the attributes.

ii.

Diffused preference: customers may show

great variation in their

preferences for the mentioned product attributes.

iii.

Clustered preference: these are called the natural market segments. The first
firm in this market may position themselves in the centre appealing to all the
groups. It might position in the largest market segment ( concentrated
marketing ). It might develop several brands, each positioned in a different
segment. If the first firm develops only one brand, competitor would enter
and introduce brands in other segment.

Procedure of market segmentation:

There are 3 steps in the process of identifying market segments:
1. Step one: Survey stage:
Conduct an exploratory interview to gain insight into consumers
motivation, attitudes and behavior.
Prepare a questionnaire and collect data on attributes and their importance
ratings.
Brand awareness and ratings

54

 Product usage patterns

Attitude towards the product category
Demographics, geographic, psychographic and media graphic
2. Step two : Analysis stage:
Apply Factor analysis to remove highly correlated variables.
Apply cluster analysis to create a specified number of maximally different
segments.
3. Step three: Profiling stage:
Each cluster is profiled in terms of its distinguishing attitudes, behavior,
demographics, psychographics and media patterns. Each segment is given a name
based on its dominant characteristics. Market segmentation must be redone
periodically because market segments change. For segmentation to be useful the
segments must be relevant, accessible, sizeable, measurable and profitable.
Methods/ Bases of market segmentation:
Markets can be segmented using several relevant bases. They can be based on the
various characteristics of the customers such as age, sex, education and
geographical aspects etc. Usually, the variables are divided into two broad
categories:
a. Consumer characteristics geographic, demographic, psychographic etc
b. Consumer responses ( behavioral ) benefits sought, use occasions or brands

Explain the bases of segmentation?

Geographic segmentation tries to divide markets into different geographical units:
these units include: Regions, Countries, City / Town size, Population density,
Climate.Geographic segmentation is an important process - particularly for multi55

national and global businesses and brands. Many such companies have regional
and national marketing programmes which alter their products, advertising and
promotion to meet the individual needs of geographic units.

Demographic segmentation consists of dividing the market into groups based on

variables such as age, gender family size, income, occupation, education, religion,
race and nationality.As you might expect, demographic segmentation variables are
amongst the most popular bases for segmenting customer groups.This is partly
because customer wants are closely linked to variables such as income and age.
Also, for practical reasons, there is often much more data available to help with the
demographic segmentation process.
Age:Consumer needs and wants change with age although they may still wish to
consumer the same types of product. So Marketers design, package and promote
products differently to meet the wants of different age groups. Good examples
include the marketing of toothpaste (contrast the branding of toothpaste for
children and adults) and toys (with many age-based segments).
Life-cycle stage:A consumer stage in the life-cycle is an important variable particularly in markets such as leisure and tourism. For example, contrast the
product and promotional approach of Club 18-30 holidays with the slightly more
refined and sedate approach adopted by Saga Holidays.
Gender:Gender segmentation is widely used in consumer marketing. The best
examples include clothing, hairdressing, magazines and toiletries and cosmetics.

56

Income:Another popular basis for segmentation. Many companies target affluent

consumers with luxury goods and convenience services. Good examples include
Coutts bank; Moet & Chandon champagne and Elegant Resorts - an up-market
travel company. By contrast, many companies focus on marketing products that
appeal directly to consumers with relatively low incomes. Examples include Aldi
(a discount food retailer), Airtours holidays, and discount clothing retailers such as
TK Maxx.
Social class:Many Marketers believe that a consumers "perceived" social class
influences their preferences for cars, clothes, home furnishings, leisure activities
and other products & services. There is a clear link here with income-based
segmentation.
Lifestyle:Marketers are increasingly interested in the effect of consumer
"lifestyles" on demand. Unfortunately, there are many different lifestyle
categorisation systems, many of them designed by advertising and marketing
agencies as a way of winning new marketing clients and campaigns!
Psychographic segmentation is sometimes also referred to as behavioural
segmentation.
This type of segmentation divides the market into groups according to customers
lifestyles. It considers a number of potential influences on buying behaviour,
including the attitudes, expectations and activities of consumers. If these are
known, then products and marketing campaigns can be customised so that they
appeal more specifically to customer motivations. The main types of
psychographic segmentation are:

57

Lifestyle different people have different lifestyle patterns and our behaviour
may change as we pass through different stages of life. For example, a family
with young children is likely to have a different lifestyle to a much older couple
whose children have left home, and there are, therefore, likely to be significant
differences in consumption patterns between the two groups.
Opinions, interests and hobbies this covers a huge area and includes
consumers political opinions, views on the environment, sporting and
recreational activities and arts and cultural issues. The opinions that consumers
hold and the activities they engage in will have a huge impact on the products
they buy and marketers need to be aware of any changes. Good recent examples
include the growth of demand for organic foods or products that are (or are
perceived to be) environmentally friendly
Degree of loyalty customers who buy one brand either all or most of the time
are valuable to firms. By segmenting markets in this way, firms can adapt their
marketing in order to retain loyal customers, rather than having to focus
constantly on recruiting new customers. It is often said that it is ten times more
profitable selling to existing customers than trying to find new ones. So the
moral is work hard at keeping your customers.
Occasions this segments on the basis of when a product is purchased or
consumed. For example, some consumers may only purchase flowers, wine or
boxes of chocolates for celebrating birthdays or Christmas, whereas other
consumers may buy these products on a weekly basis. Marketers often try to
change customer perception of the best time to consumer a product by promoting
alternative uses for a product. For example, recently Kelloggs has attempted to

58

change the image of cereals to that of an any time snack, rather than simply a
breakfast meal.
Benefits sought this requires marketers to identify and understand the main
benefits consumers look for in a product. Toothpaste, for example, is not only
bought to maintain healthy teeth and gums, but also because of its taste and in
order to help combat bad breath!
Usage some markets can be segmented into light, medium and heavy user
groups.
2. Volume segmentation: The quantity or the potential quantity of purchase is the
base for segmentation. The variables are bulk buyers, small scale buyers,
regular buyers, one time buyers.
3. Multi attribute segmentation (Geo clustering):
Marketers these days combine several variables in an effort to identify smaller,
better defined target groups. One of the developments in this area is called
geoclustering and it yields richer description of consumers and neighborhoods
than traditional demographics.
MARKET TARGETING
INTRODUCTION
Market targeting is a process of taking decisions regarding the market segment to
be saved. It is one in which the seller distinguishes the major market segments;
target s one or more of these segments and develops products and marketing
programmes tailored to each selected segments.

DEFINITIONS
59

Market targeting defines A group of customers at whom the organisation

especially in tends to aim its market effort.

STEPS PROCESS OF MARKET TARGETING

Market targeting consists of two steps namely.
Evaluating the market segment
Selecting the market segments,
We shall now detail them briefly.

I. EVALUATING THE MARKET SEGMENT

In evaluating the different market segment, the firm must 100k at three factors
namely
Segment size and growth
Segment structural attractiveness and
Company objectives and resources.
SEGMENT SIZE AND GROWTH
While selecting the segment, firm should see whether the potential segment has the
right size and growth characteristics.
Large firms prefer segments with large sales volumes and often avoid small
segments.

SEGMENTS STRUCTURAL ATTRACTIVENESS

The segment showed have profit attractiveness. According to portes therefore five
forces that determines the intrinsic long-run profit attractiveness of a market or
segment. They are
Industry competitors
60

Potential entrants
Substitutes
Buyers and
Suppliers

COMPANY OBJECTIVES AND RESOURCES

The third factor to be considered by a company in the evaluation of market
segment is its own objectives and resources.

II. SELECTING THE MARKET SEGMENTS

Having evaluated the market segments, the company should now decide
how many segments to serve. Following are the five patterns of, target market
selection.
SINGLE SEGMENT CONCENTRATION
Under this pattern, the company selects one of the various segments and
concentrates thereon.
MERITS
The following are the Merits
Through concentrated marketing, the company can achieve a strong market
position in the segment.
It can enjoy operating economics through specializing its products
distribution and promotion.
SELECTIVE SPECIALISATION
Under the pattern, the firm selects a number of appropriate and attractive segments.
This is to called multi-segment strategy and has the merit of diversification of
firms risk.

