FUNDAMENTALS OF

MARKETING MANAGEMENT
(Ms. Priya Jhamb)

PREFACE

Marketing is rightly said as performance of business activities that directs

the flow of goods and services from producer to consumer. Marketing is no
longer a company department charged with a limited number of tasks-it is a
company-wide undertaking. It drives the company vision, mission, and
strategic planning. Marketing includes decisions like who the company
wants as its customers; which needs to satisfy; what products and service to
offer; what prices to set; what communications to send and receive; what
channels of distribution to use; and what partnerships to develop. Marketing
succeeds only when all departments work together to achieve goals: when
engineering designs the right products, fianc furnishes the required funds,
purchasing buys quality materials, production makes quality products on
time, and accounting measures the profitability of different customers,
products and areas.
My objective of writing this book is to introduce the basic concept of
marketing in the simplest possible language to the readers. I have attempted
to explain the basic concepts with the help of examples.
All the efforts have been done to make the text free of errors. Still, I dont
rule out the possibility of some omission. I will be obliged if such omission
can be pointed out and intimated so that necessary modifications can be
done in the subsequent editions.

PRIYA JHAMB

FUNDAMENTALS OF MARKETING MANAGEMENT

Course Objective:
To help students to understand the concept of marketing and its applications, also to
expose the Students to the latest trends in marketing.
Course Contents:
Module I
Introduction, Nature and scope of marketing, Functions of marketing, Importance of
marketing. Marketing concepts Production concept, Product concept, Marketing concept,
Societal Marketing concept.. Selling V/S Marketing, Marketing mix.
Module II
Marketing Environment - Demographic, Economic, Legal, Socio-cultural, technological.
Module III
Marketing of services-Nature of services, Characteristics of services, Implications on
marketing
Module IV
Market segmentation and targeting-Levels of market segmentation Basis for segmenting
consumer markets, Differentiation and positioning of the market offer.
Module V
Product decisions -Concept of PLC, PLC marketing strategies, Product classification,
new product Development, Brand decisions, Packaging & labelling,
Module VI
Pricing strategies, Objectives, Determinants of price, pricing methods
Module VII
Promotion Mix- Factors determining promotion mix, Promotional tools Basics of
advertisement, sales promotion, public relations & personal selling, Publicity.
Module VIII
Place (Marketing channels), Channel structure, Channel design strategies.
Module IX
Consumer behaviour Nature, scope & significance of consumer behaviour - Factors
affecting consumer behaviour.

INDEX
S.I.Nos Chapter No.

Subject

Page No.

1.

CHAPTER-I

MARKETING: MEANING AND CONCEPTS

2.

CHAPTER-II

MARKETING ENVIRONMENT

26

3.

CHAPTER-III

MARKET SEGMENTATION

33

4.

CHAPTER-IV

MARKETING OF SERVICES

47

5.

CHAPTER-V

PRODUCT PLANNING

56

6.

CHAPTER-VI

PRICING DECISIONS

84

7.

CHAPTER-VII

PROMOTION MIX

98

8.

CHAPTER-VIII

CHANNELS OF DISTRIBUTION

115

9.

CHAPTER- IX

MARKETING RESEARCH AND CONSUMER

BEHAVIOUR

125

10.

BIBLOGRAPHY

145

11.

KEY TO END CHAPTER QUIZZES

146

CHAPTER- I
MARKETING: MEANING AND CONCEPTS
Contents:
1.1
1.2
1.3
1.4
1.5

Meaning of Marketing
Nature and scope of Marketing
Importance of Marketing
Marketing concepts
Marketing mix

1.1 Marketing is a process which carries goods from producer to ultimate consumer.
Marketing bridges the gap between consumer and producer. Marketing is an important
activity of all business enterprises. The definition of marketing has been changing from
time to time with the changes in the market place and perspective of the marketing men.
Marketing has two kinds of definitions traditional & modern.
Traditionally, marketing has been defined as the performance of business activities that
direct the flow of goods and services from producer to consumers. In this case, marketing
begins after the goods are produced and ends with their sale. It emphasizes only one way
traffic i.e., transfer of goods from producer to consumers.
According to Professer Cundiff and Still Marketing is the business process by which
products are matched with market & through which transfer of ownership are effected.
According to American Marketing Association, Marketing is performance of business
activities that direct the flow of goods and services from producer to consumer.
Modern concept of marketing is more than physical process or a set of activities i.e.,
distribution of goods & services. It is now used in a wider sense, i.e., the creation of
customers. It is focusing attention on the consumer and the satisfaction of his needs
and is therefore, consumer oriented. Marketing today produces that which consumer
needs, in the quantity that the consumer requires, at a price that the consumer can pay for
the satisfaction offered to him in the form of goods & services through the various
channels of distributions that suit the consumer convenience.
According to William Stanton, Marketing is a total system of business activities
designed to plan, price, promote, and distribute want satisfying products to target market
to achieve organizational objectives.
This definition has two significant implications; firstly, the entire system of business
activities should be customer oriented. Customer wants must be recognized and satisfied.
Secondly, marketing should start with an idea about a want satisfying product and
should not end until the customers wants are completely satisfied, which may be some
time after the exchange is made.
According to Phillip Kotler, Marketing is a social and managerial process by which
individuals and groups obtain what they need and want through creating, offering and
exchanging products of value with others.
According to this definition marketing starts with human needs and wants. People satisfy
their needs and wants with products. The importance of the physical products lie in the
service they provide as solution to needs. The consumer considers the different products
value and price before making a choice among them. The will choose the product that
produces the most value per unit of money.
6

MARKETING v/s SELLING

Theodore Levitt explains the contrast between the selling and marketing concepts as
follows:Starting point
Factory

Focus
Products

Means

Ends

Selling &
Promoting

Profits through
sales volume

(a) The selling concept

Target
Market

Consumer
needs

Integrated
marketing

Profits through
customer satisfaction

Marketing
1. Focuses on Customers needs
2. Begins before production
3. Continues after sale
4. A comprehensive Term in terms of Meaning
5. Philosophy of Business
6. Profits through customer satisfaction
7. Let the seller be aware
8. Integrated Approach
9. Long-term Perspective
10. Customer first then Product.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Selling
Focuses on Sellers needs.
Begins after production
Comes to an end with Sale.
A narrow Term in terms of Meaning
Routine day to day Physical Process
Profits through sales volume
Let the Buyer be aware
Fragmented Approach
Short-term Perspective
Product first then Customer

1.2 NATURE AND SCOPE OF MARKETING

Nature and Scope of Marketing can be divided into the following manner
Nature
Scope

Activities
Performed

Various
Approaches

Areas of
Applicability
According to
Philip Kotler

Function of
Marketing

- Consumer
Research
- Determination of
product & Price
Policies
- Determination of
Distribution
Channel
- Promotional
Decisions
- After
Sale
Services

- The Distribution of
goods and services
Approach
- The delivery of a
Standard of living
concept
- Marketing as a
social system.
- The creation of
utility concept.
- The Generation of
Revenue concept.
- Institutional
Approach
- Art and Science
Approach
- Modern Concept
of
Customers
satisfaction

- Products
&
Services
- Experiences
&
Events
- Persons & Places - Properties & org. - Information
&Ideas
-

A.

Managerial
Function
Planning
Organising
Staffing
Directing
Control
B.
Functional
Function
Marketing
Research
Product
planning
Purchase
Assembling
of goods
Grading &
Standard System
Branding
Storage
Transportat
ion
Packing
Selling
Advertising
Finance
Risk
Servicing

Stanton also stated:

Just as marketing does not begin at the end of the production line, it does not end with
the final sale.

NATURE OF MARKETING
Nature can be studied under two parts:
(A) Activities performed
(B) Various Approaches

(A)Activities Performed
The following activities describe the nature of marketing:1. Consumer Research Consumer is the king of the market. Every product
should be according to his tastes and habits. To know the preferences of the
consumer, consumer research should take place. By doing this, the producers will
also be able to achieve their targets and profits.
2. Determination of Product and Price Policies The effective manufacturing
of a product depends upon product policies and effective sale is the result of
proper price policy. These policies include color, design, size, brand name,
trademark, label and price of a product.

3. Determination of Distribution Channel After manufacturing the product,

the marketing has to decide the channel through which the product will flow from
factory to potential consumers. They include the decisions related with retailers,
wholesalers, recruitment of salesman etc.
4. Promotion Decisions The purpose of these decisions is to inform, to remind
and to persuade, these decisions decide about the promotion mix which include
advertising, personal selling publicity and sales promotion.

5. After Sale Services These services are provided to satisfy the consumers.
These services are given to listen the complaints and doubts of the consumer.
These services link up the producer and consumer. Sometimes markets get some
valuable suggestions from consumer during this period. These include guarantee,
warrantee services etc.
(B) Various Approaches :Nature of marketing should be studied through various approaches. By approach here
is meant a way of gaining an understanding of subject matter. The important
approaches are as follows:1. The distributions of goods & services Approach This approach focus on
the flow of goods & Services from producer to consumer. Also, it analyses the

means of distribution and lays emphasis on the activities such as buying and
selling, branding, packaging etc. It is an old and product oriented approach.
2. The Delivery of Standard of Living Approach This concept has been
propounded by Paul Mazur. According to Paul Mazur, Marketing in the delivery
of standard of living. Marketing uplifts the standard of living of society.
Standard of living can be improved by quality and quality of the products used by
consumers.
3. Marketing as a Social System These approach to the study of marketing
focuses on the contributions made by the various marketing activities and
institutions tot eh overall standard of living of the society. Also, it analyses from
the social point of view, the costs, more particularly the social costs art which
several marketing functions are performed and cost of the contributions made by
each marketing institutions. This approach is based on the social services, history
and social philosophy. There are these sub types of social approach (1) The
people oriented approach of the psychologists (2) the social system approach of
the sociologists and (3) the historical approach of the marketing historians.

4. Functional Approach -The functional approach of the study attempts at the

physiological treatment to the subject. It views marketing from the standpoint
of group of inter-related activities. The overall marketing process is broken down
into economic functions or services, such as buying, selling, transportation
storage etc. Each function is then analyzed with a view to determine its nature,
need and importance in relation to both marketing institutions and commodities or
classes of commodities.
5. Institutional Approach - The institutional approach is analytical in character.
It attempts to analyze and describe each segment of the marketing system. It
undertakes to describe and analyze the various types of wholesalers, retailers and
other institutions which together make up the marketing system. For instance, the
retailing system is first divided into its component parts. The each type of retail
institution is analyzed in terms of its importance, marketing functions performed
by it, cost of its operations, competitive conditions, trends, economic positions
etc.

6. Art and Science Approach Sometimes question is asked whether marketing

is a science or an art. Form the discussion given below, whether it is science or art
or both will be clear.
(a) Marketing as a Science Marketing is certainly a social science, as much
as marketing is concerned with an organized body of knowledge
systematically used. In more and more studies of the subject the scientific
method is employed the result of which are reflected in the rapidly
developing literature of the field.
10

(b) Marketing as an Art The performances of marketing function is also

an art. It is in the sense that it is a skill that can be acquired by experience,
skill or observation. For example, within a business organization
marketing managers have to go about a lot of decision making without
the benefit of all the relevant facts which they would like to have.
7. The Generation of Revenue Concept According to the concept, marketing
is an economic process whose objective is to generate revenue for the business.
Marketing provides the reasonable product to the consumers. It helps in cost
reduction also. The marketers get profits with the help of proper marketing
strategies and marketing programme.

8. The Creation of Utilities Concepts

There are four kinds of utilities
(a) Time utility
(b) Form Utility
(c) Place utility
(d) Possession and Ownership Utility.
Marketing creates these utilities in a product:(a) Time Utility Wholesalers and retailers provide products to consumers
timely. When consumers demand the product, such products are provided
to them with the help of marketing. Marketing includes storage,
distribution facility which increases the utility of the product with the
passage of time.
(b) Place Utility Different products have different importance at different
places. For example woolen products are in more demand at hill stations.
Marketing helps in the flow of goods from producer to consumers at
different places.
(c) Form Utility We can increase the value of products by changing their
forms such as ready made garments are more valuable than unstitched
cloth or cotton. Marketing with the help of planning, manufacturing create
from utility among products.
(d) Possession Utility Change of possession also increases the value of a
product. For example furniture is more useful in houses than at the
showrooms. Stethoscope is more useful in hands of doctors that than at the
shops.

11

Scope of Marketing

(A) Areas of Applicability

(B) Activities or Functions

(A) Areas of Applicability:

The applicability area determines the scope of marketing. Philip Kotler includes 10 types
of entities in the scope of marketing which are as under:
Marketing is used to produce the goods according to consumers needs. The products
should satisfy the consumer.
Services also come under the scope of marketing. Professionals who provide their
services to people also use marketing. For example Accountants, doctors etc. There is a
market for experiences also such as weekend spots etc. Marketing is also used to
promote events such as cricket matches etc.
Now celebrity marketing has also become popular. The marketing of persons is also
done. Different places, cities, state are also required marketing. For example State
Tourism promotes different places. The area of marketing is property. It is used in
selling real and financial property. Organisations, information, ideas are the other area
which marketing covers.
(B) Functions:
These can be classified as under:I.
Managerial
II.
Functional
I. Managerial Functions:
1.

Planning function The marketer has to prepare a plan before producing any
product which can include the following :(i)
Determination of Price, size, content, design of a product
(ii)
Determination of markets
(iii) To decide intermediaries
(iv)
To determine distribution channel
(v)
To decide promotion mix

12

2. Organisation Functions Organisation means division of work according to

the capability of persons. Marketing planning determines what is to be done
while organization explains the levels to be maintained. Organisation function
should be divided according to the size of a company.
3. Staffing function Under this function, the recruitment, selection, training, and
remuneration are decided.
4. Direction function Marketing manager gives directions to his sub-ordinates
to achieve the objective. Encouragements, Motivation are the two basic pillars of
this function.
5. Control function Marketing is a continuous process. It should be checked
regularly. All the hurdles in the way of production should be controlled properly.
II. Functional Functions:
1. Market Research Market research helps to know about the tastes, preferences
of consumers. It provides the information regarding price, quality of competitive
products in the market.
2. Buying Buying represents demand side and goods are bought for the purpose
of reselling, production or for consumption. Manufactures and middleman
assemble the material through buying process.

3. Selling Selling represents supply side. Marketing aims at selling goods and
services at a profit. The selling function involves :(i)
Product Planning and development
(ii)
Prospecting
(iii) Pre Approach
(iv)
Approach
(v)
Demonstration
(vi)
Sale
(vii) Feedback
4. Standardization and Grading Standardization refers to establishing of
norms for features, quality and functions of a product and grading means sorting
out the product into different classes on the basis of common features and preestablished standards. The standardization precedes grading process.
5. Branding Branding means naming a product for its identification and
distinction. Brands have communication value. They improve product image
Lox, Pepsi, Dove are the examples of brand. It is a creative matter to conceive
and decide appropriate brand name for a product.
13

6. Transportation Transportation is a process of carrying goods from production

point to consumption point. It overcomes the hurdle of distance in the flow of
goods and creates place utility. Transport has made mass production and wide
distribution possible.

7. Storage and Warehousing Storage is a process of preserving goods in good

condition till they are consumed and used. It bridges time lag between production
and consumption and creates time utility. Storage and warehousing enable
marketing to have equalization of supply of commodity to its demand. It is
necessary for assembling and distribution of goods.
8. Packaging Packaging has immense convenience and promotional value for
marketers. Package means a wrapper or container covering a product and
packaging is the activity of designing and producing a container or wrapper for a
product. Packaging protects the product and it performs promotion function also.

9. Pricing Pricing is the process of determining price of a product. Price is

determined by the manufacturer. Sale can not be performed without price. It is
an important P of marketing mix.
10. Advertising Advertising is a paid form of non personal communication of
ideas, goods and services by an identified sponsor. It can be audio, visual or both.
It is a mass communication medium and a creative work. It can be of various
types such as local, regional, national, institutional etc. Marketing performs the
advertising function effectively.
11. Financing Financing means providing money and credit to carry on marketing
transactions. Producers, wholesalers, retailers, agents and even customers require
funds for their activities. Banks, financial institutions and money lenders provide
funds.
12. Risk Taking There exists risk of loss in every marketing activity. These
losses are of three kinds :(i)
Physical loss accident, fire, flood etc.
(ii)
Credit loss Bad debts etc.
(iii) Economic less Fluctuations in demand or supply
13. Marketing information Marketing information refers to the facts and figures
pertaining to environmental changes affecting performance of business. Sound
marketing decisions and strategies can be formulated only when adequate,
relevant and accurate information relating to market conditions, changes in

14

industries and economy, shifts in consumer preference, government, life style of

people etc. are made available.
14. Servicing Marketing provide different type off after sale services to customers
such as guarantee, warrantee etc. These services are important to satisfy the
consumers. These services improve the goodwill of the firm.

1.3 Importance of Marketing

A. Importance of Marketing to the Firm / Manufacturer

According to Peter F. Druker, Marketing is a distinguishing and unique function
of the business. The importance of marketing to the business firm may be
summarized as under:

1.Helpful in business planning and decision making: Nowadays, firm

produces not according to its production capacity but according to the
requirement to the market. Thus business planning and decision making of the
firm is based on marketing.

2.Helpful in distribution: Marketing helps the firm in selecting proper

distribution channel which can deliver the goods to the consumers at minimal
distributions cost and at reasonable prices.

3.Helpful in communication between firm and society: Today,

manufacturer and consumer are situated at a distance of thousand of kilometers
away from each other and it is the marketing which reduces the distance between
manufacturer and the consumer.

B. Importance of the marketing to consumers

1.Increase in consumer satisfaction: Goods are produced according to the
needs and tastes of the consumers, which increases the customer satisfaction.

2.Facilitates choice: In order to satisfy the demand of different type of

customers, products of different varieties, designs, colors, sizes etc. or produced.
It helps the customers to make better choice.

3.Increase in knowledge: Marketing through various means of sales

promotion, i.e., advertising, publicity, salesmanship and other communication
15

Medias inform the consumers about the various type of product available in the
market and their uses and thus, increase their knowledge.

4.Providing good quality products: Most of the companies undertake

research and development which helps in improving the quality of the products,
thus, consumer gets better quality product at reasonable prices.

5.Price stablisation: Storage and transportation are two important functions of

marketing. With the help of which marketing equalizes demand and supply. It
helps in movement of goods from area of surplus to area of deficit and this
stabilizes the prices.

6.Increase in standard of living: Marketing gives top priority to the needs of

customers. Quality of products, branding, packaging, advertising, distribution, etc.
all are directed towards the satisfaction of customers. Marketing helps in
improving their standard of living by offering a wide variety of goods and
services with freedom of choice.

C. Importance of Marketing to the Society

1.Provides employment: Marketing is an important source of providing
employment. A large number of people are engaged in different marketing
activities like storage, transportation, packaging, advertising, sales promotion
activities, marketing research etc.

2.Increase in national income: When goods are produced in different

varieties according to needs and tastes of consumers, there is an overall increase
in demand. An increased in demand stimulates production activities in the country
as a result there is increase in the natural income of the country.

3.Reduction in distribution cost: An efficient marketing reduces the cost of

distribution to a minimum thereby, products available to consumers at the
competitive prices, thus benefiting the consumers.

4.Protection from depression: Marketing provides protection to the economy

against depression. In the situation of depression marketing helps by discovering
new markets, making it consumer oriented, improving the quality of products,
suggesting alternatives uses of products etc.

D.Importance of Marketing as a Business Function

1.Bases for business functions: Marketing is the beating heart of the business
organization. The chief executive of a business cant plan, the production
manager cant produce, the purchase officer cant purchase inputs and the
16

financial controller cant budget until the basic marketing decisions have been
taken.

2.Creation of utility: Marketing helps in the creation of place, time and

possession utilities for the benefit of customers.

3.Basis of economic activities: All economic activities like production,

consumption, exchange and distribution are dependent on marketing.

4.Production of Socially useful products: A marketing function maintains a

regular interaction with the present and potential consumers and uses to ascertain
their needs.

E.Role of marketing in the Economic Development:

1.Importance of marketing in the Economic Development :
Philip Kotler has summarized the importance of marketing in the
economic development in four stages:
i. Pre-industrial stage: In this stage most of the people are
engaged in hunting, herding, farming and handicrafts. Most of the
human efforts are devoted to meeting the basic needs for good,
clothing and shelter.
ii. Early industrial stage: During this stage producers attempt to
increase their productivity by increasing the amount of physical
capital available and by improving work processes through product
standardization.
Importance of marketing increases because marketing includes
branding storage, transportation, standardization and grading etc.
iii. Industrial stage: During this stage producers have achieved a
high level of output. The main problem in this stage is to generate
sufficient demand, employment and income.
The role of marketing increase during this stage of
economic development. Some new marketing
function such as: product planning, product design,
product packaging, promotion, customer service,
sales analysis and marketing research, etch has been
given much importance.
iv. Post-industrial stage: in this economic development, the living
pattern of the society took a rapid change. With the increase in percapita income the purchasing power of general public increases.
Now people are less interested in quality of their goods and more
interested in the quality of their lives. Marketing in this stage not
17

only concerned with consumer satisfaction, but also concerned

with consumer welfare.

2.Importance of marketing in Developed Economy :In developed economics the volume of production in generally more than the
demand. It is because of latest technology and developed infrastructure of
production. Many developed of the world like USA, Japan, France, Australia,
England, Germany, etc. are developed because marketing is in developed
form there.
3.Importance of Marketing in Underdeveloped Economy:
Marketing has a special significance in underdeveloped economies. A rapid
development of the economy is possible only by adopting the modern
methods of marketing. Infect, marketing in underdeveloped economics is still
line its infancy. Industrialisation and organisation go hand in hand with
application of modern refinements in the field of marketing. Marketing is the
most important multiplier and an effective engine of development. It
mobilizes latest economic energy and thus, is the creator of business activities.
4. Importance of marketing in a developing country:
The importance of marketing in developing countries has been well indicated
by Prof. Peter. F. Drucker, according to him marketing plays a critical role in
respect of development of developing countries, in the following manners:(i)

(ii)
(iii)
(iv)

Development of marketing leads to the integration of various

economic sectors of the nations such as agriculture and
industry.
It makes possible the fullest utilization of existing assets and
production capacities.
It mobilizes unknown and untapped economic energy.
It contributes to the development of entrepreneur and
managerial class of people.

1.4 THE MARKETING CONCEPT

A correct understanding of marketing concept is fundamental to the study of modern
marketing and marketing management. In any walk of life, thinking precedes doing; the
way of thinking that determines the very course of action. A concept is a philosophy,
an attitude a course of thinking, an idea or a notion relating to any aspect of divine and
human creations.

18

STANDARD DEFINITIONS
According to Prof. Philip Kotler, Marketing concept is a customer orientation backed by
integrated marketing aimed at generating customer satisfaction, as the key to satisfying
organizational goals.
2. Production Orientation Concept: Till 1930, there prevailed a strong
feeling that whenever a firm has a good product, it results in automatic
consumer response and that needed little or no promotional efforts. That
is, if the product is really good and the price is reasonable, there is no need
for special marketing efforts. The assumptions of this concept are (i) any
thing that can be produced can am sold. (ii) The most important task of
management is to keep the cost of production town. (iii) A firm should
produce only certain basic products. This concept can be illustrated as
under :Under this concept, production is the starting point. The product
acceptability occurs after the product is produced.
3. Sales Orientation Philosophy: The failures of the production
orientation philosophy of 1930s paved the way for change in the outlook
that was possible during 1940s. This reshaped philosophy was sales
orientation that holds good to a certain extent even today. It states tat mere
making available the best product is not enough; it is futile unless the firm
resorts to aggressive salesmanship. Effective sales-promotion, advertising
and public-relations are of top importance. High pressure salesmanship
and heavy doses of advertising are a must to move the products of the
firm. The essence of sales-orientation philosophy is Goods are not bought
but sold. The maker of product must say that his product is best and he
fails if he keeps mum. The assumptions of this philosophy are (i)
Producing the best possible product. (ii) Finding the buyer for the product.
(ii) Finding the buyer for the product (iii) the managements main task is
to convince the buyer through high pressure tactics, if necessary. It can be
illustrated as under :
The philosophy has been prevailing since 1940. It is more prevalent in selling all kinds of
insurance policies, consumer non-durables and consumer durable products, particularly
the status symbols.
4. Customer orientation Philosophy : This philosophy was brought into
play during 1950s and points out the fundamental task of business
undertaking is to study and understand the needs, wants, desires and
values of potential consumers and produce the goods in the light of
customer rather than the product. The enterprise is to commence with the
consumer and end with requisite product. It emphasizes the role of
marketing research well before the product is made available in the market
place. The assumptions are: 1. The firm should produce only that first
19

product as desired by the consumer. 2. The management is to integrate all

its activities in order to develop programmes to satisfy the consumer
wants. 3. The Management is to be guided by long range profit goals
rather than quick sales. It can be illustrated as under :-

This means a radical change in the philosophy. The meanest two basics changes namely
(i) move from production to market orientation. (ii) Graudal shift from age old Cavest
emptor to Caveat vendor. Since 1950, this philosophy is in vogue and will continue so
long as consumer is the kind of the market.
5. Social Orientation Philosophy: There has been a further refinement in
the marketing concept particularly during 1970s and 1980s. Accordingly
the new concept goes beyond understanding the consumer needs and
matching the products accordingly. This philosophy cares for not only
consumer satisfaction but for consumer welfare or social welfare. Such
social welfare speaks of pollution-free environment and quality of human
life. Thus, a firm manufacturing a pack of cigarettes for consumer must
not only produce the best cigarettes but pollution free cigarettes ; an
automobile not only fuel efficient but less pollutant one. In the other
words, the firm to discharge its social responsibilities. Thus, social welfare
becomes the added dimensions. The assumptions of social orientation
philosophy are: (i) The firm is to produce only those products as are
wanted by consumers (ii) The firm is to be guided by long-term profile
goals rather than quick sales. (iii) The firm should discharge its social
responsibilities. (iv) The management is to integrate the firms resource
and activities do develop programme to meet these individual consumer
and social needs. The concept can be illustrated as under.
This social oriented philosophy is the latest and is considered as an integrated concept.
This philosophy, as it covers earlier long standing concepts, is bounded to rule the
marketing world for pretty long time. However, we are to wait and see as to what changes
are likely in the coming years and decades that will shape the new marketing concept.

1.5 MARKETING MIX

Marketing mix is the blend or compound of all the marketing efforts going round the four
ingredients namely, product, price, place and promotion. these ingredients are interelated
and all revolve round potential consumer satisfaction as the focal point. it is the complex
of mixes relating to inputs and resources utilised in marketing programme to attain the
business objectives such as profit return on capital employed
market share and so on.
According to N.H.Border," Marketing mix covers two things, first a list of
important elements that make up this marketing programme and list of forces having
bearing on market operations."

20

THE ELEMENTS OF MARKETING MIX:- Marketing mix is made up

THE PRODUCT MIX:Product is the sum total of physical and psychological satisfaction it provides to the
buyer. A product is sum total of its parts like materials used in its construction and its
ability to perform, its packaging, its brand and intangibles associated with it- all speaks
about its personality or image. The product mix is the composite of products offered for
sale by firm, over period of time. It includes various variables as:-

1.Product line and Product range:- Product line is a group of closely related
products which are able to satisfy a class of needs, to be used together, to be sold at the
same consumer groups, to be modified through the same distribution channels or fall
within given price range. It speaks of the width of the product.
Product range, on the other hand, speaks of the depth of specialisation in terms of varities
based on consumer pockets and functional requirements.
2 .Product Design:- The marketing decision starts with designing the product in such a
way which is required by the target consumers. Product design is an important factor in
the sale of many products. In this the manufacturer decides about the form, the colour and
the line of all the products being planned.
3.Product package:- Package is the container or wrapper used to house the product.
Packaging is the general group of activities in designing the container or wrapper of the
product. A good package protects the product, provides convenience to the consumer,
increases economy and communicates. Attractive packages have a communication value.
4. Product Quality:- Establishment and control of quality standard is a basic step in
merchandising. Generally, specific grades or standards of quality are established for the
products either by the agreement among producer and by law. Product quality depends on
proper design, engineering, choice of materials, manufacturing processes and packaging.
5. Product Labelling:- A product label may be either descriptive, informative, grade
designating or a combination of these. Labels are fixed to products to identify them and
to describe their ingredients, quantity, quality and other characteristics. In very country,
labeling is mandatory in case of food, drug and cosmetics products so that manufacturer
is to give details of his name, place and date of manufacturing, expiry date, composition
and so on.
6. Product Branding:- A brand is a symbol, a mark, a name, a communication which
brings identity of a given product. A brand is a particular image, a quality, a value and
personality. A good brand name is one which is easy to remember, pronounce, describe
the product.

21

7. After Sale Services:- With the increase in the use of machinery, appliances and
equipments, there is need for after sale services. After sale services as the name suggests,
are the services provided by the producer after sale of the product in order to provide
maximum satisfaction to the consumers.
THE PRICE MIX:
Price is the value of product expressed in terms of money. It is the price of the product
that ensures a decent return on investment, guarantees stable economic structure, creates,
maintains and extend market and market share. The various price mix variables are:1.The pricing policies and strategies:- These are the guidelines and the frames
within which management administers prices so as to match them to the market needs.
These policies can be broadly identified as policies involving price variations, leadership
variations, psyche of the consumer.
2.The Terms of Credit:- Without the ability of offer some form of deferred payment
or installment buying, many of the producers sold by the business houses would never
activise the size of the market needed to get production economies of scale. Credit, by
expanding the market, can make new firms of production economical worthwhile. The
modern business is built upon the credit.
3.Terms of delivery:- Delivery of goods to the dealers, middlemen and customer is of
vital importance. Clear cut policies are to be spelled out regarding the terms of delivery
as to the quantity, time and place of delivery and the conditions of valid delivery.
4.Margin:- It is the difference between final price paid by the consumer and the cost
incurred in making the product available to the consumers. This includes margin of
wholesaler, retailer and producer. It has been observed that articles particularly,
consumers durables and non durables need lower margin because of low consumption.
On the other hand, the industrial products requiring after sale services and maintenance
will need high margin.
5. Resale Price Maintenance:- It is the practice whereby the manufacturers or
distributors or importers recommended the price or profit margin at which product will be
sold. It is a policy of estabilishing a minimum resale price below which a wholesaler or
retailer may not sell the products of the manufacturer.

THE PROMOTION MIX

Promotion mix is the communication mix which deals with the personal and impersonal
persuasive communication about the product or service of the manufacturer. Though

22

companies communicate with their present and potential customer in a variety of ways,
the two most common categories namely, personal and impersonal. It includes:-

1.Personal Selling:- Personal selling is face to face conversation between potential

customer and the companys salesman so as to convince the person to buy the product or
service being dealt by him.

2.Advertising:- Advertising is non personal presentation of ideas, goods and services

by an identified sponsor. It aims at providing information to various potential customer in
order to convince them to purchase the product of their company. Various medias are
used to convey the information such as tv, radio, film etc.

3.Sales Promotion:- It implies special offers. It deals with offering of short term
incentives such as coupons, premium, contest for consumers, buying allowance etc. sales
promotion is the achievement of short term marketing objectives by schematic means.

4. Public Relations:- Public relations involve the installation and maintenance of

mutual understanding between a firm and all who are likely to come in contact with it.
These sections of society are customers, shareholders, administrative staff and general
public. It attempts to increase the image and personality of the organisation.

THE PLACE MIX

It stands for matching arrangement for smooth flow of goods and services from producer
to consumer. It is concerned with the creation of time, place and possession utilities. It
contains:-

1.Transportation:- Transportation is the process of making the goods and services

available to the consumer. It aims at providing the goods to the consumers at right time
and right place. It aims at selection of the most efficient, economical, dependable and
rapid mode of transport for the firms product.

2.Warehousing:- It creates time utility by adjusting supply and demand, preserving or

conditioning the product and obtaining more favourable demand and market price. It
aims at storing goods upto the time actual demand arises so that goods can be made
available to the consumers in time.

3.Inventory Levels:- It involves determining the volume of merchandising the

manufacturer experts to sell in a given period of time. Sufficient inventory must be in
hand of different sizes, colour, models and varieties to make the goods available to the
ultimate consumers within time.

4. Channels of Distribution:- It is related to the determination of the number of

middlemen to be used and legal implications involved in their relationship. It denotes
23

various intermediaries between producer and consumer. It includes wholesalers, agent,

retailer etc.
So, above is combination of various marketing elements used for the promotion of the
companys product and service.

24

END CHAPTER QUIZZES:

1.Marketing aims at:a)
b)
c)
d)

Earning profits.
Customer satisfaction.
Providing services to customers.
None of above.

2.Marketing starts:a)
b)
c)
d)

Before production of goods.

At time of production.
After production of goods.
At selling of goods.

3.Production oriented philosophy emphasis on:a)

b)
c)
d)

Production of goods.
Product only.
Providing services.
Customer.

4.Marketing ends at:a)

b)
c)
d)

Providing after sale services.

Making sales.
Delivery of goods to customers.
Marketing research.

5.Marketing is:a)
b)
c)
d)

An art.
Science.
None of above.
Both a and b.

6.Marketing mix includes:a)

b)
c)
d)

Product.
Price.
Place.
All of above.

7.Social orientation philosophy aims at:a) Consumer satisfaction.

b) Consumer welfare.
25

c) Earning profits at any cost.

d) None of above.

8.Product mix includes:a)

b)
c)
d)

Transportation.
Pricing policies.
Warehousing.
None of above.

9.Marketing is the performance of business activities that direct the flow of

goods and services from ----------------------- to ------------------------------.
a)
b)
c)
d)

Producer, Consumer.
Consumer, Producer.
Producer, Wholesaler.
Wholesaler, Retailer.

10.How many Ps are there in marketing?

a)
b)
c)
d)

One.
Two.
Three.
Four.

26

CHAPTER-II
MARKETING ENVIRONMENT

Contents:
2.1
2.2
2.3
2.4

Marketing Environment
Factors affecting marketing environment
Micro factors
Macro factors

27

2.1 In a rapidly changing works, successful companies cannot afford to remain inward
looking only. A periodic assessment of the outside inside view of their business is
necessary is adapt their businesses to their business is necessary to adapt their business to
either best opportunities.
According to Kotler. A companys marketing environment consists of external actors
and forces that affect the companys ability to develop and maintain successful transitions
and relationships with its target customers. It may be appreciated that marketing
environment is comprised of uncontrollable factors and forces that have an impact on
the companys marketing effort.

2.2 Various factors and forces of marketing environment can be

distinguished into two parts:a) Micro- Environment: Consisting of actors in a companys
immediate environment that can affect its ability to serve its
markets. These actors are the company, its suppliers, its
marketing intermediaries, customers, competitors and public.
b) Macro Environment: Consisting of large social forces that
affect all the actors in the companys micro-environment. These
forces are demography, economic, physical, technological,
political/legal and socio-cultural in nature.

2.3 THE FACTORS OF MICRO-ENVIRONMENT

In order to carry out its business, a company comes in contract with various
agencies/actors which affect its functioning. Although the list may be large, on the whole
six major types of actors which come in direct contact with an enterprise have been
identified.
a)
b)
c)
d)
e)
f)

Company
Suppliers
Marketing intermediaries
Customers
Competitors
Public

a) Company :
28

The first actor of micro-environment is the company itself. The nature of business
of a company will greatly affect its functioning. The mission and objectives of a
company, and the top managements business philosophy will have a direct
bearing on the marketing strategies of company e.g. if a company is into
manufacturing industry, its marketing activities will be different from a company
in the services sector.

b) Suppliers :The suppliers provide input to run a business. They can affect the company in
various ways. The marketers must keep a watch on availability and price patterns
of raw material and article components to run an enterprise. The marketing
strategies may have to be modified at a very short notice, e.g. if the price of raw
material is rising the marketers have to raise their prices. If there is less
availability of it the marketers should avoid booking very big order.

c) Marketing Intermediaries :These are the facts which keep a company promoting, selling and physically
distributing goods and services from company to their final customer/consumers
or buyers. But they may create bottlenecks in physical distribution. They may
resort to handling, undercutting and unhealthy competition which can damage the
interests of the marketers. They may not pass on the promotional schemes of a
company and thus may disrupt even the most meticulously designed marketing
plans.

d) Customers :They are the eons for whom the entire marketing is done. Their role can hardly be
underplayed because it the marketing strategies of a company are not suited to
their needs, they can be rejected out rightly. The customers may comprise of
consumers, industries, resellers, government and non-profit organizations and
international customers. The strategies will differ for each type of customers. So,
these marketing mix and promotion schemes must be suited to the needs of
customers.

e) Competitors :
In the era of globalization of business, competitors emerging as a major actor of a
companys micro-environment. The level of competition has intensified manifold
and this diverts the companies of several strengths like product differentiation and
brand images. The products are becoming homogeneous and their life cycles are
becoming shorter and shorter. This calls for rapidly changing the strategies of
companies. It may be appreciated that by increased product proliferation, the
competitions has set in at various levels such as desire competition, generic
competition, form competition and brand competition.

f) Publics :A public is any group that has actual or potential interest in or impact on a
companys ability to achieve its objectives. It can facilitate or impede a
29

companys ability its goals. So, a successful relations with the public has to be
manage to ensure success of the marketing activities.

2.4 FORCES IN MACRO ENVIRONMENT

There are six types of forces, viz:a)

b)
c)
d)
e)

Demographic Environment
Economic Environment
Technological Environment
Political / Legal Environment
Socio/Cultural Environment

a) Demographic Environment :The size of the population, its geographical distribution, density, mobility,
trends age, distribution, birth marriage and death rates, racial, ethnic and
religious structure etc. have implications on marketing planning. For
example the size and distribution of population limits the size and
distribution of markets. The returns will be higher in densely populated
areas such as metropolitan cities as compared to population distributed
over a wide area like deserts.

b) Economic Environment :More number of people does not constitute a market. They must have
purchasing power as well. The purchasing power is dependent on factors
such as current income, prices, savings and credit availability. The
marketers have to be in a position to understand the effects of each of
these and should also be able to recognize future trends and their
repercussions in marketing planning. For example, in light of South East
Asian crises, several companies postponed their expansion plans in the
area. The focus shifted from luxury items to const efficient products.

c) Physical Environment :The physical environment can be source of both opportunities as well as
threats to the business. This can be creating scarcities as well as
availability of resources which can affect business. For example in India, a
good monsoon means good agricultural produce. This means higher
income of large section of society and hence better opportunity for
marketers to induce customers to purchase.

d) Technological Environment :The present age is an ear of the technological revolution. The world is
changing at a very fast pace. The companies have to keep pace with this
change. For example, the change is evident in electronics industry where
the models become obsolete very soon. This calls for a lot of investment in
R&D. The marketers have to price their products accordingly.
30

e) Political Environment :The political environment and legal development have a tremendous
impact on marketing decisions. The political and legal environment is
comprised of laws affecting business, government agencies and pressure
group that influence and constrain various organizations and individuals in
society. A wide range of laws affects business of and marketing activity
and marketers have to comply with them. The product, price, etc, have to
be in compliance with prevailing laws, conventions and practices. For
example, the NGOs working on environment protection have a persuaded
several state governments to impose a ban on use of polythene bags as
packaging material. The marketers will have to resort to alternatives
means of packing their products.

f) Socio/Cultural Environment :The socio cultural forces affect marketing decisions in several ways. The
beliefs of people, their values and norms have to be always considered.
The core cultural values must be identified and also their modifications at
the level of subcultures must be studied. These get affected by secondary
cultural values and also change over a period of time. The marketers can
design their products and promotion campaigns keeping these in mind.

31

END CHAPTER QUIZZES

1.Marketing environment includes:a) Micro environment.
b) Macro environment.
c) Both of above.
d) None of above.
2.Micro marketing environment includes:a) Suppliers.
b) Customers.
c) Intermediaries.
d) All of above.

3.Macro marketing environment analyses ------------------------marketing

factors:a)
b)
c)
d)

Internal.
External.
Both of above.
None of above.

4.Study of economic environment includes study of market on the basis of :a)

b)
c)
d)

Age.
Economic conditions.
Sex.
None of above.

5.Demographic forces includes:a)

b)
c)
d)

Income of the consumer.

Competition in the market.
Technology.
None of above.

6.Legal forces includes restrictions imposed by:a)

b)
c)
d)

Law of the country.

People.
Company.
None of above.

7.Macro forces includes:a) Demographic factors.

b) Economic factors.
c) Political factors.
32

d) All of above.

8.Micro environment doesnot include:a)

b)
c)
d)

Suppliers
Economic environment.
Market intermediaries.
Customers.

9.Competition includes:a)
b)
c)
d)

Desire.
Generic.
Form.
All of above.

10.Environment means:a)
b)
c)
d)

Factors effecting the organization.

Factors not effecting at all.
Study of only those factors which has positive impact.
Study of the factors having negative effect.

33

CHAPTER-III
MARKET SEGMENTATION
Contents:
3.1
3.2
3.3
3.4
3.5
3.6

Marketing Segmentation
Objectives of marketing segmentation
Requirement for effective segmentation
Basis of Market Segmentation
Marketing strategies
Product Differentiation and Marketing Segmentation

34

People have different needs and values, therefore, a marketer cant serve all customers in
a broad market such as automobiles or soft drinks. This all happens because consumer is
unique in one respect that he is not like others in some respects. The customers are too
numerous and diverse in their buying requirements. The marketers needs to identify the
market segments that is can serve more effectively. A marketer must define his target
market. According to Philip Kotler target marketing requires marketers to take three
major steps:
(i)
Identify and profile distinct groups of buyers.
(ii)
Select one or more market segments.
(iii) Establish and communicate the products benefits in the market.

3.1 MEANING
Market Segment is a meaningful buyer group similar wants. It is the portion of the market
designed on the basis of same features of people it covers. Thus, market segment includes
buyer group with similar wants, purchasing power, geographic location or buying habits.
Market Segmentation is the process of dividing a potential market into distinct submarkets of buyers with homogeneous needs and characteristics. It is the process of
dividing the market in order to conquer them. It is identify the groups of buyers on the
basis of difference in their desires and requirements.
The strategy of market segmentation involves the development of two or more different
marketing programmes for a given product or a service with each marketing programme
aimed at a different grouping of individuals.

There are three assumptions of market segmentation process. These are :

(a) Markets are heterogeneous.
(b) Different market segments respond differently.
(c) Market segmentation is consistent with the marketing concept.

35

DEFINITIONS

Some important definitions of market segmentation are as follows :

1. Market segmentation is the sub-dividing of a market into homogeneous subsets
of customers where any subset may conceivably be selected on a market target to
be reached with a distinct marketing mix. Philip Kotler
2. Market segmentation consists of taking the total heterogeneous market for a
product and dividing it into several submarkets or segments, each of which tends
to be homogeneous in all significant aspects. William J. Stanton
Analysis :
Thus market segmentation is a process of dividing marketing into some parts on
certain basis. Market segmentation is based on the nation that markets are
heterogeneous and not homogeneous in themselves.
Inspite of heterogeneity, the buyers of products can be divided into homogeneous
groups.

3.2 OBJECTIVES OF MARKET SEGMENATION

The objectives of market segmentation are as under :1.

2.
3.
4.
5.
6.

To formulate marketing programme for each consumer group according to

their nature.
To know the needs, buying habits, necessities and priorities of buyers.
To achieve market targets.
To make the marketing policies and strategies customer oriented.
To expand market and satisfy the consumers.
To develop news products according to consumers needs.

REASONS FOR THE DEVELOPMENT OF MARKET SEGMENTATION

1. Technological Process :
With a rapid change in technology, the manufacturing units are producing products at
the lower costs. Technology has made possible, the production of goods as per the
requirement of different market segments.
2. Adoption of Cost reducing Techniques :
Nowadays, the marketers are adopting cost reducing techniques. These techniques
help the marketer to produce more. This will help in matching the demand with
supply in the market segment.
36

3. Implementation of Marketing Programme :

The marketers design marketing programme and marketing mix to achieve success in
the market. By market segmentation these policies can be formulated according to the
needs of consumers.

4. New Product Development :

Every marketer wants to introduce new products. He takes the help to market
research. Market research provides the information regarding needs, desire, choice of
consumers. By market segmentation correct information can be collected because
consumers come to close with marketers. Product innovations are also possible.

5. Increase in Competition :
There is cut-throat competition in the market. Every manufacturer wants to attract
more number of buyers. The marketers are adopting modern concept of marketing
that is consumer oriented, therefore it is needed to lister consumers. Market
segmentation helps in this process because it provides a definite consumer group and
a definite product.

3.3 REQUIREMENTS/CRITERIA FOR EFFECTIVE SEGMENTATION

To be effective, segmentation of market must exhibit some characteristics that are as
follows :1. Identifiable :
The consumers of the market segment should be identified. It helps to make
marketing programmes effective. This difference can be found on the basis of some
characteristics. Consumers of the same group are homogeneous.
2. Measurable :
The size, profile of the segment must be measurable. There are various basis for
segmenting the market such as Demographic, psychographic. Demographic factors
are measurable and psychographic factors are non-measurable.
3. Obtainable :
Every market segment should be obtainable in terms of data. Information is required
for effective market segmentation. The information obtained should be in the nature
of convenient measuring the constitution of market segments.

IMPORTANCE OF MARKET SEGMENTATION

37

Today it is not possible to serve entire market with a single brand and the market
segmentation becomes inevitable for marketing strategy. A marketer receives the
following advantages of the market segmentation :-

1.To know marketing opportunities :

By segmenting the market, a marketer is able to create new markets for their
products. Moreover information can also be obtained through Market segmentation.
A marketer can make necessary changes in his marketing programme for increasing
sale.

2.To prepare effective marketing programme :

The success of marketing programme depends upon its adoptability by consumers. By
dividing the entire market into general segments, a marketer can make his programme
according to the requirements of consumers. Different programmes should be framed
for different segments.

3.To win competition :

Market segmentation is helpful in knowing the strengths, weaknesses, opportunities
and threats of a firm. Therefore a marketer can frame a proper marketing mix. As
several marketing policies can be made and exercised to sustain in the competitive
1.
2.
3.
4.
5.
6.

Mass Marketing.
Product Variety Marketing.
Target Marketing
Micro Marketing.
Customised Marketing.
Personalised Marketing.

1. Mass Marketing :
Mass marketing means providing the same product and applying the same marketing
mix to all consumers assuming that there is no difference among consumers in terms
of their needs. A marketer affect standardized products to all.
Features :(i)
(ii)
(iii)
(iv)
(v)

The whole market is considers as one segment.

Same product for all customers.
Common marketing programme to appeal all buyers.
Undifferentiated marketing strategy.
Large scale production.

2. Product-Variety Marketing :
Under this marketing, a marketer provides different designs, colour, shapes in his
product accoroding to the needs and wants of consumers of different segments.
Different strategies are adopted to satisfy the consumers.

38

Features :(i)
(ii)
(iii)
(iv)
(v)

Mass marketing with product varieties.

Adoption of product differentiation approach.
No proper segmentation.
Products are modified according to the need of customers.
Maruti 800, Zen, Suzuki, etc. are the different models produced by Maruti
Udyog Ltd. To satisfy various needs of customers.

3. Target Marketing :
Under this marketing, different segments are to be formulated. Target market means a
group of potential buyers of a product, service or idea. Modern Marketing concept is
based on target marketing.
Features :(i)
Total market is divided into different segments.
(ii)
Different products for different segments.
(iii) Product positioning is also under the scope to target marketing.

4. Micro Marketing :
Under this marketing target market is further bifurcated and customers needs are
satisfied on a local bases. This marketing is adopted to satisfy the needs of customers
at a specified place.

3.4 BASIS FOR MARKET SEGMENTATION

Market can be divided on several basis. For successful implementation of marketing
strategy, it is important to locate proper base for segmenting the market. Prof. Cundiff
and Still have divided the product market in two segments on the basis of purchase of
product : (a) Consumer market, (b) Industrial market.