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PRODUCT SPECIALISATIONS
In product specialization the firm concentrates on the production of a certain
product and sells it to several segments.

MARKET SPECIALISATION
In this pattern, the firm concentrates on satisfying the needs of a particulars group
of customers.

FULL MARKET COVERAGE

In this case, the firm tries to serve all customer groups with all the products that
they might need.

MARKET POSITIONING
INTRODUCTION
The word positioning was popularized by two advertising agencies in V.S.A.,
called AI Ries and Jack trout. They see positioning as a creative exercise done with
an existing product.

DEFINITION
Market positioning defined as A piece of merchandise a service, a company, an
institution, or even a person.

POSITIONING STRATEGIES / MARKET POSITIONING STRATEGIES

There are several positioning strategies. They are.

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POSITIONING ON PRODUCT ATTRIBUTES

The marketer can position its product on specific product attributes. Examples
are: LG features technical and performance attributes.

POSITIONING ON BENEFITS
Products can be positioned on the needs they fill or benefits they offer.
Examples: Colgate reduces cavities; clinic all clear shampoo clears dandruff.

POSITIONING ACCORDING TO USAGE OCCASIONS

Another way of positioning the product is as per their usage occasions. That is,
products can be positioned for specific usage occasions.

POSITIONING THE PRODUCT FOR CERTAIN CLASSES OF USERS

Another approach is to position the product for certain classes of users. Certain
cine films are released as adult only films, as films for children etc.,

POSITIONING DIRECTLY AGAINST A COMPETITOR

A product can be positioned directly against a competitor. It attempted to position
the product s easier to use and more versatile.

POSITIONING AWAY FROM COMPETITORS

A product may also be positioned away from competitors. 7-up be came the
number three soft drink. When it was positioned as the Un-cola the fresh and
thirst quenching alternative to coke and Pepsi.

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POSITIONING AS TO DIFFERENT PRODUCT CLASSES

Finally, the product can be positioned with respect to different product classes.
For example: camy hand soap is positioned with bath oils rather than with soap.

(UNIT V)

Explain Retail Sales Forecasting , Methods, Analysis and Application.

Retail sales forecasts are predictors of future market performance based on
past season trends. Retailers commonly report gains or losses to their shareholders
and business media, which can then be compiled to get an idea of upcoming
results.
Sales forecasting is a difficult area of management. Most managers believe
they are good at forecasting. However, forecasts made usually turn out to be
wrong! Marketers argue about whether sales forecasting is a science or an art. The
short answer is that it is a bit of both.
Reasons for undertaking sales forecasts
Businesses are forced to look well ahead in order to plan their investments, launch
new products, decide when to close or withdraw products and so on. The sales
forecasting process is a critical one for most businesses. Key decisions that are
derived from a sales forecast include:
- Employment levels required

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- Promotional mix
- Investment in production capacity
Types of forecasting
There are two major types of forecasting, which can be broadly described as
macro and micro:
Macro forecasting is concerned with forecasting markets in total. This is about
determining the existing level of Market Demand and considering what will
happen to market demand in the future.
Micro forecasting is concerned with detailed unit sales forecasts. This is about
determining a product's market share in a particular industry and considering what
will happen to that market share in the future.
The selection of which type of forecasting to use depends on several factors:
(1) The degree of accuracy required - if the decisions that are to be made on the
basis of the sales forecast have high risks attached to them, then it stands to reason
that the forecast should be prepared as accurately as possible. However, this
involves more cost
(2) The availability of data and information - in some markets there is a wealth
of available sales information (e.g. clothing retail, food retailing, holidays); in
others it is hard to find reliable, up-to-date information
(3) The time horizon that the sales forecast is intended to cover. For example, are
we forecasting next weeks' sales, or are we trying to forecast what will happen to
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the overall size of the market in the next five years?