Consumer Market Different Basis

The consumer market can be segmented on the following basis :
I.
Geographic Segmentation
II.
Demographic Segmentation
III.
Psychographic Segmentation
IV.
Behavioural Segmentation
V.
Multiple Segmentation

I.

Geographic Segmentation :

Geographic segmentation means dividing the market into different geographical units.
That is the customers are classified on the basis of geographical areas where they reside.
National market, State market, local market and urban-rural market, denote territorial
coverage of market. Market sepgmentation can also be made on the criteria of climatic
conditions of customers areas e.g. Hot, Cold, rainy regions. Marketers may choose to
restrict their operations to a secific area, say a city, a district or state. The following are
the basis of geographical segmentation.
Region

North, East, West, South, Central.

39

City Size
Density of area
Climate

:
:
:

Metropolitans, Small cities, towns

Urban, Semi-urban, Rural
Hot, Cold, Humid, Rainy.

II. Demographic Segmentation :

Market segments are defined according to demographic such as age, sex, income,
family life cycle, occupation, religion etc. Demographic factors are most popular
factors to segment the market. These variables are easy to measure. The following
are the basis of demographic segmentation :
Age
:
0-5, 6-12,13-19,20-34, 35-49, 50-64, 65 above
Sex
:
Male, Female
Marital Status
:
Married/unmarried
Income
:
High income, Middle income, Lower income
Family size
:
One, Two or three, four, five and above
Family life cycle :
Professional, business, clerical
Education
:
Primary, Secondary, Senior Secondary, College, University
Religion
:
Hindu, Muslim, Christian, Sikh
Nationality
:
Indians, Chinese, Americans

III. Psychographic Segmentation :

Psychographic considerations for market segmentations are based on social class,
life-style, and personality of customers. Following are the basis of psychographic
segmentation :Life Style
:
Conservative, Liberal, Adventuresome
Culture
:
Hindu, Muslim, Chinese, Continental
Social class
:
Lower-lower, Middle-middle, Lower-upper, Middle-lower,
Middle-middle,
Middle-upper,Upper-lower,Upper-middle,Upper-upper.
Personality
:
Extroverts, Introverts, aggressive

IV. Behavioural Segmentation :

Behavioural pattern of customers can also be the basis for market segmentation. The
consumers are segmented on the basis of their behaviour. This segmentation is
based on the consumer response. Following are the examples of this segmentation :Needs-Motivation :
Safety, Security, Affection
Perception
:
Low Risk, Moderate Risk, High Risk
Attitude
:
Positive, Negative
Occasions
:
Regular, Special
Readiness stage :
Unaware, aware, informed
Benefits
:
Cost, quality, repairs, durability
Awareness
:
Ignorant, aware, informed, interested
Usage rate
:
Habituated, Strong loyalty, Moderately attached

V. Multiple Segmentation :
The target market segment can be defined on more than one of the basis stated
above. Normally customers are classified in terms of their age, sex, income and
40

education. For example, a fashion garment manufacturer may target at young,

college going, upper middle class, male or female population for his fashionable
dresses.

INDUSTRIAL MARKET DIFFERENT BASIS

Business markets can be segmented with variables such as geography, benefits, usage
rate etc. Moreover it can be segmented with demographic variables, operating variables
and personal characteristics of the buyers. Philip Kotler quoted some variables for
segmenting the business market. Some of them are as under :
Demographic (i) Company size
(ii) Location
Operating
(i) Technology
(ii) User or non-user status
Situational
(i) Urgency
(ii) Size of order
Personal characteristics (i) Loyalty
(ii) Attitude towards risk.
Thus many basis are used for segmenting the industrial market. Some basis are as under
:(i)
Kind of business :- A separate segment is being formulated for each type
of business. For example, clothe industry can be segmented as weaving,
printing, dying, finishing, embroidery.
(ii)
Size of users :- The market can be divided as large, medium, small buyers.
A marketer always try to influence large buyers by offering them less price
and discounts.
(iii) Purchasing Procedure :- Industrial buyers purchase in centralise or
decentralize manner. They consider lot of factors while purchasing, for
example low price. Better quality, convenience, less wastage and Spoilage,
easy availability.
(iv)
Geographical location Basis :- Industrial market can be segmented on
geographical basis.
3.5 MARKET SEGEMNTATION AND ADOPTED MARKETING STRATEGIES
OR ALTERNATIVE MARKETING STRATEGIES TOWARDS MARKET
SEGMENTS
Every market can be segmented as the buyers are never all alike. Therefore a firm has to
shape its policies according to these differences. To a marketer, alternative market
strategies are available. He can adopt anyone according to the requirement. Let us study
the alternative strategies.

1.

Undifferentiated Marketing Strategy :

This strategy lays emphasis on one product and formulates only one marketing
programme. It focuses on what is common in the needs of people. It tries to attract large
number of buyers with its product and marketing programme. Firm does not segment its
market under this strategy. The company focuses on the centre of the target market to get
maximum advantage. This strategy is helpful in reducing cost. It relies heavily on product
differentiation to protect itself from competition, mass advertising etc.
41

The best example can be of cigarettes, wrapped in a white paper and Coca-Cola company
sells coke, Limca, Thums up and does not distinguish the target audience.

Undifferential marketing one target market

Features :(i)
(ii)
(iii)
(iv)
(v)

One target market.

Preference to common needs of customers.
One marketing mix for the target market.
One marketing programme to attract large number of buyers.
A narrow product line.

Merits :(i)
(ii)
(iii)
(iv)
(v)
(vi)

Large scale production.

Cost economies.
Maximum Profits.
Common advertising Programme.
Reduced Market research expenses.
Increase in goodwill of the firm.

Demerits :(i)
(ii)
(iii)

Ignores various needs of consumers.

Profits in the short run only.
Product oriented strategy.

2. Differentiated Marketing Strategy :Under this strategy, a firm operates in different segments of the market. A marketer
designs separate products and marketing programmes for each. Market research is
conducted to know the consumers needs. Different products are offered to increase the
sale. This strategy is also helpful in expanding the market.

Differentiated Marketing Strategy different consumers different segments

It provides product variety to consumers.

Features :(i)
(ii)
(iii)
(iv)
(v)

Various market segments.

Different marketing programmes.
A different marketing mix for each segment.
Large product line
Variety of products.
42

Merits :(i)
(ii)
(iii)
(iv)

Customer oriented.
Increased Sale.
Products according to the needs of the segment.
More suitable for common usage products.

Demerits :(i)
(ii)
(iii)

Difficult to implement due to restricted firms resources.

Increased product cost, Advertising cost, and administrative cost.
Increased Research and development expenditure.

3. Concentrated Marketing Strategy :Under this strategy the marketer focuses on certain areas of market. It follows one
product-one segment strategy. This strategy the small companies to establish in the
market. According to Philip Kotler, Instead of going after a small share of a large
market, the firm goes after a large of one or a few sub-markets. But another way instead
of spreading itself this in many parts of the market, it concentrates its forces to gain a
good market position in a few areas.
This stragey is useful when firms resources are limited. It focuses to gain good market
position.
For example Philip Kotler has specialized in Marketing.

Features :(i)
(ii)
(iii)
(iv)

Customer oriented.
One product one segment.
Attract large number of buyers.
One marketing mix for one segment.

Advantages :(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

specialized organizations to satisfy the needs of segments.

Strong market position of a firm.
Increase in goodwill.
Deep knowledge of the segments needs.
Decreased costs.
More suitable in different needs satisfying products.
Optimum use of resources.

Demerits :(i)
(ii)
(iii)
(iv)

Risky strategy.
Restricts the growth opportunities.
Increase in Competition.
It neglects other segments that are otherwise profitable.

SELECTION OF A SUITABLE MARKETING STRATEGY

43

After discussing the implications of the three marketing strategies, the next step is to
select an ideal segmentation strategy. While selecting s strategy, the following points
should be considered (given by Professor R Willam Kotraba).

1.

Company resources :

A company selects the strategy according to its financial resources. Firms with limited
financial resources will go for concentrated marketing. On the other hand strong financial
position permits the firms to adopt either differentiated or undifferentiated marketing.

2.

Product Homogeneity :

Some products are homogeneous. All consumers have same perception of these products.
For example salt, fruits etc. A marketer can adopt undifferentiated marketing strategy for
such products. On the other hand, some products are heterogeneous. For example
automobiles, TV, cameras etc. a marketer can adopt differentiated marketing strategy for
such products.

3.

Product Lift Cycle Stage :

Product Life Cycle generally has four stages. Introduction, growth, maturity and decline.
When a product is in introduction stage, the firm wants to create primary demand,
therefore undifferentiated strategy is more suitable strategy. As the product moves
towards the other stages, the firm tries to increase sale, at the stage of maturity, the firm
should adopt differentiated marketing strategy.

4.

Market Homogeneity :

Market homogeneity means the degree to which the consumers are alike in their
preferences, tastes, desires etc. in such case, undifferentiated marketing is suitable. On
the other hand, differentiated or concentrated marketing is more suitable in heterogeneous
markets.

5.

Competitors Marketing Strategy :

A marketer should consider competitors marketing strategy while adopting strategy for
his segments. When competitors are active, differentiated marketing is more suitable. On
the other hand, when the competitors are adopting undifferentiated marketing strategies, a
firm can gain by adopting undifferentiated marketing.

6.

Government Policy :

Government Policy has the impact on the selection of marketing strategy. Government
frame the policies to protect the interests of the masses. A marketer has to follows the
guidelines given by the Government.
Finally, it is clear that no particular strategy is superior to others. The selection of ideal
strategy totally depends upon some factors. In a changed environment. The marketing
strategy has be changed.

44

3.6 PRODUCT DIFFERENTIATION AND MARKET

SEGMENTATION
Product differentiation means to adjust demand to the supply conditions. To win the
competition in market, a market follows two steps :
(i)
Reduction in price.
(ii)
Product differentiation strategy.
In product differentiation strategy, the marketer modifies his product in terms of
packaging, size, colour, design etc. A marketer convinces his customers that his product
in different or better than the one available in the market.
The best examples are Godrej, Hindustan Liver Ltd. Adopting product differentiation in
their products like soap etc.
Market segmentation means to adjust supply to the demand conditions. It adjusts product
according to he needs of consumer. It is the process of identifying the customers
according to certain base. Here, the total market is divided into sub-parts. According to
A. Robert, Market segmentation is the strategy of dividing markets in order to conquer
them .

Difference Between Product Differentiation and Market Segmentation

Base
Object
Nature
Equilibrium in
demand and
supply
Product line
Segment
Result

Market Segmentation
Its objective is to provide
product to limited market.
It is customer-oriented.
It means to adjust supply to
demand.

Product differentiation
It gives birth to extensive
markets.
It is product oriented
It means to adjust demand to
supply.

There is extended product line.

Every market segment is treated
as separate segment.
Market segmentation helps to
increase the sale.

Under it product line is limited.

The whole market is considered
as homogeneous unit.
Product differentiation helps to
win the competition.

45

END CHAPTER QUIZZES

1.Process of dividing heterogeneous market into homogeneous is called:a)
b)
c)
d)

Market positioning.
Mass marketing.
Market segmentation.
Target marketing.

2.The requirements for effective segmentation should have all the following
except:a)
b)
c)
d)

Measurable.
Substantial.
Accessible.
Rationality.

3.The variables used to segment the market are:a)

b)
c)
d)

Purchasing power.
Geographical location.
Buying attitude.
All of above.

4.Market ---------------------- are large identifiable groups within the market:a)

b)
c)
d)

Sub groups.
Segments.
Portions.
Off shouts

5.Cost of market segmentation includes:a)

b)
c)
d)

Product cost.
Production cost.
Promotion cost.
All of above.

6.When one product is produced to satisfy the whole market needs, it is

called:a)
b)
c)
d)

Undifferentiated marketing.
Differentiated marketing.
Concentrated marketing.
None of above.

7.Concentrated marketing means:46

a)
b)
c)
d)

Selecting a specific area and leaving the rest.

Selecting whole market.
Leaving the whole market.
None of above.

8.Demographic segmentation is done on the basis of:a)

b)
c)
d)

Age.
Area.
Life styles.
Benefits.

9.Phychographic segmentation is done on the basis of:a)

b)
c)
d)

Attitude.
Personality.
Life style.
All of above.

10.Market segmentation means:a)

b)
c)
d)

Bend supply to the will of demand.

Bend demand to the will of supply.
No demand is considered.
No supply is considered.

47

CHAPTER-IV
MARKETING OF SERVICES
Contents:
4.1
4.2
4.3
4.4

Meaning and features of services

Classification of services
Services marketing mix
Service marketing mix

48

4.1 Services are usually offered along with physical goods. The services component can
be minor or major part of the product. However, in case of services marketing, although
supporting goods are required, yet services are the major object of a transaction.
Customers buy the services provided by physical product that satisfy certain wants and
not physical product itself.
According to W.J.Stanton, Services are identifiable, intangible activities that are
the main object of a transaction designed to provide want satisfaction to customers. To
produce a service may or may not require the use of tangible goods.
According to Philip Kotler, a service is any act or performance that one partly
can offer to another that is essential intangible and doesnot result in ownership of
anything. Its production may or may not be tied to a physical product.

So, the salient features of services are:

Services are intangible.

Services are series of activities.
Services have a customer orientation.

SPECIAL CHARACTERISTICS OF SERVICES

Intangibility
Inseparability
Heterogeneity
Perishability

Intangibility:- Services cannot be seen or tasted like the physical products before they
are purchased. This can cause lack of confidence and uncertainty on the part of consumer.
to overcome this, consumers tend to look for evidence of quality and other attributes in
the people, place, communication, equipment, material etc. in providing the service. For
example, consumers tend to look for evidence of quality in the dcor and surroundings of
the beauty saloon or from the qualifications and professional standing of the consultant.

Inseparability:- In contrast to physical goods which are sold away from the place of
manufacturing after sometime , service cannot be separated from the creator or the seller
of the service. This means that service provider become an integral part of service itself.
A doctor has to be available personally to provide service to its patient.

Heterogeneity/Variability:- While it is possible to offer uniformity of products, a

service is always unique, it only exist once, and is never exactly repeated even by the
same service provider. It is attributed to the pivotal role of human element in providing
and rendering services. This is despite the fact that rules and procedures have been laid

49

down to reduce the role of the human element and ensure maximum efficiency. This can
give rise to concern about service quality.

Perishability:- Services are perishable; they cannot be stored. For example, due to any
reason a few seats remain empty on a train, or a theatre cancels a particular live show that
particular service opportunity is lost forever. The Perishability of services is not a
problem when demand is steady because it is easy to staff the service in advance.

4.2 CLASSIFICATION OF SERVICES

A. CONSUMER SERVICES:- Some important consumer services are:

Catering and entertainment services:- Restaurants, cafeterias and hotels

offer food services to numerous individuals and families who face
difficulties in preparing themselves. The most common and organised
forms of entertainment service are movies, golf, music, circuses, cricket,
video games, dramas and dancing.

Hotels, motels, flotels and rotels:- Millions of people are to go in for

boarding and lodging facilities sheer out of necessity, pleasure tour or a
business trip. For each class of society, these hotels do care and are known
for excellent service and consumer care and delight.

Personal care service:- Ever refinement in standard of living paved the

way for personal care service. It includes beauty parlours, hair dressers,
laundaries, plumber etc.

Medical and surgical services:- It includes pathologists, dentists, children

specialists, dermatologists etc., providing service to a large number of
people in the society.

Educational service:- It consists of extra teaching, coaching, cosultancy

and guiding. It includes sports club, swimming pools,martial art scholls
etc.

Transportation services: It includes road transport, rail transport and air

transport providing services to a large number of people to transfer
material from one place to another.

50

Insurance services:- It provides protection to society from theft, fire,

earthquakes, floods, retirement, life etc. so as to give a feeling of security
and freedom.

Financial services:- It aims at providing finance for home, business,

marriage, car or anything needed by the person.

B. INDUSTRIAL SERVICES:- The most common industrial services are:

Financial services:- It involves providing finance to various industrial

concerns who are in need of it so that they can run their business smoothly. It
includes providing long term as well as short term finance.

Transport services:- The most industrial units needs the services of transport
providers to make their goods and services available to the ultimate
consumers. It includes providing services like providing of trucks, carts,
ships and airlines etc.

Warehousing services:- Warehouses are essential to hold inputs and output

from the time they are made available for conversion and consumption till
they are finally consumed by their ultimate consumers. There are specialised
warehousing units who provide services to various units for a reasonable
amount of charge.

Advertising services:- Advertising is paid form of non personal

communication of ideas, goods and services by an identified sponsor. It is the
advertising agencies that plan and place the advertising at least cost with
professional touch. These help in preparing and implementing the promotion
and communication mix.

Manpower selection and training:- There are many agencies that perform
crucial task of selecting and training the manpower required by various
companies so that each individual company need not perform this work.

Middlemen services:- Middlemen are agents or mediators between producer

and consumers. These persons provide services to each individual firm so as
to make their goods and services available to their consumers within time.

4.3 THE SERVICES MARKETING MIX

Marketing mix consists of the various elements of a marketing programme which need to
be considered in order to successfully implement the marketing strategy and positioning
51

in the companys market. It comprises of seven elements-Product, Price, Place,

Promotion, People, Process and Physical Evidence.
PRODUCT:- It is important to understand that customers dont buy the products/service
that actually buy specific benefits and value from the total offering. The notion of the
service concept is based on the idea that actual service offerings can be broken down into
a number of levels relating to customer need satisfaction, features and benefits. Typically,
three levels are identified: The core benefit/service:- It is sought specifically to satisfy customers needs or
solve the problem.

The expected service:- This relates to customers expectations of what kind of

services are available to satisfy their needs.

The augmented service:- Making the service better in some way is the means by
which service providers differentiate their offering in an attempt to influence
customer choice. Extra features, over and above the expected service,can be
added to make the service more attractive to prospective consumers.

PRICE:- Pricing decisions for services are particularly important given the intangible
nature of the product. Pricing decisions are significant in determining the value for the
customer and play a role in the building of an image for the service. Price always gives a
perception of quality of the service that is likely to be provided.
Many factors influence the price which is ultimately charged for the service. The
type of organisation, the structure of the market, prices charged by the competitors, cost
of producing the service etc may have an impact on pricing decisions.

The pricing tactics that may be used to sell services are:

Cost plus pricing

Flexible pricing
Price slamming
Penetration pricing

PROMOTION:- Promotion aims at communicating information about service to the

target market. Promotion plays an important role in informing, educating, persuading and
reminding customers about the intangible services which have no physical product and
packaging to attract potential customers attention. Effective communication aims at
informing customers about their role in service delivery process. It includes: Advertising
Personal selling
Publicity
Sales promotion
52

DISTRIBUTION:- Perishability and inseparability characteristics greatly influence the

distribution of services. Usually, services have short and simple channel. Most services
are distributed through direct sales. at best one agent, or middlemen can be added to it,
like in the case of insurance, travel agent, courier service etc. the main purpose of these
middlemen is to bring together the producer of service and the user. Thus, the service can
be provided to customer at the lower cost as compared to tangible goods.
PEOPLE:- In prevailing market environment, consumers are becoming increasingly
sophisticated in terms of their expectations. Quality of service is judged by its standards.
The inseparability means that human element forms an intrinsic part of the service
package and it greatly influence its quality. Level of customer satisfaction or
dissatisfaction can be governed by the way in which personnel deal with the specific
needs and request of the customers. The importance of people within marketing of
services has led to great interest in internal marketing in order to ensure high quality of
external marketing. Internal marketing aims to ensure that people work together in a way
that is aligned with the organisations state mission, strategy and goals.
PROCESS:- A service is performed rather than handed over. Processes involve the
procedures, tasks, schedules, mechanisms, activities and routines by which a service is
delivered to the customer. It involves policy decisions about customer involvement and
employee discretion. This element is all the more important in service businesses where
inventories cannot be stored. If the service operations run efficiently, the service
providers will have a clear advantage over less efficient competitors. The choice of
process can be a source of competitive advantage for services company.
PHYSICAL EVIDENCE:- In the absence of actual physical products about which the
consumer can make judgements relating to quality and value, the consumer will look for
other ways of evaluating the service.
e.g cleanliness in a hospital, library facility, decoration in a restaurant etc. all contribute
towards the image of service organisation as perceived by the customer.

4.4 SERVICE MARKETING MODEL

Prof. Christian Gronross defines that the marketing activities for service organisations
can be clubbed under three major headings:
External marketing
Internal marketing
Interactive marketing
According to him, traditional four Ps are marketing efforts that are
external to organisation because these efforts are targeted at consumers. By internal
marketing he meant that the company and each and every individual in an organisation
play some role in marketing a product or service and hence any effort by the company by
the way of training on product knowledge, product handling, customer knowledge can be
taken as inter marketing kit. Bt interactive marketing, he looked as skill of employees in
53

handling consumer contact. A consumer judges the quality not on the basis of technical
quality of the product services package but more so by its functional quality.

External marketing:- It is one that uses traditional 4 Ps approach. These traditional

4Ps are those marketing efforts that are external to the organisation and which are
projected to target customers. The important aspects to be covered under it are :1.
2.
3.
4.
5.

Market planning of services.

Channel of distribution for services.
Logistics in services.
Advertising of services.
Personal selling of services.

Internal marketing:- It implies that the service enterprise should train effectively
and motivate its employees and all the supporting service personnel to work as a team to
provide customer satisfaction in the first place and consumer delight in its broader
perspective. In this sense a service organisation employees are essentially the contact
personal with the customers. Therefore, it is not the one man show but an exercise of
every employee to support and strengthen the programme of service selling. It was
Christian Gronross who said, internal marketing should be broader than traditional
marketing and should be viewed as a managerial philosophy.

Interactive marketing:- In case of service marketing, service quality depends both

on the service provider and the quality of delivery more as in case of professional
services. The customer judge service quality on the basis of technical norms. But, the
professionals cannot take it for granted that they have satisfied their clients simply by
providing good technical service. That is, they are expected to master interactive
marketing skills and functions. Interactive marketing means that the perceived service
quality depends heavily on the quality of buyer seller interaction. In these days, as both
competition and cost increases on one hand and productivity and quality decreases, more
marketing sophistication is needed. Therefore, service companies face those major
marketing tasks. That is, they want to increase their competitive differentiation, service
quality and productivity.

54

END CHAPTER QUIZZES

1. The activities, benefits or satisfaction which are offered for sale are
called:a)
b)
c)
d)

Mass marketing
Marketing of services
Marketing of products
Target marketing

2. The number of items in service marketing mix are:a)

b)
c)
d)

Two
Seven
Three
Ten

3. The important reason why marketers need to classify service is to:a)

b)
c)
d)

Standardize advertising programme

Allocate personal duties
Determine prices
Identify similarities in marketing needs

4. Inseparability necessarily implies:a)

b)
c)
d)

A high level of consumer-producer interaction.

Intangibility of service offering
A high level of tangibility in the service offering.
Variable output

5. Inseparability can be most effectively reduced by:a)

b)
c)
d)

Reducing tangible element of service offer.

Increasing the labour content of service input.
Using electronic means of service delivery.
De-skilling of employee task

6. Intangibility implies a lack of

a)
b)
c)
d)

Quality control
Physical ownership
Product specification
Consistency

7. Services with high level of variability tend to be:a)

b)
c)
d)

People based
Service provided on one to one basis
Customized service
All of above
55

8. The extended marketing mix for services has been developed on the
basis of:a) Scientific analysis of actual decision made by services marketing
managers.
b) Need for realistic framework for analysis
c) Intuition
d) Need to incorporate service quality as a core element of marketing mix.

9. In the service sector, critical incidents:a)

b)
c)
d)

Occur each time an organization interacts with bits customers

Necessarily involve front line employees
Can only be defined by managers
Can only be defined by employees

10.Compared with high contact services, customers of low contact

services are most likely to judge service quality on the basis of:a)
b)
c)
d)

Outcomes
Processes
Quality of personal
Waiting time

56

CHAPTER V
PRODUCT PLANNING
Contents:
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10

Features of Product Planning

Objectives of Product Planning
Scope of Product Planning and Development
Product Development
Branding
Labelling
Packaging
Product classification
Product Life Cycle
Stages in new product development

57

Product Planning includes two words product and planning. Product means the
utilities provided to consumers according to their needs which satisfy them. Planning
answers the basic questions as what? how much? when? where? why? and so on.
Product planning, therefore, means a technique applied to he creation, development and
marketing of new products on a planned basis to maximize profitability. It is that plan
which matches the products of the company to the requirements of consumers.
In a nutshell, produt planning is the systematic determination of the manufacturers
product line. Adjustment of products to meet the needs of market is product planning.
Product planning embraces all activities which enables producers and middlemen to
determine what should constitute a companys line of products.
-William J. Stanton

5.1 COMPONENTS/FEATURES OF PRODUCT PLANNING

Product Planning has various features which are as under :-

1.

Product Innovation :

An innovation is the adoption of a new idea, product or process which is prospectively

useful. An innovation provides a new product to consumers. A new product is one
which consumes perceive as new.
Broadly speaking innovations include the following :(a) Product improvements
(b) Technology innovations
(c) Marketing innovation

2.

Product Diversification :

Product diversification means stretching breadth and length of product mix by adding
new items or product lines. It is the management policy to earn business and profits from
a number of sources. These additional sources or product lines may have link with the
companys existing products or may be totally unrelated. For example HMT, originally a
Machine Tool manufacturing unit, had gone into new lines like wrist watches, bulbs and
tubes, electric lamp components. Diversification is a strategy for growth and survival in
his highly complex marketing environment. There is immense truth in the saying
diversify or Die.

3.

Product Standardisation :

Goods are sold different way by inspection, by sample, or by description. If goods are
standardized, it is possible to sell them by sample or description. This simplifies purchase
and sale of goods.
Standardisation reduces cost of marketing. It helps consumers to select good quality
products because consumer will select from limited variety.

4.

Product elimination :
58

Product elimination becomes necessity because of its reduced effectiveness, it has a

strong substitute, it has declining sales trends, it has decreasing price trend and profit.
Product elimination helps in saving the firm from purchasing of costly raw materials,
taking full advantage of marketing opportunities. The decision of product elimination is
taken under product planning.

5.2 OBJECTIVES OF PRODUCT PLANNING

Product planning has some specific objectives. These objectives are as under :-

1.

To Satisfy Consumer needs :

Consumer is supposed to be the king of market. Product planning includes research and
identifies consumers tastes, preferences, likes and dislikes. A marketer produces
products according to the market with the help of Product Planning.

2.

To maintain a viable product portfolio :

Product Planning includes the important decisions like Product innovation, Product
standardization and Product elimination. By product elimination, only viable products are
available for consumers.

3.

To appraise the strength and weaknesses :

Every firm has its own strengths and weaknesses. Through product planning, a marketer
tries to improve them. It helps in making a successful marketing programme and
marketing mix.

4.

To encourage better resource utilisation :

Product planning is related with development of new products, modification of existing

one and discontinuance of flop products. Efficient Product planning helps in better
utilization of resources.

5.

To match marketing and production efficiencies :

Product planning is the planning regarding products innovation, modification,

elimination etc. Product planning helps in knowledge the latest of marketing. A marketer
produces and supplies the goods according to the need of consumers.

6.

To increase the firms sale :

In product planning, a market decides about the price policy, distribution policy and
promotion policy. Though efficient promotion policy, a marketer is able to convenience
consumers to purchase his product. It increases the sale of firm.

7.

To strengthen companys ability in critical times :

59

Product planning involves devising procedures to evaluate the performance of products.

It helps in modification. It extends the life of the products. It deletes the products which
have reached the terminal stage of their lives. It develops the new products.

5.3 IMPORTANT AREAS OF PRODUCT PLANNING OR SCOPE OF

PRODUCT PLANNING AND DEVELOPMENT
Product planning and development has wide scope. All decisions related to product are
included in it. It includes the following aspects :-

1.

Product variety:

First of all the manufacturer has to decide whether he should produce to satisfy demands
for all variety of products existing in the market or he should attempt to meet demands of
a limited variety of products only.

2.

Product quality:

Many manufacturers prefer to restrict their offer to a single quality. This may be high
quality meant for high income groups or of average quality or market quality designed to
sell at a standard market price. The quality of a product depends upon market conditions,
objectives and resources of the manufacturer.

3.

Product colour :

Colour of the product should be chosen carefully. Nowadays, consumers are influenced
by colours. They choose that colour of the product which is matched with their
personality and lifestyle. Every colour has its own significance. They are related with
health, faith, religion. For example white is considered colour of peace while pink
indicates love. Therefore consumers are very selective in choosing products.

4.

Product size :

Due to change in society pattern, the consumers prefer those products which are available
in different sizes that is small, medium or large. The consumers purchase products
according to their convenience. The size of a product depends on the nature of product,
resources, competitive products size, transport facility, packaging etc. Therefore, size
decision should be taken after considering the above factors.

5.

Product diversification :

Diversification of product lives refers to the practice followed by a seller to add new
product to the line of products presently handled by him. Diversification is important to
minimize the risk arising out the changes in fashions and consumers tastes. New
technological development also brings into existence new products. Diversification is
also to expand the activities of the firm.

6.

Product simplification :
60

Simplification of product lines is just opposite the practice of diversification. It refers to

the practice of limiting the number of products a seller deals in. Simplification is
important because less capital is tied up in inventories. Personnel have better opportunity
for specialization in simplification. Moreover manufacturing and marketing activities can
be more effectively directed.

7.

Product positioning :

Product positioning means a conscious attempt on the part of marketers to impart a

distinct identity to his own brand to make it stand apart among the competitors. It is a
strategy of establishing a distinct place for a brand in the mental perception of its
consumers. For example Raymonds fabrics are positional as Executive Class
Collection.

8.

Product branding :

A brand is defined as a name, term, symbol, or a design or a combination of them. A

manufacturer uses brand due to growth of competition, increasing importance of
advertising, etc. A manufacturer should be very careful while selecting a brand because a
brand is an effective weapon in the hands of manufacturer. A brand should be simple,
short and easy to memorise etc.

9.

Product grading :

By grading we mean the act of separating or sorting out the goods according to the
established standards to determine their grade. Established standards may be based on
weight, size, strength, soundness, taste, colour or appearance and such other
characteristics of goods.

10.

Product Label :

The label is an important feature of a product. It is that part of a product which contains
information about the producer of the product. A label may be a tag attached directly to
the product. It is use to communicate brand, grade and other information about the
product.

11.

Product Package :

Packaging is the sub-division of the packing function of marketing. It means placing of

goods in small packages-boxes, bottles or cans, bags etc. for sale to the ultimate
consumers. It is concerned with putting goods in the market in the size convenient to the
buyers. Packaging is important because it protects the product.

12.

Product uses :

A marketer must explore new uses of a product. It helps in increasing the demand of the
product. For example Dabur Honey can be used in various ways.

13.

After-Sales Service :
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Once the product has crossed the seller, it is the buyer who uses the physical product. It is
possible that the physical product does not perform as expected because of some
mechanical, technical or other defect. So a marketer should provide after-sale service to
his buyers. For example Guarantee, Warrantee etc.

5.4PRODUCT DEVELOPMENT
MEANING
Product development includes a number of decisions such as what to produce, how to
have its packaging, how to fix its price and how to sell it ? it is the responsibility of
production department to develop and produce products on the advice of marketing
department. Product development is concerned with the development and
commercialization of products. The work of product planning and development is
performed by marketing department.

DEFINITIONS
1.

Product development encompasses the technicalities of product research,

engineering and design.
W. J. Stanton

2. Product development involves the adding, dropping and modification of item

specifications in the product line for a given period or time, usually one year.

-Lipson & Darling

ELEMENTS OF PRODUCT DEVELOPMENT

Product development has three elements which are summarized as under :-

62

1.

Product innovation :- An innovation is the adoption of new idea, product or

process.

2.

Product Improvement :- It means alteration or modification in design and

physical attributes of already existing product to enhance its performance and
quality. It is stretching of product line. It creates new brand for consumers choice.
Product can be improved in terms of quality, size, style, fashion, design, packaging
etc.

3.

Packaging Improvement :- Package means a wrapper or container covering a

product. Packaging improvements can be done in terms of shape, size, material etc.
A change in packaging gives a new look to the product.

IMPORTANCE OF PRODUCT DEVELOPMENT

Product development is an important activity. The importance of product development
can be summarized as under :-

1.

Consumer satisfaction :-Product development is an activity of developing

new satisfaction of consumers.

2.

Increase in goodwill : Businessmen makes a detailed study of the market in

relation to the products. Then they develop a product. A satisfied consumer
purchases more and it also improves the image of the firm.

3.

Extends the Product Life cycle : Every product has it own product life cycle.
Product life cycle has four stages-introduction, growth, maturity and decline. In
maturity stage, the sales of the firm are maximum. To extend the period of his
stage, a producer takes the help of product development. Product requires
modifications in this stage.

4.

Winning the Competition : in Product development process, a marketer tries

to develop a product according to the tastes and preferences of consumer. It helps in
winning the competition.

5.

Maximizes Profitability : Product development creates the new uses of

product. It increases the sale which results into maximum profits.

6.

Standardized products : Standardisation of goods increases the sale of goods

because customers know that the goods are of certain standard.

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PRODUCT IDENTIFICATION
Product identification includes the marketing activities which helps in identification of
products. Products are presented to consumers never in the natural form. Rather they are
packed. Labeling and branding are the important marketing activities which differentiate
the products of one manufacturer from the other. These activities make product
identification easy. The consumers like those products which comes in package with
brand name. They prefer guaranteed products. Labeled products are also their choice
because label gives its contents, uses and instructions.
Thus, a marketer adopts these techniques to make identity of his product. There are
mainly three techniques of Product Identification which are summarize as under :Product Identification

A
Branding

B
Packaging

C
Labeling

A brand is a symbol, a market, a name, a design or a combination of them which is used

for the identification of a product. The second technique to identify the product is
packaging. The products available in a shop on shelves must be distinguishable for easy
identification.

5.5 MEANING OF BRANDING

Branding is the process of finding and fixing the means of identification. It is the process
of naming the product. Once, a product shapes, it needs an identity that is in the form of
brand and recognizing it is branding. Branding means giving a distinct individuality to a
product. Branding helps in product differentiation and enables the firm to carry out assure
control over the market. It creates an exclusive market for the product. Following are
important terms used in branding policy.

DEFINITIONS
1.

All trademarks are brands and thus include the words, letters or numbers which
may be pronounced ; they may also include a pictorial design.
-William J Stanton

2.

A brand name is a name, term, symbol or design, or a combination of them which

is intended to intended to identify the goods or services of one seller or group of
sellers and to differentiate them from those of competitors.
-American Marketing Association
64

BRAND NAME
It is a part of brand which can be vocalized i.e. utterable e.g. Cinthol, Moti, LG, Sony etc.
It can be a combination of letters, words or numbers. For example Hamam, Bisleri,
Nirma etc .

BRAND MARK
It is a part of brand which can not be uttered, but can be recognized such as symbol,
design, colouring or lettering for example logo of Philips, eye on Bajaj electrical, Anchor
on electric switches etc.

TRADE MARK
It is brand name or mark registered under law for protection against its copying or
imitation. It enjoys legal protection against misuse by competitors.
According to the American Marketing Association, A trademark is a brand or part of a
brand that is given legal protection. It protects the sellers exclusive rights to use the
brand name or brand mark.

FEATURES OF A GOOD BRAND NAME:1.

2.
3.
4.
5.
6.

It must be easy to pronounce and remember.

It should be short and sweet.
It should point out producer.
It should be legally protectable.
It should be original.
It should reflect product dimensions.

MERITS OF BRANDING:1. Merits to Manufacturers: Product get individuality:- For any product, there are many
competitiors, though ours is the first company to introduce the product.
The product, if branded will has its own personality standing out rest of all
competitors.

Control of product prices:- Control of retail price is a significant

factor because each consumer is quality and cost conscious. Each pack
65

contains maximum retail price inclusive or exclusive of taxes depending

upon situation. This makes the producer to sound sleep as the greedy
middlemen would not be able to charge high price.

Increases bargaining power:- Good brand and branding gives greater

bargaining power to the manufacturers with the dealers. This is because
there is already a pull in favour of the product. Hence, there is no need for
great push by the retailers.

It reduces advertising cost:- A product which is known to customer

will hardly need any extra advertising expenditure. At the most he has to
remind the consumers about the product by advertising because of
competitive business environment.

Ever increasing demand:- Powerful brands have the capacity to create,

maintain and extend the demand for the product. The strong brands have
longer life.

Introduction of new product becomes easy:- Launching of new

product is not an easy task. But when consumers are brand loyal then they
easily adopt the new products launched by the producer. This is
particularly true in case of smokers, soaps, toothpaste, hair creams etc.

A powerful weapon of Product differentiation:- Day by day the

environment is becoming competitive. In such cases, only those
companies who are able to differentiate their product from competitors are
able to succeed in the market. It is the brand image which helps the
company to differentiate its products from that of competitors.

2. MERITS TO CONSUMERS:

Brand stands for quality:- When consumers are buying the products,
they are selective as certain brands as it symbolizes lises the quality
standards. Unbranded products to have quality but no assurance as greedy
producers may say something and pass on spurious stuff to consumers.

Consumer protection against cheating:- The hard earned money of

consumer does not go waste because, the manufacturers print on each pack
or container the MRP- maximum retail Price- inclusive or exclusive of
taxes. Therefore, the retailers cannot charge more than what is printed.

Branded product reflect their lifestyles:- Branded products speak of

the personality of a product and therefore, the life style of consumers. One
can easily say, by the use of certain brands of toiletories, dress materials,

66

ready made garments, shoes etc. to what class the consumer belongs, it
reflects the quality of life.

Steady and regular supply of products:- consumers are not only

worried about the supply of quality goods at reasonable rates but equally
interested in adequate and regular supply of goods. Each individual, each
family has not only budget but schedule of supply of goods in definite
quantities.

Prevalence of stable prices:- Between branded and non branded

products, branded products have prices printed as to what the consumer is
to pay as MRP. In case of unbranded products, manufacturers generally
donot print MRP. The act of branding is in favour of consumers as regular
prices are printed that stay regular over a particular period but it doesnot
give chance to the retailer to do any manipulation as they can do in case of
unbranded products.

5.6 PRODUCT LABELLING

Labeling is another significant means of product identification like branding and
packaging. Labeling is the act of attaching or tagging labels. A label is anything- a
piece of paper, printed statement, imprinted metal etc. which is either a part of
package or attached to it, indicating value of- contents of price of product name and
place of producers. It carries a verbal information about the product, producer or such
useful information to be beneficial to the user. Thus a label is an information tag,
rapper or seal attached to the product or product package.
A label may be descriptive, informative or grade designating or a
combination of these. A descriptive label describes the contents of package or
ingredients of the product. A descriptive label on a cane of pineapple describes the
contents by size, weight, syrups etc. an informative label includes detailed description
with the emphasis on how the product is made? How to use it? how to care for it? in
order to drive maximum satisfaction. A grade label designates customary regulated
standards.

THE PURPOSES OF LABELLING:

1. To bring home the product features: A label goes on describing the
product specialties which makes the product a quick mover. It gives its correct
use. Thus, bottle containing poison, if not labeled, it fails to tell about its contents.
Wrong labeling does more harm than no labeling at all.
2. To facilitate the exchange process: As good many competitive products
are available in given product range, lable helps in avoiding in unwanted
confusion. This is of special importance in case of drugs and chemical where even
67

a spelling mistake proves fatal to the users. That is why, druggist and chemists are
having qualified pharmacists in the pharmacies.
3. To incurs self service: A label is a strong sales tool that encourages self
service operations. if the customers are supplied with necessary information of the
contents of the package or the container, as its contents, weight, use, price, taxes,
instruction and so on, consumers can pick the package off their choice from shop
shelves. Thus labeling has a special role to play in self selling units.

5.7 Product Packaging

Packing is a process that speaks of companys ability to contain economically.
Man made or natural product for shipment, storage, sale or final use. It comprises the
activities of wrapping or creating the product for performing the marketing functions
more easily and economically , in simple words , packing is the act of housing the
product in the packages or containers like tin, can, bags ,jars, bottles, boxes, cages
and the like. A package is a wrapper or a container in which a product is enclosed ,
encased , house, or sealed. Packing on the other hand, deals with activities of
planning and designing of different means of packaging the products. what are cloth
to human being , so are the packages for the products.

Standard definitions:
In the words of Professer Williams Stanton, packaging is the general group of
activates in designing of container or wrapper for the product.
Package design is the unique combination of colors, graphics and symbols to
distinguishing the product.
According to Professor Philip Kotler, Packaging is an activity which is concerned
with the Protection, economy, convenience and promotional considerations.

OBJECTIVES OF PACKAGING:

Product Protection
Product Identification
Product Convenience
Product Promotion
Product Profit Generation

ESSENTIALS OF GOOD PACKAGING:

1. It should protect the contents:- by very nature, every packaging is designed
to protect the contents of it against the natural and artificial factors of damage
68

such as dust, dirt, watering, evaporation etc. The intrinsic values or qualities of
the product are to be maintained intact.

2. It should be attractive:- Protecting, of course is the primary aim and the

function of packaging. However, it should be capable of catching the attention of
on lookers or those who come in contact with it. It is an attention getter. It stands
out of others.

3. It should bestow convenience:- The package so designed should grant

highest degree of convenience to manufacturers, distributors and consumer alike.
Good packaging increases product sanitation, ease in handling, transporting,
storing and using the packages. Today, producers are giving much importance to
product use facilities.

4. It should guarantee economy:- The point of protection, attraction and

convenience need not be sacrificed for the economy. Economy is something that
not only reduces packing cost but also brings down other expenses such as
transportation, warehousing and handling.

5. It should assure flexibility:- A good packaging is one that assures adaptability

as packages can be put to many uses. Thus, packing should be possible with
different kinds of materials.

6. It should be pollution free:- It is a world wide problem that packaging has

environmental problem especially the discarded packaging. That is why there is
trend of recycling the packing material especially the discard one. In addition,
research is also being done to find out packing material that is ecofriendly.

7. It should be informative:- A good package is one that is informative i.e. it

should provide the necessary information to both consumers and distributors. It
should give information regarding products contents, grade, brand, weight, usage
etc. so that it becomes easy for both producer and consumer to handle the product.
There should be proper labeling on packing.

ROLE/FUNCTIONS OF PACKAGING:1.
2.
3.
4.
5.
6.
7.

It protects the contents.

It provides product density.
It acts as promotional tool.
It provides user convenience.
It facilitates product identification.
It allows easy product mix.
It extends product life cycle.

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PACKING STRATEGIES:

Family packing strategy:- It is a packaging potion in which the packages of

the entire product line closely reassemble each other. In other words, it is a kind
of strategy, where the major features of the packages in respect of the entire
product line looks alike. For instance, Camlin stationery products have the black
tiny camel on its all items.

Multiple packing strategy:- it is a kind of strategy wherein number of closely

related but heterogeneous products used by one consumer are placed in a single
package. Such a package conveys the idea of an ideal matching set that one
possesses. Thus, in case of men, shirt, pant, neck-tie, handkerchief, tie-pins may
be packaged together.

Reuse packing stategy:- It is the strategy wherein the manufacturers offer their
products in such packing which can be reused after consumption of the contents
of the same. Maltova food drink was offered in a glass jar which can be used as
a tumbler. Amul butter is presented in a jar which can be reused.

Ecology packing strategy:- Use of resources of the environment results in

pollution problem. To preserve the physical environment, a company is required
to design a packing strategy that not only protects the environment but also
preserves it. The purposes of such a strategy may be returnable bottles and
containers, use of containers that decompose over a period of time, arranging of
packing material and recycle it. That is why many manufacturers are packing their
materials in the containers which are reusable as a means of recycling the packing
material.

5.8 Product classification

The commodity approach to the study of marketing gives the two possible broad
classification of products namely-traditional and the modern.

A. Traditional Product classification:

The traditional classification has three alternative as:
1.Consumer and industrial products.
2.Durable and non-durable products.
3.Convenience,shopping and speciality goods.

70

1. Consumer and industrial products: Consumer products are those which are
meant for the consumption or final use of consumer or households. These are the
products which are used without further commercial processing. In the other
words, consumer goods are meant for personal and non business use. On the other
hand, industrial goods are those which are used by business buyer as input for
further commercial processing. Thus, shampoo, biscuits, watches are consumer
goods while raw material, spare-parts, supplies and equipments or machinery are
industrial products.

2. Durable and non-durable products: Both the consumer and industrial

products can be further classified as Durable and non-durable products. Durable
Products are those tangible products that last longer or they do not get exhausted
even after repeated use. For instance, the chair on which we sit, the cars we
drives.
On the other hand, non durables, non durable products are those which get exhausted
which a single or a few uses. For Instance, food items we eat the soft drinks we drink
etc.

3. Convenience, shopping and specialty products : It was Professor Melvin

T. Copeland of Harvard Business school was classified consumer goods as
convenience, shopping and specialty products based on the nature and extent of
shopping efforts put in by the consumers.
Convenience goods are those products which are bought with the minimum
efforts, at the short notice and from convenient location. These products have the feature
such as purchase at convenient location-full knowledge of product-enjoy continuous and
regular demand-small lot purchases-highly standerdisatised-keen competition among
producers and are perishable in nature.
Shopping goods are those where consumer devotes considerable time in selection
of those before they buy. The consumers want to compare a quality, price and style in
several shops before they buy.
Specialty goods are those which enjoy certain special features and special efforts
are made in their purchase. These products have unique characteristics and brand
identification, calling for special efforts.

B. Modern Product Classification:

This classification was suggested by Aspinwall. His classification is three pronged. First,
it spots the product on a continuum. Secondly, it considers five product classifications
until two. Thirdly, it identified product classified by colours as red, orange and yellow.
Following is its outline:

1. The continuum: This classification spots all the products along the continuum
with two basic characteristics at each end of the continuum. Accordingly any
71

product falling between these two ends some combinations of these two basic
types.

2. Product Characteristics: Five product characteristics are identified in spotting

the products along the continuum. These are:a) Replacement Rate: it signifies the rate at which a product is purchased and
consumed by users in order to provide the satisfaction a consumer expects from a
given product.
b) Gross Margin: It represents the difference between the paid in cost and the final
realized sales price by the seller.
c) Adjustment: It speaks of the amount of services applied to goods in order to meet
the exact needs of the consumer.
d) Time of Consumption: It marks the measured time of consumption during which
the goods give up the utility desired.
e) Searching Time: It stands for the measured average time and distance between the
consumer and the retail outlets.
3. Net Product Names: He has named the classified products as per colours as red,
orange and yellow. Red products are those that have high replacement rate and low
gross margin, adjustment, time of consumption and search time. Yellow goods are
those which enjoy low replacement rate, high gross margin, adjustment, time of
consumption and search time. In the middle we have orange goods that enjoy these
five characteristics neither high nor low but medium.

5.9 PRODUCT LIFE CYCLE

Product Life Cycle model is a useful technique for appraisal of product performance in
terms of its sales-cost-profit. The concept of PLC was popularized by Prof. Theodore
Levitt. This model attempts to analyse cyclical changes in sales and profits throughout
sales history of a product. It is a product aging process. PLC means four phases of life
cycle of a product. Just as an individual has infancy, youth, adulthood, and old age; a
product in normal course, has four stages of life history viz. introduction, growth,
maturity and decline.
The Life cycle of a product has many points of similarity with the human Life cycle.
The product is born, grown bustly, attains dynamic maturity, then enters in declining
years.
Arch Patton

MEANING OF PLC
The product life-cycle is a conceptual representation. The concept of product life cycle
highlights that sooner or later all products die and that if management wishes to sustain
its revenues, it must replace the declining products with the new ones. Product life cycle
72

indicates that products move through the cycle of (i) introduction (ii) Growth (iii)
Maturity (iv) Decline.
Sales and profit rise till the growth stage. However in maturity stage sales rise but profits
fall.
The product Lift cycle model is one of the most encountered concepts in marketing
management. Prof. Levitt popularized the concept and Prof. C.R. wassen, B. Carty, M.
Chevalier, D.J. Luck, D.T. Kollat, J. F. Robson-furthered the original concept.