(4) The position of the products in its life cycle. For example, for products at the
"introductory" stage of the product life cycle, less sales data and information may
be available than for products at the "maturity" stage when time series can be a
useful forecasting method.
The first stage in creating the sales forecast is to estimate Market Demand.
Market Demand for a product is the total volume that would be bought by a
defined customer group, in a defined geographical area, in a defined time period, in
a given marketing environment. This is sometimes referred to as the Market
Demand Curve.
Market Demand = customers x average price
Stage two in the forecast is to estimate Company Demand
Company demand is the company's share of market demand.
This can be expressed as a formula:
Company Demand = Market Demand v Company's Market Share
Step Three is then to develop the Sales Forecast
The Sales Forecast is the expected level of company sales based on a chosen
marketing plan and an assumed marketing environment.
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Note that the Sales Forecast is not necessarily the same as a "sales target" or a
"sales budget".
A sales target (or goal) is set for the sales force as a way of defining and
encouraging sales effort. Sales targets are often set some way higher than estimated
sales to "stretch" the efforts of the sales force.
WRITE A NOTE ON PRODUCT MIX. ALSO EXPLAIN THE MIX & LINE
DECISIONS TAKEN BY A MARKETER.(OR)
PRODUCT MIX:
It is the set of all those products and items that a particular seller offers for sale.
Any companys product mix has width, length, depth and consistency:
Width: It refers to how many product lines the company carries. E.g. HLLs
detergents, bath soap, toothpaste, fabric wash, beverages etc.
Length: it refers to the total number of items in the product mix. E.g. HLLs
Dove, Liril, Lux, and Pears etc.
Depth: it refers to how many variants, shades, models, pack sizes etc. are
offered for each product in the line. E.g. lux is available in sandal, jasmine, and
lavender with 3 pack sizes.
Consistency: it refers to how closely related to various product lines are in end
use, production requirements, distribution channel or some other way.
PRODUCT MIX EXPANSION:
This is accomplished by increasing the depth within a particular line and/or the
number of lines a firm offers to consumers.

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Line extension: When a company adds similar items to an existing product line
with the same brand name it is called line extension. E.g. Mysore sandal, Mysore
sandal gold.
Mix extension: Adding new product line to the companys already existing
product mix is called mix extension. The new line may be related or unrelated to
current products. There can be four alternatives.
Related product, same brand.
Unrelated product, same brand.
Related product, different brand
Unrelated product, different brand.
Product mix contraction: It means either eliminating an entire line or simplifying
the assortment within a line. Thinner and/or shorter product lines or mixes can
weed out low profit and unprofitable products.
PRODUCT LINE DECISIONS:
A broad group of products intended for essentially similar uses & having similar
physical characteristics constitutes a product line.
Product line analysis:
The product line managers need to know the sales & profit of each item in their
line in order to decide which items to build, maintain, harvest or divest. The
analysis is done on the following basis

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 Sales and profit: A high concentration of sales in a few items means line
vulnerability. These items must be carefully monitored & protected. If any of
the products is not contributing much towards the profit, it can be dropped.
Market profile: It must be reviewed how the line is positioned against
competitors. Product map is useful for designing product line marketing
strategy. It shows which competitors items are competing against ones items.
Also any untapped opportunity or market segment can be identified. After
performing product line analysis, the product line manager has to consider
decisions on product line length, line modernization, line featuring and line
pruning.
1. Product line length:
A product line is too short if profits can be increased by adding the items, the line
is too long if profit can be increased by dropping items.
It depends on:
Companys objectives: if it wants high market share and high growth, it will
carry longer lines. If it wants high profitability, it will carry shorter lines.
Time: product lines lengthens over time. Excess manufacturing capacity puts
pressure on product line manager to develop items.
Excess manufacturing capacity: unutilized manufacturing plants, and labor may
force to develop new items.
Pressure from sales force and distributors: in order to satisfy their customers by
offering a complete product line.
Product line extension results in increased cost of:
Design and engineering costs.