DEFINITIONS
1.

The Product Life Cycle is an attempt to recognize distinct stages in the sales
history of the product the sales histories pass through four stages, known as
introduction, growth, maturity and decline.
-Philip Kotler, Marketing Management

2.

Life Cycle of marketing offerings stages of marketing acceptance through

which a market offering passes form introduction to its market death. The stages in
a market offerings life cycle are market introduction, market growth, market
saturation, market decline and market death.
-Lipson and Darling

3.

Life cycle of a product is a kin to human life cycle form several angles. Like a man
the product also takes birth, rapid growth, attains the maturity and then enters the
declining stage.
-Arch Palton

4.

The Product Life Cycle concept is the explanation of the product from its birth to
death as a product exists in different stages and in different competitive
environments.
-William J Stanton

FEATURES OF PRODUCT LIFE CYCLE

The important features of product life cycle are as under :(1) Product life cycle is compared with human life cycle. It has four stages :
introduction, growth, maturity, decline as human life cycle has : childhood,
adolescence, youth and old age.
(2) Product move through the cycle. It starts with introduction and ends with decline.
(3) Sales volume and units profits rise correspondingly till the growth stage. In
maturity stage, sales rise but profits fall.
(4) It is not necessary that all products in the market follow through four stages. It is
possible that a product might cross only the first stage.
(5) There is no definite line of demarcation between one and the subsequent stage.
(6) The length of each stage varies from product to product depending on the nature
of product, competition, changes in technology etc.
73

(7) A marketer adopts different marketing strategies in different stages. For example
more advertising is done in introduction stage and Product modification is done in
maturity stage.
(8) The marketing mix also changes form stage to stage.

STAGES OF PRODUCT LIFE CYCLE

1.

Introduction stage :

The first stage of a product life-cycle is the introduction stage. Under this stage prices are
relatively high and competition is very less. The sale grows at lower rate because
consumers are unaware about the product. Heavy promotional expenditures are made by
marketer. Following are the main characteristics of this stage :
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

The price of products are high because of low production and technological
problem.
The sales grow at lower rate because consumers are unaware and production
capacity of the firm is low.
There are heavy promotional expenses there are more chances of product failure in
introduction stage.
Profits are low due to less sales, high distribution cost.
High cost of production, promotion and distribution.
Existing consumers may be hesitant to try new product.
A marketer introduces limited products that is narrow product line in introduction
stage.
Market is not aware of the availability of new product.
Initial low demand keeps production below break even point.
Difficulties and delays in adjusting production schedules.

Marketing Strategies :
A marketer should adopt the following strategies :
1.
2.
3.
4.
5.
6.
7.
8.

More advertising and publicity of the product.

Introductory offers should be given with attractive gifts.
More importance should be given to quality of a product.
Skimming the cream policy in high-tech products or market penetration policyin
customer goods like soap etc. may be adopted.
Selective distribution policy and various attractive schemes should be offered to
dealers.
More suggestions should be invited from consumers so that product deficiencies
could be ironed out.
Product must be provided for trail basis.
Potential and present consumers must be informed.

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Growth stage :
This is the second stage of product life cycle. As the product grows in popularity, it
moves into the second stage i.e. growth stage. In this stage competitors enter the market
and the company may have to resort to product improvement and innovation. It may
enter new market segment and try new distribution channels. The prices may remain
static or fall slightly for meeting competition. Advertising is geared to create brand
image. The following are the main features of this stage :
1. The sale grows at faster rate because of streamlined production facilities. The sales
are increased at an increasing rate.
2. The advertising expenditures are high as it moves towards brand identification.
3. Profits rise sharply because of high sale and prices. Consumers are aware about the
product.
4. There is greater incentive for the new companies to enter the market. Competitors
have the advantage of entering the market because research and development have
already been completed.
5. Wide distribution network is adopted by a marketer because there is a demand from
the every corner of market.
6. Product modifications, improvements are made because every marketer wants to
win competition and reduce price.
7. Price of product is stable or slightly reduced due to large scale economies, product
modification and competition.

Marketing Strategies :
The following strategies are adopted by a marketer :
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

New varieties of product are introduced to satisfy the different consumers.

More importance to product quality.
Special offers, concessions, allowances to dealers are given.
More efforts to create brand image and brand loyalty.
Improvement in product.
More retail outlets are built to satisfy the need of consumer.
Reduce the price to attract more consumers.
Expanded product line.
Heavy advertising expenses to stimulate sales.
Customer satisfaction is the main motto of marketer.

Maturity stage :
This is the third stage of product life cycle. As the competition becomes keen and market
gets saturated with product brands, the maturity stage sets in. in this phase of PLC, the
sales increase at a decreasing rate. The firm has to combat competition by cutting prices,
increasing promotional efforts and modifying products, markets and marketing mix.
Consequently profit will fall. Product differentiation, identification of new segments and
75

product improvement are emphasized during this stage. The important

features of this stage are as under :1. The sales grow at falling rates because there is little growth in the market.
2. Prices tend to fall and selling efforts becomes aggressive.
3. Profits are squeezed because customer are attracted towards substitutes and
competitive products.
4. Promotional Exps. are made in normal ratio to sales. Advertising Exps. are made
to differentiate manufacturers product form others.
5. Weak competitors leave the market because large and strong competitors adopt
various strategies to be remained in the market.
6. Prices charged by the producers are quite lower and uniform. The strength and
vitality of higher prices fade.
7. Profit margins are decrease because sales are also decreased.

Marketing Strategies :
The following marketing strategies are adopted under maturity stage :
1. Develop new market : The company may search for new market segment or
consumers. For instance, Sunsilk shampoo was made available in small packets
for a price of Rs. 2 only so that low income group consumers may be attracted.
2. Emphasis on new uses of the same product : For example, nylon originally used
for making parachute and ropes was later developed as a fabric and now used in
typres.
3. Increase in frequency or volume of product use : This may be done by offering
quantity discounts, premiums, trade deals, discount coupons, contests and other
sales promotional tools.
4. Quality improvement : R & D efforts are made to increase product performance,
durability, reliability, speed etc. new models of colour television sets are brought
up with multichannels. Crown TV has come up with TV model with built-in
satellite receiver.
5. Product feature modification : The features of the product may be altered to
increase its safety, convenience and usefulness. For example, the design of cars or
scooters are modified often. Dry cell torch is filled with automatic chargers.
Kinetic Honda has auto starter. Khaitan fan claims to have double ball bearings.
6. Product-style innovation : Product may be presented in new colour flavours,
ingredients and packages. Rasna was made in varied flavours. Refrigerators are
brought out in different attractive colours. Surf was sold in reusable containers.
Modification in style makes the product more attractive.
7. Price slashing : If market is price-sensitive, a reduction in price may help to
improve sales-tempo. Publishers bring out cheaper paperback editions to push up
sales. Festival or Off-season low pricing is resorted to by retail organizations
or dealers for augmenting sales.
8. Customer service : The firm offers special customer services like consumer
finance, credit facilities, delivery and transportation, prior and after sales services,
maintenance, and warranty to consumers. To boost sales, Kelvinator offered 7
year warranty and gained in volumes of sales.
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Decline stage :
In this final stage of PLC sales will drop down heavily and product or brand will go
out of market. The price will fall, profits will decline. Eventually the product line
incurs loss. Decline may occur due to technological changes, shifts in consumers
tastes, introduction of new sophisticated products, sever competition etc. Weak
products affect company reputation in market which may harm other products also. It
may create imbalanced product-mix. The important features of this stage are as under
:
1. There is rapid fall in sales because new products are available in market. People
are interested in buying new things.
2. There is fall in prices because of reduced sales. Every manufacturer wants to clear
the stock at the earliest.
3. No promotional expenses are made because consumers are not interested in
buying the product and they are aware of other better products.
4. Distribution network is reduced to the minimum with thorough rationalization.
This is an advantage as product is known for good many years.

Marketing Strategies :
The following marketing strategies adopted under decline stage.
1. A marketer may think of keeping the weak product, if there is possibility of
repositioning.
2. Marketer may reduce expenditure on promotion, advertising, R & D of weak
products.
3. No extra expenditure of efforts are made to revitalize a declining product.
4. Weak product may be discontinued and spare capacity of the firm may be used for
some other profitable product.
5. No additional feature may be added to the product.
6. Economy packs may be introduced to revive the market.
7. Moreover re-usable packages may be introduced. Attractive packaging should be
made.
8. Change in marketing mix and marketing programme.
9. Reduce the price to attact consumers. Different schemes should be offered.
10. Credit facility, easy instalment facility may be offered.

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COMPARATIVE STUDY OF STAGES IN PLC

Comparative study of stages in PLC :
Reference Point
1. Sales
2. Profits
3. Cash flows
4. Consumer
attitude
5. Competition
6. Price
7. Product
8. Marketing
strategy
9. Advertising

Introduction
Low but rising
Nil/ Negative
Negative
Hesitant/trying
resisting
Low
High
Basic
Expansion

Growth
Fast rising
Maximum
Moderate
Favourable

Maturity
Slow down
Falling
High
Loyal

Growing
Low
Improved
Penetration

Severe
Minimum
Differentiated
Defensive

Awareness

Brand Loyalty

10. Distribution
Network

Patchy

Brand
preference
Intensive

Decline
Fall
Low
Low
Not
favourable
Reducing
Minimum
Unchanged
Productivity
oriented
Clearance

Intensive

selective

PRODUCT LIFE CYCLE EXCEPTIONAL CASES

According to Philip Kotler a product has a life cycle is to assert four things :
1. Products have limited life.
2. Products sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller.
3. Profits rise and fall at different stages of the product life cycle.
4. Products require different marketing, financial, manufacturing, purchasing and
human resource strategies in each stage of their life cycle.
Most product life cycle curves are portrayed as bell shaped as drawn above. Not all
products exhibit a bell-shaped PLC.

PRODUCT DIFFERENTIATION
Product differentiation is a positioning that some firms rise to distinguish their products
from those of competitors. Distinction can be either real or perceived~ the main product
differentiators are features, performance, style, conformance, durability, reliability,
reparability design, etc.

1.

Features :

Most products can be offered with verifying features. Features are

characteristics that supplement the product's basic function. The company can
create extra/ additional versions by adding extra features, e.g. Maruti 800 is
having three different versions with different/extra features.
78

2.

Performance Quality: Performance quality refers to the level at which the

products primary characteristics operate. Performance level maybe: low average,
high superior. The manufacturer must design a performance level appropriate to
the target market and competitors performance levels.

3.

Conformance Quality: It is degree to which all the produced units are identical
and, meet the promised target specification. One of the major reasons for the high
quality, reputation enjoyed by Japanese manufacturers is that their products have
high conformance quality.

5.10 Stages in New Product Development Process.

Guided by a company's new-product strategy, a new product best development through a
series of eight stages:
1.
2.
3.
4.
5.
6.
7.
8.

New Product Startegy

Idea Generation
Screening
Concept development testing
Business Analysis
New .Product. development
Testing
Commercialisation

1.

New Product Strategy

A new product strategy links the new product development process with the
objectives of the marketing department. the business unit, and the corporation. A
new product strategy must be compatible with these objectives, and. in turn, all
three objectives must be consistent with one another. New product strategy is a
subset or part of the organisation's overan marketing strategy. This strategy
provides general guidelines because it specifies the roles the new product must
play and also describes the characteristics of products the organisation wants to
offers and the markets it wants to sense

2.

Idea Generation
New product ideas come from many sources. The most important are:
(a) Customers: The market concepts suggest the customer wants& needs are the
logical place to start the search for new-product idea through Surveys, projective
tests, focused groups discussion, suggestion & complaints letters from customers.
(b) Employees: Marketing personnel - advertising and marketing research
employees as well as sales people- often create, new ideas because they analyze
and are involve In the market place; Firms should encourage their employees to
submit new product ideas and reward them if their ideas are adopted.
79

(c) Distributors:-A well-trained sales force routinely asks distributors about

needs that are not being met. Because they are closer to end Users. Distributors
are often more aware of customer needs than manufacturers are.
(d) Competitors:- Company Can also find good ideas by examining their
competitors, products and services. They can find out what customers like and
dislike in their competitors new product. They can buy their competitor's
products, take them apart and build better ones.
(e) R&D:-It is carried out in distinct ways as basic research - aimed at
discovering new technologies, applied research- finding useful applications of
new technology; product development converting applications into marketable
products; product modification-making functional changes in existing products.
(f) Consultants:- To examine a business and recommend product ideas,
consultants are available. They determine whether a company has a balanced
portfolio of products and if not, what new product ideas are needed to offset the
imbalance.

TECHNIQUES FOR GENERATING NEW PRODUCT IDEAS

Creativity is the well spring of product ideas. A variety of approaches
and techniques have been developed to stimulate creative thinking.
(1) Brain Storming - the technique for generating; new-products ideas in
(2)

(3)

(4)

which group members propose without criticism, ways to vary a product

or solve a problem. The sheer quantity of ideas is what matters.
Focus groups - The objective of focus group interviews is to assess
group interaction when members are exposed to an idea or a concept.
Sometimes focus exposed to an idea or a concept. Sometimes focus groups
generate excellent new product ideas.
Idea Screening - It is the stage in the product development process that
eliminates ideas inconsistent; with the organisations new product strategy,
or obviously inappropriate for some other reasons. Most new product
ideas are rejected at the screening stage. In screening ideas company must
avoid two types of errors - A Drop-error, occurs when the company
dismisses an otherwise good ideas, A Go-error occurs when the company
permits a poor idea to move into development and Commercialisation
stages.
Concept Development and Testing - Attractive ideas must be refined
into testable product concepts, we can distinguish among.
Product Idea- a possible product that a company might offer to a market
product concept an elaborated version of the idea expressed in meaningful
consumer terms
Product image- the particular picture that consumer acquire of an
actual/potential product. Actually consumers do not purchases ideas but
buy product concepts. Any product ideas can be turned into several
product concepts
80

Idea-adding ingredients to a product, say milk to increasing us nutritional

value of taste.

Concept :1.
2.
3.

An instant breakfast drink for adults

A tasty snack drinks for children.
A healthy supplement for older people.

Concept Testing - concept testing calls for testing products concepts with
an appropriate group of target consumer, then getting those consumers
reactions. A word and / or picture description can suffice. It is considered
fairly good predictor to early trail and repeat purchases for the line
extension. There have also been relatively precise predictors of success of
new product.

(5)

Business Analysis: After management develops the product concept it can

evaluate the proposal business attractiveness, where preliminary demand, cost,
sales and profitability estimates are made. For the first time, costs and revenues
are estimates and compared. The newness of the product, the size of market, and
the nature of the competition all affect the accuracy of revenue projection.
Forecasting market share for a new entry is a bigger challenges. Analyzing overall
economic trends and their impact on estimated sales is especially important" in
product categories that are sensitive to business cycle fluctuation. Commonly
asked questions in this connection are:

6.

What is the likely demand for the product?

Would current customers benefit from the product?
Would it enhance the image of our overall products?
How might competitors respond?
.

New Product Development

If the result of the business analysis are favorable than the prototype (or trial
model) of the product is developed. The technical feasibility of manufacturing the
product at an acceptable cost is thoroughly examined. This stage can last a long
time and thus be every expensive.
Laboratory and use tests are often conducted on prototype models. Labs: Tests
subject production to much serve treatment then is expected by end users. User
safety is an important aspect of lab testing. Use tests including human & pet food
products, household cleaning products, etc.

7.

Testing
After products and marketing programmes have been development. They are
usually tested in the market place. Test-marketing is the limited introduction of a
product and marketing program to determine line the reactions of potential
customers in a market situation. Test marketing allows management to evaluate
alternative strategies and to assess how well the various aspects of the marketing
81

mix fit together. Cities chosen as test sites should reflect market conditions in me
new
product's projected market area. Researcher should find locations where the
demographics and purchasing habits mirror the overall market. But test marketing
is relatively too expensive. .
.
Stimulated Marketing Test :
Alternatives to test markets and it is even cheaper also Simulated market test is
presentation of advertising and other promotional materials for several products,
including a test product, to members of the product's target market. These people
are then taken to shop at a mock or real store where their purchases are recorded.
Shopper behaviour - including repeat purchasing, is monitored to assess the
product's likely ... performance under the market ,conditions.

9. Commercialisation
The final stage in the new product development process it commercialization. ln
this stage full scale product and marketing programmes are planned and, finally,
implemented. Upto this point in development, management has virtually complete
control over the product. Once the product is born and enters its life cycle,
however the external competitive environment becomes a major determinant of its
destiny.

82

END CHAPTER QUIZZES:

1.The geographical presentation of sales history of a product is called:a)
b)
c)
d)

Product life cycle.

Product positioning.
Product planning.
Product development.

2.Various stages of product life cycle are:a)

b)
c)
d)

Introduction.
Growth.
Maturity.
All of above.

3.The first step in new product development is:a)

b)
c)
d)

Idea generation.
Test marketing.
Commercialization.
Product development.

4.Sources of new ideas are:a)

b)
c)
d)

Internal sources
External sources.
Both of above.
None of above.

5.The experiment done in a limited part of the market place is called:a)

b)
c)
d)

Test marketing.
Commercialization.
Selling.
Marketing.

6.The process of giving name, symbol or mark to the product is called:a)

b)
c)
d)

Branding.
Packing.
Labeling.
None of above.

7.Ecological packing policy aims at:a)

b)
c)
d)

Control the pollution.

Help in reuse of the product.
Provide all related goods closely.
None of above.

83

8.Labeling means:a)
b)
c)
d)

Giving name to the product.

Making product attractive.
Piece of paper attached to give information about the product.
All of above.

9.The services provided by producer after the sale of the product is called:a)
b)
c)
d)

After sale services.

Commercialization.
Product support services.
Product credit services.

10.Aim of packaging is:a)

b)
c)
d)

Product protection.
Product identification.
Product convenience.
All of above.

84

CHAPTERVI
PRICING DECISIONS

Contents:
6.1
6.2
6.3
6.4
6.5

Meaning and features

Factors affecting Pricing decisions
Pricing Objectives
Pricing Methods
Pricing Policies and Strategies

85

6.1 Meaning of Price

Price is the exchange value of goods and services in terms of money. Price is the amount
of money charged for a product or service, or the sum of the values that consumers
exchange for the benefits of having or using the product or service. Price is the only
elements in the marketing mix that products revenue, while all other elements represent
costs. In other words, price represents the money which the buyer pays to the seller for a
product.

Importance of Price in Marketing Mix

1.

Means of allocating resources: In any economy system, price is the

mechanism for allocating resources. Price generates revenues which are made
available for the expansion and development of the firm. A firm employ
various factors of products including land, labor and capital. The extent to
which these factors will be used depends on the relative prices they receive.
Price allocates the resources for the optimum output and distribution.

2.

Price Regulates Demand: Price has an inverse relation with demand,

increase in prices leads to fall in demand and vice versa. But sometimes
higher prices help to firm to spend more on advertising and thus push up the
demand for the product. Price is the greatest and strongest P out of the four
P of the mix.

3.

Price is a competitive weapon: Price as competitive weapon has great

importance. Any company whether it is selling high or medium or low priced
goods will have to decide as to whether its prices will be above or equal or
below the competitors.

4.

Determinant of profitability : The impact of price rise or fall is instantly

reflected in the resulting profits, provided other variable remains constant.

5.

Importance of consumers : Price is an important element in meeting

consumer needs. All products have some degree of utility or want satisfying
power. But the individual consumer cannot purchase every product he desires
since he has limited amount of money at his disposal.

6.

Other advantages :
a. Price is a powerful force in attracting the attention of buyers and
increasing sales.
b. Promotion and advertisement of a product depends on its price.
86

c. Products are differentiated with one another on the basis of price.

6.2 Factors affecting Pricing Decisions

A.
B.

Internal Factors
External Factors

Internal Factors:
Internal factors are those which are well within the control of the
company.

1.

Pricing Objectives:The objectives set for pricing affect the decision

regarding fixation of price for a particular product. Firms may have a variety of
objectives such as: price stability, product maximization, sales maximization,
target return on investment, meeting the competition, survival etc. Pricing
decision should be made only after proper consideration of pricing objectives.
2.

Cost of Production: Cost of production serves as the base for price

fixation. Majority of the firms uses cost plus or target pricing method for price
fixation. Actually it is not only the cost but the plus factors which determine the
prices. Whatever may be cost of production, the price is one at which the seller is
prepared to sell buyer is prepared to buy.

3.

Marketing Mix: Price is one of the important elements of the marketing

mix and therefore, must be coordinated with the other elements :production,
promotion and distribution. Any change in price will have an immediate effect on
other three elements.

4.

Product Differentiation: In order to attract the customers, different

characteristics are added to the product, such as quality, size, colour, change,
attractive package, alternatives uses etc. Generally customers pay more prices for
the product which is of the new style, fashion, better package etc.
5.

Organisational Consideration: Pricing decisions occur at two levels in

the organisation. It is the top management which generally has full authority over
pricing. The top management sets the guidelines with in which the price is to be
administered and determine the price range while the actual price is dealt at lower
level.

6.

Product life Cycle: Pricing decisions are affected by stages of product

life cycle. As the product follows a number of stages i.e. introduction, growth,
maturity, saturation and decline.

87

External factors
External factors are those which are generally beyond the control of the company.
These factors also play an important role in deciding the price of a product.

1.

Product Demand: Product demand has a great impact on pricing. Since,

demand is affected by many factors, such as; number of prospective
buyers, their preferences, their capacity and willingness to pay, number of
competitors, what they are charging for similar products.

2.

Elasticity of Demand: Price elasticity demand also affects the pricing

decision. If the demand of the product is inelastic, high price may be fixed.
Contrary to it, if demand is elastic, the firm can not fix high prices rather it
should fix lower prices than that of competitors.

3.

Competition: Competition is a crucial factor in price determination.

While deciding the prices, the marketers must know the pricing objectives,
policies and strategies, strengths and weakness of the competitors.

4.

Economic Conditions: Economic Environment of the country is an

important factor affecting the pricing decisions. Inflationary and
deflationary conditions affect the pricing. In recession period, the prices
are reduced to a sizable extent to maintain the level of turnover.

5.

Government Regulations: The government of the nation influences the

pricing policies in a number of ways. It regulates the prices of the product
it makes available and services rendered to the community like electricity,
transport, railway, postal etc.

6.

Consumer Behaviour: The behaviour of the consumers and users for

the purchase of the particular product, do affect pricing, particularly if
their number is large. In other words, the composition and behaviour of
consumers have great impact on pricing decisions.

7.

Distribution Channel: A number of intermediateries exist between the

manufacturers and the final consumer. Each of them charges for their
services, which ultimately add up to the cost of the product. Therefore,
longer the distribution channel, higher will be the price of the product and
vice-versa.

88

8.

Suppliers: If the suppliers raise the price, it will lead the manufacturer to
increase the price of the product, which will ultimately affect the
consumer.

9.

Market position of the company: Market position or the image of the

company in the minds of consumers regarding its product mix, quality,
technology, durability, usefulness, after sale services etc. may also
influence the pricing decisions of the company.

10.

Miscellaneous factors: Besides the above, there are number of factors

which directly or indirectly influence the pricing decisions. Such as: social
and ethical consideration, consumers reactions towards rising prices,
wages rates, productivity, trade customs, speculation etc.

6.3 THE PRICING OBJECTIVES

1. Survival: Survival is the most fundamental objective in most cases. Survival
price objective is a short-run or a temporary goal and is insisted only when the
firm faces a survival crises. Once, it turn the corner, it shifts to other price
objectives.

2. Target return on investment: Pricing for profit is the most logical price
objective. Pricing to attain predetermined profit involves the establishment of
specific profit goals either as a percentage of sales or a R. O. I. Or R. O. A. M.
(return of assets managed). Price decisions based on investment return are
becoming very common both in private and public sector undertakings, these
days.

3. Market share: A market share price objective can be either to maintain the
market share to increase it or sometimes to decrease it. The company uses the
price as an input to enjoy a target market share. Target market share means that
portion of the industry sale which is company aspire to attain. This market share
is normally expressed as a percentage of a total industry share. Price is typically
one of the most important variable in improving or maintaining market share.

4. Cash flow management: Product pricing decisions are extremely important to

the financial manager. In the past, marketing plans did not, as a rule, makes any
89

major claim on a companys cash reserves. Today the marketing world has
changed drastically. The rapid extension of new product research and
decentralised distribution net-works and the explosions of aggressive selling have
made it necessary to commit sums of money to marketing.

5. Price and profit stabilisation: Stabilising prices and profit can be a long term
objective of a firm. Fluctuating prices having fluctuating profits bringing into play
unwanted forces affecting the firms economic health and status in market place.
Stabilisation of prices and margins is more in critical industries where oligopoly
prevails.

6. Resource mobilisation: Mobilising the resources for either self-development

or reinvestment elsewhere can be another price objective. Prices are deliberately
set high in certain cases so as to make not more profit but to generate more
surplus for the purpose of reinvestment in the same firm or in the other firms.

7. Meeting killer competition: Price can be used as a weapon to meet the

competition or eliminate it. Matching or marring the competitors is the simplest
strategy in case of those companies that are more interested in non-price
strategies. Meeting of competition implies keeping more or less same prices as
fixed by the competitors.

8. Profit maximisations: Profit maximisation is the age old objective of pricing.

Here, price policy followed by the management helps the firm to maximise its
earnings under given market conditions. Maximisation of the profit is of the
overall activities of the firm and not in case of each product item because, it
means exploitation and goes against the concept of social responsibility of
charging reasonable profit.

9. Maintaining the image: Every company has a identity from the moment it
opens its doors. It is an identity representing what it has done to convey the
public. It is the sum total of the impression that the people have about the firm. It
is about its product packages-trademarks-brand names-employees-graphics the
marketing programme and the like. This images is deeply influenced by how the
company handles the delicate and sharp weapon of pricing.

90

6.4 METHODS OF PRICE DETERMINATION

Pricing methods are based on cost, competition and demand.

A. Cost based pricing methods: cost establish the floor for the possible price
range and there are two commonly used cost oriented pricing methods to set
the product prices. These are(1) cost plus pricing and(2) target return pricing.
1. Cost plus pricing method: Cost plus or mark up pricing involves
simply adding a percentage of the cost to arrive at the price. There is slight
difference between cost plus and mark up pricing. Mark up pricing is an
addition of profit calculated as a percentage of sales rather than as a
percentage of cost. In the final analysis, the amount of profit will be the
same through the percentage of profit differs on cost and on sales.
2. Target return pricing: It is another very popular cost oriented method
followed by good many manufacturers. It is based on the breakeven
analysis. It sets the prices at a desired percentage return over and above
the breakeven point thus, the cost of producing and offering the goods for
sale are determined and a target percentage return is than added to these
cost at a given standard output level. Since. Total revenue to be generated
includes costs and profits it is easier to find unit selling price by dividing
the total sales revenue by total output or input level.

B. Competition based methods: These are outlined below

1. Going rate pricing: Going rate pricing is the method of setting the
prices in relation to the prices of the competitors. The firm bases its price
largely on the competitors prices with less attention paid to its own cost
or demand. Therefore the firm may charge the same, more or less than the
major competitor or competitors. Generally in industries where oligopoly
prevails such as steel , paper, fertilisers, aluminium, copper and the like,
the firm charge the same prices as the competitors. It is natural that the
firm charges the prices when the competitor or competitors change not
bothering about their cost and demand changes. Some firms may charge
not higher or lower prices than their competitors.
2. Sealed bid pricing: In all those business lines where the firms bid for
jobs, competition based pricing is followed rather than its costs and
demand. The firm fixes its prices on how the competitors price their
products. It means that if the firm is to win a contract or a job, it should
quote less than the competitors. With all this, the firm cannot set its price
below a certain level. This is, it cannot price below the cost. One the other
hand , higher prices above its costs reduces the chances of winning the
91

job. The net effect of the two opposite pulls can be well described in terms
of expected profit of a particular bid.

C. Demand based pricing methods:

There are two important demand based methods namely, (1) demand modified
break even analysis pricing and (2) perceived value pricing.

1. Demand modified breakeven analysis: Demand modified breakeven

pricing is that method which sets the prices to achieve highest profit (over
the breakeven point) in consideration of the amount demanded at
alternative prices. In other words, this method requires estimates of market
demand at each feasible price breakeven points and expected profit levels
of total sales revenue can then be calculated.

2. Perceived value pricing: Of late, good many firms are setting their
product prices on the basis of perceived value of a product. It is buyers
perception of value and not the sellers cost which is the key to the product
pricing. The prices setter use non-price variables in marketing mix to build
up perceived value in the buyers minds and prices is set to capture the
perceived value. This approach fits well within the thinking of product
positioning.

6.5 PRICING POLICIES AND STRATEGIES

A. Price Variation policy:
Price variation policies are those where in the firm attempts to vary the prices of its
products with a view to match them with the differing market needs. There can be three
variations of such price variation policies. These options open to the firm are :(1)
Variable price policy. (2) Non Variable Price Policy (3) Single Price Policy.

1.Variable Price Policy :

It is that policy in which the company charges different prices for sale of its like goods at
a given time to similar buyers purchasing in comparable quantities under similar
conditions of sale. This is price charged differ from buyer to buyer. This variable price
policy is more adopted in small business and where products are not standardized.

2. Non variable Price Policy:

It is also called as one price policy because, the company charges similar price for sale
92

Of like goods at a given time to a class of buyer purchasing in comparable quantities

under similar condition of sale. Here, the prices charged varies from class to class say,
wholesaler, sub wholesaler, retailers and distributor. This non variable price policy is less
discriminatory s price differ from class than customer to customer. It is a popular price
policy followed by all those firms which have indirect marketing arrangements.

3. Single Price Policy:

It is the Price Policy wherein all the buyers irrespective of their class, size or the
conditions of purchases are charged similar purchase price under similar condition of
sale. This is the price Policy that has no touch of discrimination and it is constructive in
the sense that it helps in building goodwill. It is equally easy to administer as there is no
scope for bargaining. Instead of speaking on price of the product, the sales army can
utilize its time on product quality, service and outstanding.

B. Geographic Price Policies:

Geographic price policies are fully reflective of the practical problems of consumers and
producers or the seller locating geographically and the emergent transportation costs of
Product linking them.

1. Point of Origin Price Policy:

It is that type of geographic pricing policy in which a firm quotes ex-factory price and
make no allowance for the transportation cost necessary to move the goods to the
point of destination. There can be two variations in the policy namely ex-factory
and free on rail (F.O.R.). Price under ex-factory pricing holds buyer responsible for
all the transportation costs of both freight and cartage from the factory point. On the
other hand, F.O.R. Price is the One in which the company bears cartage or carriage
till the transport agency or the railway station. That is the buyer are to meet freight
from the transport agency or the railway station to the point of destination.

2. Freight absorption Price policy:

Freight absorption Price policy is the one that the transportation costs fully or partly.
That is, the price quoted is inclusive of transportation costs. In others words, the buyers
do not bear directly freight and other transportation charges though the price includes
such charges. There can be three variations of this freight absorption price policy namely,
Uniform Delivered Price Policy
Zonal Price Policy
Base Point Price Policy

Uniform Delivered Price Policy:- It is one in which the firm absorbs

full transportation costs and delivers the goods to all buyers at their ends at
a uniform price irrespective of location and distance.
93

Zonal Price Policy:- It is under which the firm divides its markets into
zones and quotes uniform prices to all buyers located in the identified
zone. The price quoted will differ from zone to zone rather than a single
price all over the country. The price arrived at is the addition of average
transportation costs to the basic price.

Base Point Price Policy:- It implies partial absorption of the transport

costs by the firm. However the price is quoted by adding transport costs
computed up to the buyers location by reference to one geographic
location, not necessarily the factory.

3. Price Differential Price Policy:- The price policies that involve price

differentials are those the pricing firm accepts the gap between the price quoted to
the consumers or dealers and the actual price charged. Thus, price differential
represents the differences between the price quoted and the price charged to the
buyer. it means that the final price will be less than the quoted price. but there
may be price hike too. The forms of price differentials are:Discounts
Rebates
Premium

1.Discounts:- Discount is the price differential that reduces the quoted price so that
the buyer pays much less than the quoted price. Discount is an allowance made to the
buyers in consideration on marketing service rendered. Discount can be of three types
namely,
a) Trade discount
b) Quantity discount
c) Cash discount
Trade discount is the deduction allowed of the quoted price with reference to specific
position enjoyed by the buyers in the channel of distribution. The aim is to compensate
the intermediaries of the distribution channel for their valuable service rendered. It is a
percentage deduction of the quoted price.
Quantity discount is the deduction allowed off the quoted price to the buyers on the basis
of quantity bought. It is generally allowed on the aggregate of all or specific classes of
product purchases measured in rupee value or physical units or in terms of purchase at
time or purchase over a period of time or beyond a specific floor volume.
Cash discount is the deduction from the invoice price granted to all those who clear their
bills within the desired dead-line. It is a reward to the buyer for timely or prompt
payment of the amount due. The cash discount rates are based on the prevailing rates in
the market at a given point of time.

94

2.Premiums:- All the earlier four point were those that reduced the net price
payable by the buyer. However, at times, opposite is also true. There are occasions
where the actual price paid will be higher than the quoted price. Thus, consumer
durable manufacturing units can add premium to the price quoted for one reason or
the other. It does not mean that discounts are not given. Even after enjoying
discounts, the prices paid might be higher. It is not that all companies resort to this
premium adding. Thus a Tractor or Fridge are likely to ass extra say warrantees,
special after sale services, extra durability and so on.

3.Rebates:- Rebate is a deduction of the quoted price. Many a times, the buyers
suffer loss of value satisfaction caused by certain factors. The causes of such
dissatisfaction may be defective goods delivered, delays caused in delivery, goods
damaged in transit, possible deterioration in quality on the shelves. In order to
accommodate these genuine claims, concessions are given in the form of rebates.

4. Leader Price Policy:- Leader pricing is one where the firm in the industry initiates
the price charged and these price changes are so effective that other firms follow suit. It is
the one of price approximation by the followers to that of initiator in the industry. In
market jargon the former is called as price followers and the later as price leader. It is
based on the principle that there is some truth and wisdom in following the established
and giant units.

5. Psychological Pricing:- It is to do with creating a typical consumer perception so

that the consumer is made to buy the product. That is, the prices fixed influence the
psyche of customer and spur him to action. It is mostly followed in case of consumer
durables.

6.New Product Pricing Policy:- In case of new products, there can be two possible
price policies:
Skimming Price Policy
Penetrating Price Policy

Skimming Price Policy:- It sets the high initial price to first profit from price inelastic
consumers, and then successively lowering the prices, often used under competitive
conditions, to the level that more price sensitive customers are willing to pay. It sets
introductory prices at high levels relative to costs to skim the cream off the market. As
there is no immediate competition and there are price elastic customers, the firm finds it
easier and safer to set initial new product price as high as possible relative to costs and to
lower the prices gradually as the market conditions dictate.

95

Penetrating price Policy:- It is an attempt to set new product prices low relative to
costs. It involves setting how initial price to establish market share, pre-empt the
competitors and/ or to capitalize production economies. By setting low initial prices, the
competitors are kept away and this makes possible for the firm to enlarge its share by
generating larger sales volume.

END CHAPTER QUIZZES

1.Psychological pricing aims at:
a) Satisfying psyche of the customer
b) Making sales of the product at any cost
c) Following the leader
96

d) Sale of new product

2. Cost plus pricing method is based on:

a) Cost plus some percentage
b) only cost
c) No profit
d) None of above

3.------------------ is price policy wherein all the buyers are charged similar
purchase price under similar conditions of sale:
a) Variable price policy
b) Non variable price policy
c) Single price policy
d) Uniform delivered price policy

4. ------------------- is the deduction of the quoted price:

a) Trade discount
b) Rebate
c) Quantity discount
d) Premiums

5. ------------------- is method of setting the prices in relation to the prices of

the competitors:
a) Sealed bid pricing
b) Target return pricing
c) Demand based break even analysis
d) Going rate pricing

6. the amount customer pays for the product is called:

a) Cost
b) Price
c) Promotion
d) Place

7. The deduction given to persons who clear their bills within deadline is
called:
a) Trade discount
b) Premium
c) Cash discount
d) Rebate

8. Premium leads to:

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a) Decrease in price
b) Increase in price
c) No effect
d) None of above

9. New product pricing includes:

a) Skimming price policy
b) Penetration price policy
c) Resale price maintenance
d) both a and b

10.Charging Rs.99 instead of Rs.100 is called:

a) Leader price policy
b) Psychological price policy
c) Skimming price policy
d) Penetration price policy

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CHAPTER VII
PROMOTION MIX
Contents:
7.1
7.2
7.3
7.4

Personal Selling
Sales Promotion
Advertising
Public Relations

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Promotion mix or communication mix is the particular combination of promotional tools

used by a firm to communicate with the audiences. These are the means by which firms
attempt to inform, persuade and remind its target market, using both direct and indirect
means, about the brands they sell as well as about the company as a whole. Although
communications directed to the target markets are the mainstay of the communication
program, firms need to communicate with all its stakeholders i.e. suppliers, customers,
shareholders, customers, employees and government agencies. Firm develop specific
communication plans directed to the stakeholders.
Communication mix stands for three special kinds of promotional activities
namely, personal selling, advertising, sales promotion. Some authors include the fourth
element namely, public relation.

7.1 PERSONAL SELLING

Personal selling is an art of convincing the prospects to buy the given products and
services. It is an act of persuasion. It is an ability to handle the people to dangle the
product. It is the science and art of understanding the human desires and pointing the way
to their fulfillment. It is the ability to convert human needs into wants.

DEFINITIONS:
According to American Marketing Association, Personal selling is the oral presentation
in conversation with one or more prospective purchasers for the purpose of making
sales.
According to Blake, Salesmanship consists of winning the buyers confidence for the
sellers house and goods thereby the regular and permanent customer.

RELEVANCE OF PERSONAL SELLING

There are certain market conditions where personal selling is more relevant as it provides
easy and effective answers to various problems. These conditions are:-

1. Market conditions:- The special market situations that encourage personal

selling are: Where a firm sells in a small local market.
Where consumers are concentrated at a single point.
Where any agent or middlemen is not available.
Where selling is made only to middlemen.

2. Product conditions:- These includes:100

Where the companys product is in the introductory stage of product life

cycle.
Where the product requires personal demonstration.
Where the product requires personal attention to satisfy the needs of
customers.
Where the product is of high unit value.
Where the product requires after sale services.

3. Consumer conditions:- The special customer conditions that require

personal selling are:

Where the consumer needs immediate answers to his queries.

Where the consumer requires persuasion and follow up.
Where the purchases are valuable and irregular.

4. Company conditions:- There are certain company conditions that

motivate for personal selling. These are:

Where the company is not able to identify and use non personal methods
of selling.
Where the company thinks that it does well with personal selling as
compared to any other alternative.

METHODS OF PERSONAL SELLING:1. Selling across the table:- This is the selling method under which the
companys salesman negotiates the sales across the table by inviting the
prospective buyer either in companys premises or at any other specified place
especially hotels. This method is generally used in long term, high value
transactiouns that establish relatively long term buyer-supplier relationship. The
best example of this type is the supply of industrial products.

2. Selling at the doorstep:- Under this method sales is done by the companys
salesman by personally visiting the houses of the prospective customers and
explore the possibilities of making sales of their product.

3. Auction selling:-This is the method of making sales where the companys

salesman invites the prospective buyers at an appointed place and time may be
companys premises or any other common place of meeting. The salesman asks
the group to quote the price, after giving them an opportunity to examine the
goods. Generally he quotes the minimum amount below which the bids are not
allowed the fall so that company can become aware of minimum price to be
received. It is a very popular method of making sales.

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4. Tender selling:- It is the method of sales under which the company invites the
tenders from the prospective buyers through an advertisement requesting them to
submit their offer of purchase in respect of particular product or service. The
company sells the product to that person who gives the most profitable price and
meets the companys conditions regarding sales.

5. Selling at the counter:- Under this method, the salesman of the company does
not go to the prospective customer, but it is the buyer who visit the salesman at
the shop to purchase a product or service. The salesman available at the counter
attends the customer, give the demonstration of the product, helps the customer in
making up his mind to purchase the product. This is the most common method of
making sales.

THE PROCESS OF PERSONAL SELLING:Selling process is the sequence of steps involved in the conversion of human
desires into demand for a product or service. These steps are:1.
2.
3.
4.
5.

Prospecting
Pre-approach
Approach
Presentation and demonstration
Overcoming objections

1. Prospecting:- searching for prospects is called prospecting. Here, the prospects

is the person or institution who is likely to be benefited by the product the
salesman want to sell and can afford to buy it. It is the work of collecting the
names and addresses or persons who are likely to buy firms products or services.

2. Pre-approach:- Pre-approach is to get more detailed facts about a specific

individual to have effective sales appeal on him or her. The objective of pre
approach is to plan the information.

3. Approach:- approach means the meeting of the prospects in person by the

salesman where he makes face to face contact with the prospects to understand
them better. The objective of approach is to convert the favourable attention of the
prospects easily and smoothly into sales proposition.

4. Presentation and demonstration:- presentation implies an array and

decoration of articles in the shop. It is the heart of selling process. Effective
presentation has the capacity to convince the customer of his sales preposition.
Demonstration is a part of presentation, because mere description is not enough. It
is the crucial task of providing the proofs and providing the statements about
quality, utility, performance and service of a product.

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5. Overcoming Objections:- an objection is the expression of disapproval of an

action taken by salesman; it is an adverse reason or an argument indicating clearly
that the prospects is not yet ready to buy. The experts have a set procedure for
overcoming objections, as listen to the prospects, anticipate the objections and
prevent their occurrence.

6. Closing:- the success in the earlier stages will lead to the last stage of closing the
sale. Closing sale is to persuade the prospects to act right now than postponing the
sale. It is in this stage that prospects is turned into customer, desire into demand.

7.2 SALES PROMOTION

The phrase is made up of two words namely, sales and promotion. Sales-promotion
means special offers. Special in the sense that they are extra as well as they are specific
in time and place. Offers in the sense that they are direct propositions the presence of
which forms the part of a deal. The that supplement, coordinate and make more effective
the efforts of personal selling, advertising and distributors to increase the sale and
stimulate the consumers in buying more. It is the function in marketing of providing
inducements to buy, offered for a limited period only, at the time and place the purchase
decision is made which are supplementary to a products normal value. Sales-promotion
is a direct and immediate inducement that adds an extra value to the product so it prompts
the sales-force, dealers and consumers to buy the product.

STANDARD DEFINITIONS:American Marketing Association those marketing activities other than personal
selling, advertising and publicity that stimulate consumer purchasing and dealer
effectiveness such as display, shows and exhibitions, demonstrations and various
non- recurrent selling effort in the ordinary routine.
Mr. Christian Peterson, Sales-Promotion is the achievement of short
term marketing objectives by schematic means.
Mr. L.K. Johnson, Sales-Promotion consists of all those activities whose purpose
is to supplement, co-ordinate and make more effective efforts of the sales-force, of
the advertising department, and of the distribution and to increase sales otherwise
stimulate consumers to make greater initiative in buying.

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SALES-PROMOTION OBJECTIVES:Objectives

Alternative Programmers

1. Inquiries

free gifts-Mail in coupons for information, Catalog offer-exhibits demonstration.

2. Product trails

Coupons-rupees off specials free samples , contests-premiums.

3. Repurchase

On pack coupons Mail in coupons for

Rebate Continuity premiums.

4. Traffic-Building

Special sales- Weekly specials Enterta

Ined events-retailer coupons premiums.

5. Inventory-Build

Multi-packs-special price on twos-merc

Handise allowance-return allowamce.

Ing.
6. Promotional
support

Reusable display cases-Sales contests for

distributor sales people promotional allowance co-operative promotions.

SALES PROMOTION TOOLS:A. DEALER PROMOTIONS:The term dealer is used here to include the retailers, wholesalers and distributors.
The dealer promotions are of three types- namely, dealer loaders, dealer coupons
and point of purchase promotion.

1. Dealer loaders:Dealer loader is the premium offered to dealers tied with the quantity of
purchases. Dealer-loader offers, perhaps among the best sales promotion tactics
designed to sell in order to get the traders to stock greater quantities at specific
times. The dealers co-operation is sought to load them with stocks.There can be
three basic loader schemes:-

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Merchandise deals: When a marketer aims at building a dealer inventories by

offering additional quantities of saleable merchantdise as an incentive, it is referred
to as merchandise deal.

Price deals: under price deals for dealers, special discounts are offered over and
above the regular discounts agreed upon between the dealers and the company. For
example, if the regular discount is Rs. 5.00 per case, dealers may be given Rs. 6.00
per case that is rupee 1.00 extra per case.

Gift-novelties: Many a times the marketing prefers to give away attractive and
useful articles as presents to the dealers against the orders placed. These Giftnovelties can be transistors, radio sets, clocks, watches, cupboards, chairs, tables,
cash-boxes, lamps, steel utensil, lemon and lunch sets dress material and the like.

2. Dealer coupons:
A coupon is simply a document that entitles the holder certain stated concessions.
The function is to serve as inducement to the dealers to stock the said item or items.
That way it is very simple. A marketing company places coupons in bulk pack or
packs and exchanges them for gift merchandise listed in a catalogue.

3. Point of purchase promotion:

1. Dealer stock display contests: In real sense, a display contest amongst
dealers is more an advertising medium than an incentive offer. Here, the best
display arranged gets the prize. The objectives of stock display contents are: 1. to
provide the very necessary product exposure at the point of purchase, and 2. to
generate enthusiasm among dealers through the bait of attractive prices.

2. Dealer sales contests: Sales contest is a sales incentive competition

organized amongst salesmen or dealers. Sales contests require participating dealers
to compete among themselves in terms of sales performance during a given period.
The prizes are given by the company to the performers in order of merit as 1st , 2nd ,
3rd and so on.

B. CONSUMER PROMOTIONS:-

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Consumer promotions are the customer incentive plans to induce them to buy more.
A customer premium plan can be best described as an article of merchandise
offered to the consumer as an incentive to buy more and more regularly over a short
span .

1. Direct consumer offers:

a) Off the pack premiums: The marketer distributes the gift articles
meant for the wholesalers and retailers and then announces the premium
offer through attractive advertising media to bring the fact to the notice of
consumers. The premium article is neither banded with nor inserted inside
the product package, but is distributed separately along the product.
b) Banded premium offer: A banded premium offer can be defined as the
offer of the two product sold together, often in one combined pack, at
something less then their normal combined price when sold separately. In
case of banded premium offers the article of the premium is firmly banded
with the regular product package with a tape or other suitable material.
c) In pack offers: Here the premium is packed inside the product package
and it is followed by a message to that effect to the consumer, on the
package. It is most popular in India as the consumer receives the premium
immediately on the purchase of the product.
d) Price deals: it is a temporary price reduction used to attract the consumer
to a product. Price deals have been effective with low priced, frequently
purchased non- durable products.
e) Quantity deals: it offers the consumer more quantity of the same product
as premium at no extra cost or with a nominal increase in the price of the
deal package.

2. Conditional Consumer Offers: it includes:a) Coupon Premium Plan: under this plan, the consumers are to save
coupons usually issued as a part of product package. Premium is
given a way in exchange of the coupons.
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b) Self- liquidating offer: it is an offer where, upon the proof of the

purchase having been made, are given an option to obtain the
premium offer article at a price far less than it would cost in the
shop.
c) Consumer contests: it is the contest or competition based on skill
among the consumers in which prizes are offered. Usually,
participants are required to purchase the product and send the proof
of that and fulfill other conditions.