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 Inventory carrying costs

Manufacturing change over costs
Order processing cost
Transportation cost
New item promotional cost

Product line can be lengthened in two ways:

Line stretching
Line filling
Line stretching:
When a company lengthens its product line beyond its current range, it is called
line stretching. Line stretching can be
a. Down market stretch: if the company is introducing a lower price line than the
existing one, it is called down market stretch. E.g. surf, parker, Ariel etc. It can be
done for the following reasons
Presence of strong growth opportunities in the down market.
To tie up lower end competitors who may otherwise move to up market.
If the middle market is stagnating or declining.
Naming choice for down market can be

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 Same the brand image of the same name will helping immediate popularity.
E.g. Maruti Zen.
Use a sub brand name e.g. Hyundai Santro Xing.
Different name if the product fails, it will not affect the other products.
b. Up market stretch: entering the high end of the market for more growth, higher
margins or simply to position themselves as full line manufacturers. E.g. Philips
powerhouse player to power play range.
c. Two way stretch: companies serving the middle line might decide to stretch
their lines in both directions.

Line filling:
It means adding more items within the present range. E.g. videocon Acs from 2-3
models to a dozen models in window Acs with rotary compressor and six models
in window acs with reciprocatory compressor. The various reasons may be
Reaching for incremental profits.
Trying to satisfy dealers who complain about losses because of missing items.
Trying to utilize excess capacity.
Trying to be full line company.
To keep out competitors.
2. Line modernization:
It is necessary to modernize ones product line because new technology is coming
in very fastly. The company has to watch the newer style competitors line.

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3. Line featuring:
It means doing something extra for a selected item in the line to boost up the sales.
It may be done for items both, which are selling well as well as those that, are
selling poorly.
4. Line pruning:
It means deleting the items that are depressing the profits. The weak items have to
be identified through sales and cost analysis. It can also be done if the company is
short of production capacity. E.g. P&G has 31 versions of head & shoulders
shampoo that was pruned to less than half, to 15 variants.

Explain New Product Development:

Every company must develop new products. New product development shapes the
companys future. Booz, Allen and Hamilton identified 6 categories of new
products.
(a) New to the world product: where the product is manufactured newly and
introduced by the new manufacturer.
(b) New product line: product is new for the company but an established market
is there
(c) Addition to existing product line: products that supplement a companys
existing product line.
(d) Improvements and revision for existing product: provide improved
performance or greater perceived value.
(e) Repositioning: existing products targeted to new market segments

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(f) Cost reduction : provide similar performance at lower price/cost.

Reasons for failure of new products:
Idea is favourite to a high level executive which is really lacking practical
applicability
Idea is good but market size overestimated.
Product is not well designed.
Not positioned correctly, advertised effectively so overpriced.
Development costs are higher than expected.
Shortage of important ideas in certain areas. E.g. steel, detergents etc.
Market fragmentation.
Social and governmental constraints.
Costliness of the developmental process.
Capital shortages
Faster required development time
Shorter product life cycle.

Organizational arrangements for a new product development:

1. Budgeting for new product development:
it has to be decided how much to budget for new product development. R&D
outcomes are very uncertain to use normal investment criteria. The alternatives
available are

Finance as much projects as possible to achieve few winners.

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Some percentage of sales figure.

Spend what the competitor is spending.

Decide how many successful new products are required and work backward

to estimate the required investment.

2. Organizing new product development:
Product managers: Responsibilities for new product ideas are assigned to
them.
New product managers: they have the exclusive responsibility to come up
with new ideas.
New product committee: reviews and approves proposals
New product departments: large companies often establish a separate
department having access to top management. Their major responsibilities
are
o Generating and screening new ideas.
o Working with the R&D department.
o Carrying out field testing and commercialization.
New product venture teams: A venture team is a group brought together
from various operating departments and charged with developing a specific
product or business.
STEPS IN NEW PRODUCT DEVELOPMENT:
1. Idea generation:
New product development starts with new ideas. A system must be designed for
stimulating new ideas within the organization and acknowledging and reviewing

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them properly and promptly. Customers should also be encouraged to propose

innovations. The sources for new ideas can be company employees, customers,
suppliers, universities, inventors, advertising or market research agencies,
commercial laboratories, industrial publications, top management, scientists,
competitors etc.
The management should
Define the product, market, scope & new product objectives
state how much efforts should be developed for it.
Ide
a
Ge
ner
atio
n
=
wor
th
of
ide
a

Idea
screen
ing
=
match
with
compa
nys
objecti
ves

Concept
testing
= to test
custome
r
accepta
nce

Market
ing
strateg
y=
afforda
ble
plan

Busine
ss
analysi
s=
profita
bility

Produc
t
develo
pment

Shou
ld we
send
idea
back

Mark
et
testi
ng

Is it
possible
to
modify
marketi
ng
program

DROP

2. Idea screening:
New product ideas are evaluated to determine which one wants further study. The
ideas are sorted out into three categories promising ideas, marginal ideas and
rejects. The surviving promising ideas move into a full scale screening process.