C. SALES-FORCE PROMOTION:
a) Bonus to sales force: bonus is the extra payment made for those who cross
the sales quota set for a specified period. This help both the company and
sales force as they both benefit by increased sales.
Sales contest: sales contests are declared to stimulate the sales force to double or multiply
their sales over a stipulate period of time with the prizes going to top performers.

7.3 ADVERTISING

Advertising is the business of people, for the people and by the people. Advertising is
important and can help make firms and brands leaders in the market provided they have
just the products and services that the market requires. Advertising has become so
integral part of our life and society that we cant imagine any event, newspaper,
magazine, TV serial, Cinema etc. without advertising. Advertising is a vital marketing
tool as well as powerful communication medium. The basic objective of any
advertisement is to stimulate sales, direct or indirect by trying to make tall claims about
product performance.
The term advertising is derived from the original Latin word advertere which means
to turn the attention. The dictionary meaning of the advertising is to announce publicly or
to give public notice. Advertising is used for communicating business information to the
present and prospective customers. It provides information about the advertising firm,
features of its products, qualities, place of availability of its product, different schemes
offered, benefits of using its product etc. Advertising is important for both buyers and
sellers. Advertising influences consumer attitudes and buying behaviour. Advertisement
helps in increasing product-awareness, preferences, share of market and profitability.
According to American Marketing Association, advertising is any paid form of nonpersonal presentation of ideas, goods or services by an identified sponsor.

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Advertising Media
Media is the vehicle that carries the advertisers message to target audience.
Media includes all such means through which advertising message is communicated to
the target audience. For achieving advertising objectives, selection of right kind of media
is important. It should reach the right people, at the right time, at the right place and
convey the right message. The media choices have multiplied with the advent of colour
television, commercialization of Indian TV, cable TV, and the launch of STAR, Zee and
other regional language channels. There are various types of advertising media. These
various types of media can be grouped under the following categories.

Print Media:
Print Media is also known as press advertising. It is one of the media of communication
along with broadcast media and outdoor advertising media. It mainly includes advertising
through newspaper and magazines.

a) Newspapers:
It is really hard to imagine life without newspapers. It is essential as a good cup of
tea in the morning or even more important than tea to start a day. Newspaper is one that
gives news-views-ideas-interpretation-opinions-comments and explanation regarding the
social, economic, political, educational, moral, cultural, ecological, meteriological
developments and the like. Of all the media, newspaper is considered as the backbone of
the advertising programmes as it has continued to remain the most powerful message
carrier. Of the total space, 45% goes to advertisements in form or the other and the rest
for textual matter. The rates vary from one newspaper to other newspaper depending
upon their circulation and popularity.
The newspapers are classified on the bases of coverage, frequency, and languages.
A good number of newspapers are also published in different regional languages.

Merits of Newspaper Advertising Media :

1.
2.
3.
4.
5.

The cost of newspaper is less a compared to its use.

Wide publicity is possible.
Speedy preparation and publication of advertising is possible.
Newspapers are having a large demand and wide coverage.
It is suitable for direct and indirect selling.

Limitations of Newspaper Advertising Media :

1.
2.
3.
4.

It is having a shortest life. Todays newspaper is tomorrows waste paper.

Frequent advertisement become ineffective.
No chances for display and demonstration.
Newspaper advertising is affected by the illiteracy of the public.
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b) Magazines:
Like newspapers, magazines are one of the oldest media of advertising.
Magazines are the periodicals which come out regularly but not on a daily basis. These
may be published on a weekly, fortnightly, monthly, bimonthly, quarterly or even yearly
basis. These magazines may be classified into two broad categories as special and
general. The examples of special magazines are Film-fare, Star and Style, Femina, Eves
Weekly, Health Care, Architect, Dentist, Executive, Banker, Industrial Times, Business
India, Promotion which cater to the needs of a selected group. On the other hand, general
type of magazines do not concentrate on a particular subject but cover in general all the
aspects. The examples of this kind are; Readers Digest, Front-line, India-Today,
Imprints, Mirror, Illustrated Weekly, Times, Life, Span, Business India, Business World,
Fortune, National Geographic, Advertising and Marketing, Advertising Age and so on.
All these periodicals have a large number of readers and thus, advertisements published
in them reach a number of people.

Broadcast Media:
It includes advertisements in radio, television, cable etc. This media has both
audio and visual effect. Broadcast media carrying advertisers message to the targetaudience., Television has grown faster than any other advertising media and offers
combination of sight, sound and movement in presenting advertisements. Broadcast
media is mainly of two types:

a) Radio:
Radio advertising can be aptly called as word of mouth advertising on a whole
sale scale which was welcomed in 1920. The advertising message is conveyed through
spoken words in case of radio-advertising. Over the years, radio has remained popular
and effective means of advertising.

b) Television:
With rapid growth of information technology and electronic media, television has
topped the list among the media of advertising. TV has the most effective impact as it
appeals to both eye and the ear. Products can be shown, their uses can be
demonstrated and their utilities can be told over television. With catchy slogans,
songs and dance sequences, famous personalities exhibiting products TV advertising
has a lasting impact. Sponsorship means sponsoring a particular programme by
advertiser. In this case advertiser makes payment to TV channel for sponsoring
programme. In case of participation, advertisers pay to TV channels for 10,20,30
seconds of commercial time during prescribed TV programme i.e. advertisers make
direct payment to TV channels for telecasting his advertisement. Rates of
advertisement differ from one channel to other channel.

Outdoor or Mural Advertising Media:

Outdoor advertising means advertising out of door. It is generally done on the
roadsides. It is meant for moving-public and provides the advantage of reminding the
people frequently regarding advertisers product or service. The new forms of outdoor
109

advertising includes using balloons, kites and skywriting. Outdoor advertising is of

following types:

a) Neon-sign Boards:
These are big hoardings which are placed on busy-places. These display brand
name of advertiser. Because of big size, these attract attention easily. With the advance in
printing technology, big printed plastic-sheets with attractive colours, visual-effects are
pasted on big boards, which are permanently fixed on both sides of the busy roads. Nowa-days, electric-neon-signboards are becoming common. In the big cities, these boards
use the flashing lights by which advertisers message moves on the board electronically.
These type of neon-signboards are called electronic flashing signboards which dont use
flashing/moving lights. These neon-signboards are depicted at the top of showrooms,
shops of retailers and at other busy places/roads.

b) Posters:
Posters are made of big size paper sheets. These are pasted on the walls,
hoardings and advertising boards. This is the cheapest and oldest form of the outdoor
advertising. These are displayed on bus-stops, near railway-station, cinema halls, near
schools, colleges, road-sides, near road-crossings etc. Generally, advertisers paste their
posters at a particular place again and again.. Advertising for movie is usually done
through posters. Posters are also pasted on walls of houses, shops.

c) Vehicle Advertising:
It is also called transit advertising. It is advertising on the public transport system
such as bus transport, railways. On the Indian-railway alone, millions of commuters
move every day. In case of bus transport, advertising is common on its back side and
side- roof-panels inside the bus. Inside-transit-advertising is observed by persons
traveling in the vehicle. For passing their time, passengers look on these posters and read
whole of message. In India , because of more dependence of people on public-transportsystem, this method is more use for advertisers.

d) Sandwichmen:
They are hired-persons and are dressed like circus-jokers. They walk in busy
places with boards, posters in their hands and stickers pasted on their back, depicting the
message of advertiser. Sometimes a man is made tall by attaching long supports to his
legs. He walks through the busy places with message of advertisers in his hands. When
sandwichmen move through busy places, they catch attention of passers by.

Direct Mail Advertising:

In this advertising media, advertiser contacts target audience through mail. It
offers highest selectivity as it can be directed only to target audience. Direct mail
advertisements dont have to compete with other advertisements. Most people read their
mails thoroughly. Here the message can be in form of letters, circulars, catalogues,
brochures, booklet, informative manuals, business-reply-cards, posters, charts, coupons,
110

invitations etc. Direct mail advertising is informative and persuasive. In direct mail
advertising direct contact is made between advertisers and potential customers, whereas
in case of print media or broadcast media, target audience are contacted indirectly,
through newspaper, magazine, radio, T.V etc.

Internet Advertising Media:

Internet has created a borderless world and has linked all the internet users of the
world with each other. It is also known as information superhighway because of the large
amount of data available in it. Internet sites are full of advertising. It is the only media
where a person can read, watch, rewrite, save and can even do shopping etc. The high
interactivity of this media makes it valuable. With the growth of computers and launch of
internet on cable TV and mobile phones, its area is expanding day by day. It is another
form of electronic media. It is also known as media of new millennium. With the increase
in internet services, e-business and e-commerce are expanding and now shoppers do eshopping and retailers do e-retailing. On internet, advertisements are designed by webdesigners.

THE CHOICE OF PROMOTION MIX

The choice of promotion mix is governed by following five factors:

1. The type of target group:- Promotion activities are directed towards four
target groups namely consumers, retailers, wholesalers and industrial buyers. The
type of promotion needed is governed by the size and individual needs of each
type.

2. The size of promotion budget:- Small firms with meagre budget allocation
cannot think of enjoying economies in promotion deals. They cannot employ
large scale personal selling, and in case of advertising, the national coverage.
They have to go in for local news papers, outdoor ads, direct mail.

3. Stage in life cycle:- As during introductory stage, more emphasis is to be put

on promotion strategies, as the product is new in the market. In the growth stage,
it is secondary demand than the primary demand that counts. In maturity stage, it
becomes more aggressive and in the decline stage, the aim is to pick a selected
group of customers.

4. The competitive situation:- Mass selling is the solution in the monopolistic

market. In case of pure competitive conditions, only personal selling does well.
Oligopolistic situation needs both personal selling and advertising.

5. The nature of product:- The exact influence of the product feature on

production mix depends upon two points namely, technical nature and the degree
111

of brand familiarity. The first points need personal selling and the second sales
promotion efforts.

6. Nature of promotional tool:- Each promotional tool, may it be personal

selling, advertising or sales promotion, each of them has its unique features, costs
and benefits. Depending upon the individual needs, a suitable mix can be made
use of.

7.4 PUBLIC RELATIONS

It is a form of promotion to create, develop and maintain a bright public image of an
organization in the community so that the reputation of the seller sets as a goods selling
point to promote sale of goods under competition. Public relation means good relatios
with everyone be it consumers, employees, government, shareholders and the community
at large.
According to Edward Bareney, Public Relations is an attempt by information persuation
and adjustment to engineer public support for an activity, cause, movement or
institution.

OBJECTS:The main object of public relations is to secure the goodwill of the public towards the
product or services by having in a manner as to please those with whom the company
comes into contact. It is also an image building exercise of the company in the minds of
the consumers and at public at large.

SCOPE:The scope of public relations is very large as experts have identified five significant
targets for public relation efforts i.e. consumers, dealers, employees, shareholders and
community. This scope of targets may be enlarged by including any other target group
with which the company might wish to communicate.

FUNCTIONS OF PUBLIC RELATIONS DEPARTMENT:1. Communicating with consumers:- A favourable image must be created both
about the product of the company as well as the company in the minds of the
consumers. It can be easily done by public relation department by providing

112

proper information regarding companys profile i.e. history, background, policies,

objectives and nature as well as above all its quality of products.

2. Communicating with dealers:- Dealers relations are a key note in any

companys public relation programme. There should be smooth communication
between the organization and the dealers and vice versa.

3. Communicating with shareholders:- A shareholder is a person who has

invested his funds in the company- hence he expects a reasonable returns on his
investment, keeping in view the risk he is taking by investing his money into the
business of the company. Thus there is a need to meet frequently with
shareholders to appraise them the detail functioning of the company.

4. Communicating with employees:- If the employees are contended than

employees will do their best for the company- hence there should be regular
meeting between the management and the employees so that the difficulties faced
by the employees may be attended by the management.

5. Communicating with community:- There is a great need that community at

large be communicated about the companys favourable image in the minds of
general public. The above mentioned parties i.e. dealers, customers, employees
and the shareholders or even the company itself is an integral part of the
community.

6. Miscellaneous Functions:
a)
b)
c)
d)

Press relations
Product Publicity
Corporate Communication
Dramatisation

MARKETING PUBLIC RELATIONS:The market public relations goes beyond publicity and plays an important
role in the following task:1.
2.
3.
4.
5.

Assisting in the launch of new product.

Assisting in repositioning a mature product.
Influencing various specific target groups.
Building interest in a product category.
Building the corporate image in a way that reflects favourably on its product.

END CHAPTER QUIZZES

113

1.Any paid form of non personal presentation of ideas is called:

a) Advertising
b) Sales promotion
c) Public relations
d) Personal selling

2.Selling across the table is form of:

a) Personal selling
b) Sales promotion
c) Advertising
d) Public relation

3.Sales promotion includes:

a) Dealer offer
b) Consumer offer
c) Sales force offer
d) All of above

4.Promotion mix includes:

a) Sales promotion
b) Advertising
c) Public relation
d) All of above

5.Which media of advertising is the best?

a) TV
b) Print media
c) Display media
d) Mix of all

6.Ad repetition creates -------------------- rather than ---------------------------a) Brand familiarity, brand loyalty
b) Brand loyalty, brand convection
c) Brand convection, brand familiarity
d) Brand familiarity, brand convection

7.Mass media usually has the greatest impact at the ----------stage of new
task buying:
a) Awareness
b) Interest
c) Trial
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d) Adoption

8.Sales force usually have their greatest impact at the ---------------------stage of new, task buyer:
a) Awareness
b) Interest
c) Trial
d) Adoption

9.Companies need to know all of the following about their competitors

except:
a) What are their objectives?
b) What are their strategies?
c) Who are their legal advisors?
d) What are their strengths and weaknesses?

10.Outdoor advertising media includes:

a) Posters
b) Printed displays
c) Sky writing
d) All of above

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CHAPTER VIII
CHANNELS OF DISTRIBUTION

Contents:
8.1
8.2
8.3

Meaning
Channel structure
Channel Design strategies

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8.1 The word Channel has its origin to the French word used for Canal
Distribution is concerned with various activities such as movement of goods,
storage, promotional and financial activities involved in the transfer of goods
from producer to consumer. The term Distribution Channel thus connotes a
route or path way taken by products as they follow from the point of product to
the point of ultimate consumption.
According to William J. Stanton, A distribution channel consists of the set of
people and firms involved in the transfer of title to a product a as the product
moves from producer to ultimate consumer or business user.
Hence, It can be said that the cannel of distribution involves those activities
through which goods passes away from producer to consumers. Every producers
reaches to the consumer with the help of intermediaries and it makes possible the
movement of goods and services. IT means the participants in the channels of
distribution are:-

Producer

Intermediarie
s

Consumers

In general sense , channel members add value to a companys products by making the
merchandise available at the right time , place and in the right quantity and right
condition to the end customer. To do so , a number of activities need to be performed .
we can broadly classify these activities into forward flows , backward flows and point of
sale.

The various activities undertaken by channel members are:

Transfer of title or ownership.

Physical movement of goods.
Storage of goods at various transit points.
Stocking and inventorying goods.
Processing orders from retailers and customers .
Assuming risk connected with movement of goods.
Provide for payment of bills through financial institutions.
Provide credit to buyers.
Negotiate pricing and other terms.
Maintain a sale force to stimulate demand at retail level and to service retailers.
Develop and disseminate information to stimulate purchase.
Display of products at retail level through attractive merchandising.
117

Assistance to buyers in product demonstrations and product information.

Handling complaints and sales returns.
Providing after sales assistance in usage and training and servicing breakdowns.
Gathering and sharing information with companies about buying patterns of
current customers, potential customers, competitors and other factors that impact
the business.

The functions are not performed by any one individual or distribution entity. A number of
different channel partners perform these tasks.

8.2 CHANNEL STRUCTURE

The variety of channel participants can be combined in many different ways to create
effective marketing channels . channel structures are very unique to countries and regions
and as such they defy categorization. some commen channel structures or formats are
direct, indirect, vertical marketing systems, horizontal marketing systems and multi
channel marketing systems. Distribution channels do not remain static; channel structures
do evolve in response to local opportunities and conditions .

1. Direct / indirect distribution channel

A company may undertake to distribute its goods to customers or retailers without
involving any intermediaries. This is referred to as direct channels and they are
the shortest channels.
Alternatively , goods may be distributed through several intermediaries such as
wholesalers, agents and stockists, retailers before they finally reach the end
customer. Indirect channels are necessary to gain extensive reach and coverage.
Convenience goods typically use indirect channels.

2. Vertical marketing systems

Vertical marketing system (VMS)on the other hand , includes parties like
wholesalers, producers and retailers acting as an unified system. A VMS is a
tightly coordinated distribution channels designed specifically to improve
operating efficiency and marketing effectiveness. One channel member, the
channel captain, owns the others or franchises them or has so much power,
that they all cooperate. The channel captain can be producer, wholesaler or
retailer.
There are three types of VMS :
a) Corporate VMS
b) Administered
c) Contractual VMS

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3. Multiple channels
Rarely does a company use just one type of channel structure for its
distribution system. it usually employs several different or alternative
channels which include multiple channels, non traditional channels and
strategic channel alliances. When a company selects two or more different
channel structures to distribute the products to its target markets, this
arrangement is known as multiple or dual distribution.
Usage of multiple channels increases the market coverage and reach for the
company and provide greater convenience and better service levels to its
customers.

4. Non-traditional channels
Often non-traditional channel arrangements help differentiate a firms product
form competition. For example, a company may choose to use mail-order
channels or internet to sell products instead of going through traditional
retailer channels.

5. Horizontal marketing systems

Companies form strategic channel alliances also known as horizontal
marketing systems, which enable the companies to use another companys
already established channel.
Alliances are used most often when the creation of marketing channel
relationships may be too time consuming and expensive. Strategic channel
alliances are proving to be more successful for growing businesses, than
merger and acquisitions. This is especially true for global markets, where
cultural differences, distance and other barriers may prove too daunting.

6. The internet
The internet allows consumers to directly access manufacturers and vice
versa. As a result channel structures are undergoing a rapid change and in
many industries the role of channel intermediaries is rapidly undergoing a
change. In the travel industry, as more airlines offer e-ticketing, the role
traditionally performed by the travel agent is rapidly diminishing. Travel
agents are now positioning themselves as travel consultants for holidays, as
their role as ticketing agents may soon become redundant. The market
potential for the internet is only bounded by the penetration of the internet and
the number of consumers who are able to shop online.

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8.3 CHANNEL DESIGN STRATEGIES

Designing a marketing channel requires several critical decisions. Marketing managers
must decide the role of distribution in the overall marketing strategy and must ensure that
the channel strategy chosen is consistent with product, promotion and pricing strategies.
There are several factors that will influence the choice of channel and what level of
distribution intensity will be appropriate.
Levels of distribution intensity
Companies have three options for intensity of distribution: intensive distribution,
selective distribution or exclusive distribution.
Intensive distribution is a type of distribution aimed at maximum market
coverage. The company tries to make the product available in every outlet that
that potential customers might visit. This is because customers are unwilling to
search for it and want to spend the least time and effort in purchasing such
goods(convenience products and office supplies)
Selective distribution is aimed at making the product available to select dealers
and retailers in a given territory. This strategy is appropriate for shopping
products where purchases are preplanned. Customers prefer to shop for such
products in shopping districts or reputed retail outlets, where they can make
comparisons with other brands.
Exclusive distribution is the most restrictive form of market coverage. The
products are made available through only one or two exclusive retail outlets in a
given area. This distribution strategy is appropriate for high end shopping
products, speciality goods and industrial products. Such products require a high
level of customer service both presale and post sale, which is possible only
through a restricted number of outlets.

1. Target market factors

Convenience goods are those goods that consumers purchase frequently, and
therefore want to do so immediately and with minimum effort.
Convenient availability is the key; hence distribution channels for such products
are intensive with wide coverage. Generally the wider the coverage, the more will
be the number of intermediaries in the distribution channel . availability of the
appropriate pack sizes and product variants in demand, is the other critical
element, hence inventory control throughout the channel becomes a key
distribution task.
Shopping goods are those goods that consumers buy infrequently. These are
usually preplanned purchases and consumers make some comparison on features,
styling, prices and quality. Clothing , footwear, cosmetics, personal accessories
like watches and home appliances like televisions, refrigerators and washing
machines and automobiles (4-wheelers or 2-wheelers) are examples of shopping
goods.
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Distribution channels for such products are selective with wide market coverage.
Retailers add value to the products through products demonstrations , assistance
to customers in decision making, installation and even after sale service. Hence
companies have to support the retail intermediaries through training of sale force;
other factors like inventory control and service levels to retail outlets are also
important. Transportation conditions are a critical element of the distribution
strategy, to ensure the safe transportation of products from factory to end
customer.

2. Product related factors

Product positioning is a prime determinant of the type of channel to be used. For
instance, packaged fruit juices, if positioned as a health drink, any be made available
through gyms and fitness clubs, in addition to the mainstream convenience goods
channels. Likewise, cosmetics contact lenses need to be available at speciality outlets that
have large cosmetic counters in addition to being available at opticians.
Products that are more complex or customized tend to benefit from shorter and more
direct distribution channels; such type of product sell better through direct sales force. the
products lifecycle is also an important factor in choosing a channel . the distribution
strategy changes as the product moves through the lifecycle. During the introduction
stage , companies may use direct selling or exclusive distribution arrangements. During
the latter stages, distribution coverage is wider; distribution intensity will depend on the
type of product . perishability of the product is an important factor, as also the fragility
of the product; as such products require special packaging and special handling
arrangements during transportation and display at retail end.

Company related factors

Push vs pull strategy to stimulate consumer demand for the brand. A pull strategy relies
heavily on marketing communications to stimulate demand and pull the customer in to
the store. A push strategy relies heavily on the distribution channel to stimulate demand
by pushing the product. Which strategy a company chooses depends on a number of
factors.
A push strategy is relevant for
Undifferentiated me too products.
For brands that do not have large communication budgets.
New companies that may initially rely on push.

A pull strategy on the other hand is a must for

Lodging the brand in the customers mind space.
Highly differentiated image products.
High involvement products.

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Managing channel relationships

A marketing channel is more than a set of institutions linked by economic ties; social
relationship play an important role in building unity among channel members . a critical
aspect of managing distribution channels in managing the social relationships among
channel members to achieve synergy. The basic social dimensions of channel are power,
control, leadership, conflict and partnering.

1. Channel power, control and leadership

Channel power is a channel members capacity to control or influence the
behaviour of other channel members. Channel control occurs when one member
affects another members behaviour. To achieve control , a channel member
assumes channel leadership and exercises authority and power; this member is
termed the channel leader. In one distribution channel the manufacturer may be
the leader because it controls product availability, whereas in another channel the
retailer may be the channel leader because it wields great power and control over
the retail process and inventory.

2. Channel conflict
Inequitable channel relationships often lead to channel conflicts, which is a clash
of goals and methods among the members of the distribution channel. Conflicts
can arise becouse a channel member refuses to adapt with the times and therefore
becomes inefficient.
Often conflict arise due to channel pursuing different goals. A multi brand home
appliances retailer would want to sell as many products as possible, regardless of
brand, to improve his overall sales and profitability. On the other hand, a
particular company would want him to push their products more, as they desire a
certain sales volume and market share.
Conflicts can occur at any level within the distribution chain. A conflict among
channel members at the same level, such as two retailers or stockists, is known as
horizontal conflict. This type of conflict is common where companies practice
dual or multiple distribution strategies. Horizontal conflict can also occur when
channel members on the same level feel they are being unfairly treated by the
manufacturer. Most managers regard, horizontal conflict as healthy competition,
and may allow such a conflict to play out to their advantage.
A more serious conflict is vertical conflict, which occurs
between two different levels in the distribution chain, such as between a
manufacturer and wholesaler or between a manufacturer and retailer.
Manufacturer versus wholesaler conflict typically arise when a manufacturer
bypasses a wholesaler to deal directly with the customer, as in institutional sales.
Managing channel conflict
Conflict is not necessarily a bad thing hence the challenge is not to eliminate
conflict, but to manage it better. There are several mechanisms for effective
conflict management . one is the adoption of a superordinate goal. Channel
members come to arrangement on the fundamental goal they are jointly seeking,
whether it is market share, quality or customer satisfaction . they usually do this
122

when the channel faces an external threat, such as the advent of a new and more
efficient channel, or a change in legislation or changing customer tastes.
Co-optation is an effort by one organization to win the support of the leaders of
another organization by including them on advisory councils and the like. So long
as the leader is taken seriously , co-optation can reduce conflict, as each begins to
appreciate the others point of view.