75

co
mm
erci
aliz
atio
n

The company should reward the employees submitting the best ideas. Care must be
taken to avoid the following two types of errors:
Drop error dropping an otherwise good idea.
Go error permitting a poor idea to further processing
There are three types of product failures
a. Absolute product failure: looses money, sales do not cover variable cost
b. Partial product failure: looses money but sales cover all the variable cost.
c. Relative product failure: yields a profit less than the companys target rate.
The main purpose of idea screening is to- reject the poor ideas as early as
possible as each development stage adds cost.
3. Concept development and testing:
Attractive ideas must be refined into testable product concepts. A product idea is a
possible product the company might offer to the market. A product concept is an
elaborated version of the idea expressed in meaningful consumer terms.
Concept testing - involves presenting the product concept to appropriate target
consumers and getting their reactions. The concept can be presented symbolically
or physically. The more the tested concept resembles the final product, the more
reliable is the concept testing.
Conjoint analysis is a method for deriving the utility values that consumers attach
to varying levels of product attributes. It is used to measure consumer preferences
for alternative product concepts.
4. Marketing strategy development:

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After testing, the new product manager must develop a preliminary market strategy
for introducing the new product which should include
a. The target market size, structure, behavior
b. Planned product positioning, price, distribution strategy and
marketing budget etc for the first year.
c. Long run sales and profit goals and marketing mix strategy over time.

5. Business analysis:
After the above steps, the proposals business attractiveness needs to be evaluated.
For this purpose the management needs to prepare sales, cost and profit projections
to determine whether theysatisfy companys objectives.
The step in business analysis are
estimating total sales
estimating costs and profits.
Estimating total sales: It has to be estimated whether the sales will be high
enough to generates satisfactory profits. Total estimated sales are the sum of the
first time sales , replacement sales & repeat sales.
Estimating total sales = first time sales + replacement sales + repeat sales.
This in turn depends upon
Whether the product is a one time purchase sales will rise at the beginning
then approach zero as the number of potential buyers is exhausted. E.g.
engagement ring.
Infrequently purchased product exhibit replacement cycles dictated by
physical wearing out or by obsolescence associated with changing styles,
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features and performance. Sales forecasting for this product category calls for
estimating first time sales & replacement sales separately. E.g. automobiles.
Frequently purchased product

- the number of first time buyers initially

increases and then decreases as few buyers are left. Repeat purchases occur
soon, providing that the product satisfies some buyers.
In estimating new product sales, the first task is to estimate first time purchases of
the new product in each period. To estimate replacement sales, managers have to
research the survival age distribution- i.e. the number of units that fail in year one,
two, three and so on.
Estimating cost and profits:
After forecasting the sales, the management has to estimate expected costs and
profits. Costs are estimated by the R&D, manufacturing, marketing and finance
department.
Two things of central interest
the maximum investment exposure i.e. the highest loss that the project can
create.
payback period the time when the company recovers all of its investment
including the built in return of 15%.
Other financial measures used by the company are break even analysis in which it
is estimated how many units the company must sell in order to break even with the
given price and cost structure.
6. Product development:
If the product concept passes the business test, it moves to R&D or
engineering department to be developed into a physical product. Till now it has
existed as a word description or drawing or prototype. This stage involves huge
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investment & if it happens that it is not possible to develop the concept as a

technically and commercially feasible product, it has to be dropped and then the
company has to bear the loss of investment up till then. The target customer
requirement is translated into a working prototype by a set of methods known as
QFD or Quality Function Deployment.
This method takes the list of customer attributes (CAs) generated by market
research and turns them into a list of engineering attributes (EAs) that the engineer
can use. The R&D department may develop one or more physical version of the
product concept. This process can take days, weeks, months or years.
Along with the products functional characteristics the lab scientists must
also communicate the products psychological aspects through physical cues. E.g.
in case of mouth wash, yellow color supports antiseptic claim, red color supports
freshness blue or green color supports cool.

Testing of the products:

When the prototypes are ready they are put to functional tests. There are two types
of tests
a. Alpha testing done within the firm to see how it performs
b. Beta testing testing is done with a set of customers & their feedback
taken.
Consumer testing can be done either in home environment or in laboratory.
Consumer preference can be measured in the following ways:
1) Rank order method: consumers are asked to rank the items in the order of
preference.
2) Paired comparison method: pairs of items are presented and asking the
consumer which one is preferred in each pair.
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3) Monadic rating: ask the consumers t o rate liking of each product on a scale.
7. Market testing:
After the management becomes satisfied with the functional and psychological
performance of the product, the product is decorated with a brand name and
packaging, it goes for market testing.
It is done in order to find out

the size of the market.

reaction of consumers and dealers in handling, using and repurchasing

the product.
Factors influencing the budget of market testing

investment cost

risk

time pressure

research cost.

This is once again divided into two categories a. Consumer goods market testing
the company estimates four variables

trial

first repeat

adoption

purchase frequency

Methods of consumer goods market testing:

it can be done by

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i. Sales wave research initial trial is provided at free of cost and later the same
product along with competitors product is provided at a reduced price to see how
many purchase this brand. The company notes how many customers selected the
companys product again and their reported level of satisfaction.
Advantages:
1. Quick implementation.
2. Fair amount of security in conducting.
3. Can be carried out without final packaging and advertising.
ii. Simulated test marketing 30 to 40 qualified shoppers are invited to a shop
and questioning them about brand familiarity and brand preferences in a specific
product category. These people are then invited for a brief screening of both wellknown and new commercials or print ads. One advertisement advertises the new
products but is not singled out for sole attention. Consumers receive a small
amount of money and are invited into a s tore where they may buy many items.
The company notes how many consumers buy the new brand and the competing
brands. This provides a measure of the advertisements relative effectiveness
against competing ads in stimulating trials. Consumers are asked the reasons for
their purchases and non-purchases. Those who did not buy the brand are given free
samples. Some weeks later, they are interviewed by phone to determine product
attitude, usage, and satisfaction and repurchase intention and are offered an
opportunity to repurchase any product. It main advantage is that fairly accurate
results on advertising effectiveness and trial.
iii. Controlled test marketing a market research agency or a research firm
manages a panel of stores that carry new products for a fee. The company with the
new product specifies the number of stores and geographic locations it wants to
test. The research firm delivers the products to the participating stores and controls
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shelf position, number of facings, displays and point of purchase promotions and
pricing. Sales results can be measured through electronic scanners at the check out.
The company can also evaluate the impact of local advertising and promotions
during the test.
iv. Test marketing the ultimate way to test a new product is to put it into full
blown test markets. The company chooses a few representative cities & the sales
force tries to sell the trade on carrying the product and giving it good shelf
exposure the company puts on a full advertisement & promotion campaign in these
markets similar to the one that it would use in national marketing. The several
factors to be considered are
Number of test cities
Kind of cities
Length of test
Information to be provided
Action to be taken.
b. Business goods market testing this also undergoes Alpha testing and Beta
testing. During beta testing the vendors technical people observe how the
customers are using the product, that helps in exposing unanticipated problems of
safety & servicing and alerts the vendor to customer training & service
requirements. The vendor can also observe how much value the equipment adds to
the customers operation as a clue to subsequent pricing. The vendor will ask the
test customers to express their purchase intention and other reactions after the test.
Benefit to test customers:

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 Can influence product design.

Gain experience with the new product ahead of competitors
Receive a price break in return for cooperation
Enhance their reputation as technological pioneers.
Another method introduce the new product at trade shows
Trade shows draw a large number of buyers, who view many new products in a
few concentrated days. The vendor can observe how much interest buyers show in
the new product, how they react to various features & terms, and how many
express purchase intentions or place orders.
Another method testing in distributor & dealer display room
Here the product stands with manufacturers other products as well as competitors
products. This method yields preference and pricing information in the products
normal selling atmosphere.
Disadvantages:
Customers might want to place early orders that cannot be filled.
Customers who come may not represent the target market.
8. Commercialization:
if the company decides to go ahead with commercialization following costs are
incurred
Manufacturing facility either rented or own
Deciding plant size
Marketing advertising & promotion
The other factors that has to be considered for going for commercialization are

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a. When or timing - here they can adopt the following strategies

a. First entry entering before competitors
b. Parallel entry entering along with competitors
c. Late entering entering after the competitors
b. Where or geographic strategy: the company must decide whether to launch the
product in a single locality, a region, several regions or the national market.
Factors affecting geographic strategy
Company size small companies launch a product in one attractive city &
later enter other cities one at a time.
Large companies may launch the product simultaneously in many cities.
Primarily the companies sell the new products in the domestic market, later on if
the product is a success, they will move out to other neighbouring countries or
world market.
Explain Product Life Cycle and Marketing Strategies:
The Product Life Cycle (PLC) is based upon the biological life cycle. For
example, a seed is planted (introduction); it begins to sprout (growth); it shoots out
leaves and puts down roots as it becomes an adult (maturity); after a long period as
an adult the plant begins to shrink and die out (decline).
In theory it's the same for a product. After a period of development it is introduced
or launched into the market; it gains more and more customers as it grows;
eventually the market stabilises and the product becomes mature; then after a
period of time the product is overtaken by development and the introduction of
superior competitors, it goes into decline and is eventually withdrawn.

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Marketing Strategies for the differing stages of the Product Life Cycle.
Introduction.
The need for immediate profit is not a pressure. The product is promoted to create
awareness. If the product has no or few competitors, a skimming price strategy is
employed. Limited numbers of product are available in few channels of
distribution.
Growth.
Competitors are attracted into the market with very similar offerings. Products
become more profitable and companies form alliances, joint ventures and take each
other over. Advertising spend is high and focuses upon building brand. Market
share tends to stabilize.
Maturity.
Those products that survive the earlier stages tend to spend longest in this phase.
Sales grow at a decreasing rate and then stabilize. Producers attempt to

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differentiate products and brands are key to this. Price wars and intense
competition occur. At this point the market reaches saturation. Producers begin to
leave the market due to poor margins. Promotion becomes more widespread and
use a greater variety of media.
Decline.
At this point there is a downturn in the market. For example more innovative
products are introduced or consumer tastes have changed. There is intense pricecutting and many more products are withdrawn from the market. Profits can be
improved by reducing marketing spend and cost cutting.
Problems with Product Life Cycle.
In reality very few products follow such a prescriptive cycle. The length of each
stage varies enormously. The decisions of marketers can change the stage, for
example from maturity to decline by price-cutting. Not all products go through
each stage. Some go from introduction to decline. It is not easy to tell which stage
the product is in. Remember that PLC is like all other tools. Use it to inform your
gut feeling.
Introduction stage of PLC

The need for immediate profit is not a pressure. The product is promoted to create
awareness. If the product has no or few competitors, a skimming price strategy is
employed. Limited numbers of product are available in few channels of
distribution. Advertising differentiates the product.
Print ad of a Printer giving details about its specifications
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Growth stage of PLC

Competitors are attracted into the market with very similar offerings. Products
become more profitable and companies form alliances, joint ventures and take each
other over. Advertising spend is high and focuses upon building brand. Market
share tends to stabilise. Advertising establishes participation with the
marketplace.

Maturity stage of PLC

Those products that survive the earlier stages tend to spend longest in this phase.
Sales grow at a decreasing rate and then stabilise. Producers attempt to
differentiate products and brands are key to this. Price wars and intense
competition occur. At this point the market reaches saturation. Producers begin to
leave the market due to poor margins. Promotion becomes more widespread and
use a greater variety of media. Advertising puts price ahead of the
competition.
Decline stage of PLC

At this point there is a downturn in the market. For example more innovative
products are introduced or consumer tastes have changed. There is intense pricecutting and many more products are withdrawn from the market. Profits can be

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improved by reducing marketing spend and cost cutting. Defensive advertising

or for revitalization.
UNIT V COMPLETED

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