3. Channel partnering
Channel partnering or channel co-operation is the joint effort of all channel
members to create a supply chain that serves the customers and creates a
competitive advantage. By co-operating retailers, wholesalers and manufacturers
can speed up inventory replenishment, improve customer service and reduce the
total costs of the marketing channel. Supply chain management emphasises
channel alliances and partnerships as it helps supply chain managers to create
parallel flows of material and information. The rapid growth in channel partnering
is due to information technology as well as a common need to lower costs and
improve operational efficiency. Forced to become more efficient, many
companies are now turning towards channel partnering as a win-win situation.

123

END CHAPTER QUIZZES

1. Channel of distribution aims at:
a)
b)
c)
d)

Link producer to consumer.

Link user to consumer.
Both of above
None of above.

2. One who sells to retailer is:a)

b)
c)
d)

Factor.
Agent.
Wholesaler.
Retailer.

3. various intermediaries in the distribution channel are:a)

b)
c)
d)

merchants.
Agent.
Facilitator.
All of above.

4. direct selling goods to consumer is called:a)

b)
c)
d)

Direct channel.
Indirect channel.
Vertical channel.
Horizontal channel.

5. using more than one channel is called:a)

b)
c)
d)

direct channel.
Muliple channel.
Indirect channel.
Horizontal channel.

6. When there is maximum market coverage, it is called:a)

b)
c)
d)

Intensive distribution.
Selective distribution.
Exclusive distribution.
None of above.

124

7. pull strategy involves:a)

b)
c)
d)

pulling customer into stores.

Pushing the customer.
Selling product by direct selling.
Not supplying the goods.

8. the joint effort of all the channel members to create a supply chain
that serves the customer is called:a)
b)
c)
d)

Channel conflict.
Channel partnering.
Channel control.
Channel leadership.

9. when one member affects another members behaviour, it is called:a)

b)
c)
d)

Channel power.
Channel control.
Channel leader.
Channel conflict.

10.Company related factors of distribution includes:a)

b)
c)
d)

Push strategy.
Pull strategy.
Both of above
None of above.

125

CHAPTER IX

MARKETING RESEARCH AND CONSUMER

BEHAVIOUR

Contents:
9.1
9.2
9.3
9.4
9.5
9.6

Meaning of marketing research

Stages in marketing research process
Scope of marketing research
Meaning of consumer behaviour
Factors affecting consumer behaviour
Application of Consumer behaviour in Marketing

126

The principal task of marketing management is to fulfill the aspirations of the consumers.
It is thus imperative to understand what the consumers want; how they make the various
choice decisions; or what are their sources of information and influence process etc. As
such, marketing research is the function which provides the necessary information about
the consumer to the marketer. In the process, an organisation can identify new
opportunities in the market; evaluate and monitor marketing actions; and in general,
evolve better marketing progamme to serve the interests of the consumer. Thus marketing
research acts as the link between the consumer and the marketer.

9.1 MARKETING RESEARCH - MEANING AND IMPORTANCE

Operationally speaking, marketing research is defined as the objective and formal process
of collecting information; analysing the results and communicating the findings and their
implications in terms of marketing actions. However, some further comments about this
definition are essential. Marketing research is a systematic collection and analysis of
information that is ultimately used in evolving some marketing decisions. All stages of a
research study must be carried out in a logical manner. For instance, one should, start
with a concise statement of the issues to be investigated; indicate the information
required to study those select problems; define the methods to be adopted to collect those
data; specify the relevant technique to be employed for analysing the data; and finally
state the research findings and their specific implications for marketing decisions making.
Note that this definition indicates that marketing research should be conducted for
specific issues. Secondly, it must ensure objectivity in every step. Finally, study findings
must help the manager in the decision making. In other words, marketing research must
not be mere collection of statistical information, One must justify the choice of
methodology of data collection and analysis. And, the researcher must not be too much
pre-occupied with techniques, but instead convey the meaning of the results in the
marketing language even when some advanced or sophisticated tool is being used.
Likewise, marketing manager(s) should also provide a clear, detailed scenario of the
problems faced by the company before the marketing researchers (s). They must allow
adequate time and budget for conducting the study. They must not use marketing research
as a fire fighting device or to justify some preconceived action(s).
Marketing research is the function that likes the consumer with the organisation through
information. It involves systematic and objective search for and analysis of information
that can be used for evolving some marketing decisions.
Any research study must clearly state the issues being investigated. It must apply
systematic and formal procedure in collection and analysis of information. It must
communicate the study findings in a manner which could help in arriving at some
marketing decisions.
A research study 'will fail to serve its purpose if marketing researcher merely collates
some statistical facts or is pre-occupied with techniques or uses data of questionable
validity or communicates the findings in too much vague or technical language.

127

Likewise, a research study will suffer if the marketing manager does not offer full
perspective of the research problem; or allows inadequate time; or uses research as a firefighting device or does not really appreciate the value of research.
Problem must be clearly defined and reasons for undertaking the research from the point
of view of marketing decision making should be explicitly justified.
In order to carry out effective research programme:

1. Prepare a list of objectives to be examined

2. Avoid
Vague terms of reference
Trivial research projects
Research where underlying purpose is unknown or with held.
3. Ensure concurrence about the terms of references (specially research objectives; plan of
data collection, time and budget) among all concerned.

9.2 STAGES IN THE MARKETING RESEARCH PROCESS

Marketing research exercise may take many forms but systematic inquiry is feature
common to all such forms. Being a systematic inquiry it requires careful planning of the
orderly investigation process. Though it is an over simplification to assume that all
research processes would necessarily follow a given sequence marketing research often
follows a generalised pattern which can be broken down and studied as sequential stages.
The research process begins with the identification. The research task may clarify a
problem or defme an opportunity. The clear cut statement of problem may not be possible
at the very outset of research process as often only the symptoms of the problem are
apparent at that point. Thus the problem statement may be made only in general terms to
be made specific later after some exploratory research has been done to clarify the
problem situation.

Defining the Problem

Clear problem definition is of crucial importance in marketing research as in terms of
both time and money research is a costly process. Careful attention to problem definition
allows the researcher to set the proper research objectives which in turn facilitate relevant
and economic data collection.
Problem definition in specific terms must precede the determination of the purpose of the
research.
In order to define the problem more precisely, some sort of exploratory research may also
be undertaken. The methods popularly in use are survey of secondary data, experience
survey or pilot studies.

128

Statement of Research Objectives

After clarifying and identifying the research problem with or without exploratory
research, the researcher must make a formal statement of research objectives. Research
objectives may be state in qualitative or quantitative terms and expressed as research
"

question statements or hypothesis. For example, the research objective To find out the
extent to which the sales promotion programmes affected sales" is a research objective
expressed as a statement. A hypothesis on the other hand is a statement that can be
refuted or supported by empirical findings. The same research objective could be stated
as: "To test the hypothesis that sales are -positively affected by the sales promotion
programme undertaken this summer." Example of another hypothesis may be
"Concentrating advertising efforts in monthly waves (rather than advertising
"

continuously) would cause an increase in sales and profits. Once the objectives or the
hypothesis are developed the researcher is ready to choose the research design.

Planning the Research Design

Once the research problem has been defined and the objectives decided, the research
p

design must be developed. A research design is a iaster plan specifying the procedure for
collecting and analysing the needed information. It represents framework for the research
plan of action. The objectives of the study discussed in the preceding step are included in
the research design to ensure that data collected are relevant to the objectives. The
researcher must, at this stage, also determine the type of sources of information needed,
the data collection methods (surveys or interviews for example), the sampling
methodology and the timing and possible costs of research. The design chosen play be
from exploratory, descriptive, quasi-experimental or experimental design categories
which again include a number of alternative methods.

Planning the Sample

Although the sample plan is included in the research design, the actual sampling is a
separate and important stage in the research process, Sampling involves procedures that
use a small number of items or parts of the population to make conclusion regarding the
whole population. The first sampling question that needs to be asked is who is to be
sampled, which follow from what is the target population. Defining the population may
not be as simple as it seems. For example, if you are interested in finding the association
between savings and loans, you may survey the people who already have accounts and
the selected sample will not represent potential customers.
The next important issue is regarding sample size. How large or how small should a
sample be? Generally speaking, larger samples give more reliable information then
smaller ones but if probability sampling is used, a small proportion of the population may
give a reliable measure of the universe.

129

Data Collection
The data collection process follows the formulation of research design including the
sampling plan. Data which can be secondary or primary, can be collected using variety of
tools. These tools are classified into two broad categories, the observation methods and
the communication methods, all of which have their inherent advantages and
disadvantages.

Data Processing and Analysis

Once the data has been collected it has to be converted to a format that will suggest
answers to the problem identified in the first step, Data processing begins with the editing
of data and coding. Editing involved inspecting the data collection forms for ommission,
legibility and consistency in classification. Before tabulation, responses need to be
classified into meaningful categories. The rules for categorising, recording and
transferring the data to data storage media are called codes. The coding process facilitates
the manual or computer tabulation. If computer analysis is being used, the data can be
key-punched and verified.
Analysis represents the application of logic to the understanding of data collected about
the subject. In its simplest forms, analysis may involve determination of consistent
patterns and summerising of appropriate details. The appropriate analytical techniques
chosen would depend upon informational requirements of the problem, characteristics of
the research designs and the -nature of the data gathered. The statistical analysis may
range from simple univariate analysis to very complex multivariate analysis. You will
study univariate, bivariate and multivariate analysis and their applications in marketing
problem in last three blocks of this course.

Formulating Conclusion, Preparing & Presenting the Report

The final sate in the research process is that of interpreting the information mid drawing
conclusions for use in managerial decisions. The research report should effectively
communicate the research findings and need not necessarily include complicated
statements about the technical aspect of the study and research methods. Often the
management is not interested in details of research design and statistical analysis but in
the concerete findings of the research. If executives are to act on these findings they must
be convinced of the value of the findings. Researchers, therefore, must make the
presentation technically accurate, understandable and useful.
Frequently, the researchers are required to make both an oral and a written presentation.
Since each project is different, the presentation in each case requires originality.
However, the better the earlier steps in the research process have been executed, the more
likely it is that a good presentation would result, While the oral presentation depends a
130

great deal on the personal style of the presenter and the management expectation, the
written report in order to be effective needs to include the following details:

I) Title page
II) Table of contents
III) Introduction
IV) Statement of objectives
V) Methodology
A) Research design
B) Data collection methods
C) Sampling
D) Field work
E) Analysis and interpretation
VI) Limitations
VII) Findings
VIII) Conclusion and recommendations
IX) Appendix
A) Copies of forms used
B) Tables not included in finding
C) Bibliography, if relevant

9.3 SCOPE OF THE MARKETING RESEARCH FUNCTION

Another way of looking at the function of marketing research is to look at the particular
decision area where research results are used.

1) Sales Analysis
Much research is done in the following areas which are broadly referred as sales analysis,
measurement of market potential/demand projection, determination of market
characteristics, market share estimation, studies of business trends.
In fact, some of the more detailed studies to be carried out under the broad ambit of sales
analysis could be as follows,
The types of consumers that constitute the potential market
The size and location of the market;
The growth and. concentration of the market over certain period of time,
The competitive picture for the product;
131

The major strategies of leading competitors with respect to price, offerings

distribution etc.
The purchase habits of key market segments;
'

What is the pattern of pre-purchase deliberations made by the consumers ?

Who are involved in the decision making?
What are the roles of different members in the decision making?
'

How does the product fit into the consumer s life styles? (Operation if it is an
industrial product);
Do consumers prefer to buy some particular brands'? (i.e. Assess the degree of brand
loyalty).
The above list is not exhaustive. Here research is basically done with a view to know
consumers' motivation, attitude, cognition and perceptions etc. Thus information wilI be
collected in a manner so that they have some implications for various marketing
decisions.

II) Sales Methods and Policies

Marketing research studies are also conducted with a view to evaluate the effectivness of
present distribution system. Such studies are used in establishing or revising sales
territories.. They are also helpful in establishment of sales quotas, design of territory
boundary, compensation to sales force, physical distribution and distribution cost analysis
etc. Marketing research is also done to assess the effectiveness of different promotional
activities such as premiums, deals, coupons, sampling etc.

III) Product Management

Every marketer tries to formally or informally utilize information to manage the existing
and new products. It examines market feedback about competitive product offerings.
Also, some companies make use of marketing research to form market segments through
choice of alternative bases. Companies also carry out different research studies to assess
consumer feedback to new products and their likely potential. Of late, in India many
consumer products have been launched after making rigorous amount of research.
Moreover, researches have enabled to diagnose how consumers perceive various brands
of a product. Such studies have enabled the companies to position their brands.
Marketing research studies have been conducted to monitor the performance of the test
brand (in terms of trial and repeat purchase) launched in select shops in the market.
Studies are popularly known as simulated test marketing (STM) models. Pricing studies,
packaging research, design or physical characteristics, have also been sometimes
conducted.

132

IV) Advertising Research

Media research: Three National Readership Surveys (NRS) have so far been conducted
in India. These studies have basically estimated the readership of leading newspapers.
The last NRS has also assessed qualitatively, readers feedback on the editorial content.
Moreover, some marketing research have evaluated the relative effectiveness of different
media in specific product fields, and in context of achieving specific tasks such as
creating brand awareness or a particular product benefit.
Copy research: Advertising agencies have been regularly engaged in this activity where
they test out alternative copy designs by obtaining the feedback from to consumers.
Studies of advertisement effectiveness - Advertising agencies regularly make use of
marketing research studies to assess and monitor effectiveness of different advertising
campaigns.

V) Corporate Research
Large scale corporate image studies among different target publics - They involve an
assessment of knowledge about company activities, association of company with
sponsored activities and company perceptions on specific dimensions. These types of
corporate image studies are done periodically to monitor any change in image over time
among different publics.
Social values research: Knowledge, attitude and practices on family planning, antidowry, smoking, drinking etc.
Political studies: In recent times marketing studies have been conducted to ascertain the
public opinion about the election results.
Customer service studies: Many banks and large industrial houses have resorted to
marketing research to know the consumers' changing need for service and possible
grievances about existing operations.

VI) Syndicated Research

Several research agencies collect and tabulate marketing information on a continuing
basis. Reports are sent periodically (Weekly, monthly or quarterly) to clients who are
paid subscribers. Such services are found specially useful in t 'lie spheres of
movement of consumer goods through retail outlets (ORG Retail Audit), incidence
of disease and use of branded drugs (MARL- prescription audit), Television Program
viewing (the Television Rating Points), Newspaper & Magazine readership (NRS discussed earlier under media research), assessment of market potential of a city with
population one lakh and above (Thompson Indices), study of nation's attitudes and
'

psychographics (PSNAP and IMRB s life style research on the cigarette market).

9.4 CONSUMER BEHAVIOUR

The most important thing is to forecast where customers are moving and to be in front of
them.
Phillip Kotler.
Consumer or buyer is the central figure of all marketing activities.

133

MEANING
Consumer behaviour is the pattern of response of buyers to marketing offer of a firm. It
refers to the process as to how, consumers make their purchase decisions. It is concerned
with what, why, how, much, when and from whom buyers make their purchases of goods
and services. It is defined as all the psychological, social and physical behaviour of
potential customers as they become aware of, evaluate, purchase, consume and tell others
about the products or services. Thus consumer behaviour is concerned with (1) forces
influcing consumers actions and reactions and (2) his purchase decisions process.

CONSUMER BEHAVIOUR:
Consumer behaviour is the study of (i) what consumer buy? (ii) who buys? (iii) when
consumer buy? (iv) how consumer buy? (v) where consumer buy?
It is the behavior that consumer adopt in searching for purchasing, using, evaluating and
disposing of products, services and ideas.
The concept of consumer behaviour can be presented in terms of marketing stimuli,
process and behaviour response as under :-

Stimuli

Process
Response
(Problem Solving)

(Behavioural

outcome)

1. Four Ps of Marketing
2. Physchological forces
3. Social Factors
4. Cultural Factors
5. Economic Factor
6. Enviornmental forces

1.
2.
3.
4.

Recognition of want
Search for information
Evaluation
Buying decision

1. Buy
2. Use
3. Feel

Feedback
The consumer behaviour is a process of a buyers actions and reaction towards marketing
stimuli offered by a firm.

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IMPORTANCE OF STUDY OF CONSUMER BEHAVIOUR

There is an old saying Goods well brought are half sold. To succeed in business one
has to buy or produce what is wanted by consumers.

1.

Effective Production Policies:

Consumer preferences and tastes are changing. The study of consumer
behaviour helps to know the factors which affect the preferences of
consumer. Thus the study of consumer behaviour helps in formulation of
production policies.

2.

Effective Price Policies:

Pricing decisions are affected with consumer behaviour. There are various
types of consumers such as emotional rational etc. Their nature affects the
price of a product.

3.

Policies related to channels of Distribution :

Distribution channel affects the cost of product. Therefore, it should be
different for different nature fo products. The low price products and services
must have cheap and economical distribution channels.

4.

Determining Sales Promotion policies :

Promotion is important for the successful entry of a product in the market.
Sales promotion is an important technique of promotion. It helps producers to
know about the motives that influence the consumers. They create desire to
purchase among customers. These decisions are totally based on the nature of
prospects and consumers.

5.

Due to Market Differences :

Due to several differences in the modern, no uniform marketing programme
and policies can satisfy the needs of consumers. Thus consumer behaviour and
buying motives are different in each market. Therefore efficient marketing
strategies can not be formulated and implemented without the study of
Consumer behaviour.

6.

Due to Cut-throat Competition :

Today market is flooded with more and more products, customer expects that
the organizations should provide quality products at a reasonable price. A
good marketer studies the needs of customer and then tries to satisfy them.
This is the only way to win competition in the market.

135

7.

New Products with technological advancement :

Everyday you open your eyes with a new product. Rapid technological
advancement compels the marketer to study consumer behaviour.

8.

Implementing the marketing concept :

Marketing concept means the satisfaction of consumers. The consumers
would buyonly those products which satisfied their needs and wants. Thus,
analysis of consumers become essential to deliver the desired customer
satisfaction.

9.

Effective Market Segmentation :

Market segmentation means dividing the market into different parts according
to some homogeneous features of consumers. Market segmentation helps a
marketer to satisfy the special needs of customers. Thus the study of consumer
behaviour is essential.

10.

Providing variety of Products :

Consumers dislike using identical products and prefer different products to
satisfy their special needs and life cycle. To provide them variety of products,
their behavior shuld be analysed.

11.

Change in human behaviour and preferences :Consumer preferences are chaning. They dont act or react as the theory
would suggest. Todays consumer wants quality, value for money, less price
but good quality. It is possible through the knowledge of consumer beahviour.

9.5 FACTORS AFFECTING CONSUMER BEHAVIOUR

INDIVIDUAL DETERMINANTS
Consider the case of two sisters brought up in one family environment with exactly the
same educational background living in one house and yet exhibiting very different tastes
and purchase decisions. While one is regular consumer of Dettol Soap, India Today and
buy's ready-made garments the other sister uses only Lux International, reads Stardust
and buys hi-fashion clothes from boutiques. What is it that accounts for the vast
differences of consumer behaviour in the situation of these two sisters? The answer to
this can be found in the factors defined in the middle circle of Figure 1.1 i.e., personal
motivation and involvement, attitudes, self-concept and personality, learning, memory
and information processing.

136

Motivation and Involvement

All of us are consumers, within a given society all of us have the same alternatives to
choose from and yet no two consumers may exhibit identical consumer behaviour. The
reason for this is that each one of us is a unique individual with a unique set of needs,
desires and motivation. Motivation is that internal force which arouses or activates some
need and provides direction of behaviour towards fulfilment of the need. A motivation
maybe physiological in nature directed towards fulfilment of biological needs such as
hunger and thirst other motivations are psychological in nature focussing on the
satisfaction of psychological desires such as the desire for seeking status, job satisfaction,
or achievement. Everyone has both physiological and psychological motivations, but we
each fulfil them in different ways. One consumer satisfies his thirst by drinking water, the
second quenches it by having a Thums Up, the third drinks Bisleri Mineral Water while a
fourth prefers soda. For one consumer, buying a Delux Maruti car is a way of seeking
status, another satisfies his want for status by becoming a member of the best club in
town, while for a third having a credit card is a status symbol.
The reason why we adopt different methods of satisfaction of our motivations is because
of the differing level of personal involvement in various activities. Involvement refers to
the personal relevance or importance of a product or service that a consumer perceives in
a given situation. For a professional photographer the choice of a camera is a consumer
behaviour situation of involvement because the camera is his most important professional
tool. The photographer would be motivated to buy the best possible camera, irrespective
of the price tag. For another consumer, a camera is just a means of recording important
family events and just about any camera which is convenient to handle would fill the
need.
High involvement leads to a highly motivated state of mind as in case of the professional
photographer. High involvement and high motivation lead to a consumer behaviour
process which is distinctly different from that of a low involvement and low motivation.

137

Attitudes
Attitudes are our learned predispositions towards objects, people and events. Attitudes
guide our orientation towards these. It is our attitudes which influence how we respond to
different products and services. Attitudes are not inborn or innate in us. Rather they are
learnt from people around us.
Till a few years ago most housewives had a negative attitude towards frozen, dehydrated
or instant food. But today, with more women joining the work force, such products are
viewed as a convenience and instant, quick to cook meals are looked upon favourably.
Similarly, our attitude towards saving is undergoing radical changes. Instead of saving
and leading a simple, frugal life, people prefer to have a better lifestyle today rather than
save for tomorrow.
Our attitudes influence our purchase decisions and consumer behaviour. An attitude
which is averse to risk taking will never make for a consumer investing his money in
shares and stocks, such a consumer would always prefer `safe' investments even if though
rate of return may be comparatively lower.

Personality and Self-concept

Personality is the sum total of the unique individual characteristics that make each one of
us what we are.
It provides a framework within which a consistent behaviour can be developed. Selfconcept or self-image is the way we perceive ourselves in a social framework. We always
tend to buy only those products and services which we think fit or match with our
personality.
Marketers also try to give a distinct image or personality to their products which is as
close as possible to that of the target consumers. Gwalior Suitings uses Nawab of Pataudi
for promoting its suitings, to project an image of class and exclusivity and perceives that
this image would match well with the self-concept of their target consumers.

Learning and Memory

Everyday we are exposed to a wide and diverse range of information. But we can barely
recall a small fraction of it the next day.
We only remember that which is of relevance and importance to us, or where we have a
motivation to remember. Consider a situation where a family is viewing a TV programme
and the accompanying advertisements. Out of the 15-20 advertisements, the seven year
old daughter may remember the advertisement for Barbie dolls, the husband (who drives
the car) may remember the advertisement of radial car tyres and the wife may remember
the advertisement for a new model of mixer-grinder. This is because each one of them
has a motivation for different products.
Our motives, attitudes and personality act as filters by letting in only relevant information
'

and keeping all other information out. Surely we would see the product, hear its jingle on
the radio but chances are it will not register in our minds. We will remember it only for a
short while and then forget it.
This is known as selective retention. We retain in our memories only selective
information.

138

Information Processing
This refers to the process and activities which consumers engage in while gathering,
'

assimilating and evaluating information. As discussed in the previous paragraphs, we

only attend to selective information. The manner in which we assimilate and evaluate this
selective information is determined by our motives, attitudes and personality and selfconcept. Thus the same information maybe evaluated in a different manner by two
different individuals and the ensuing response may also be very different. A half-filled
glass elicits the response "a half-empty glass from, one consumer while another reacts by
"

saying it is half-full".

EXTERNAL ENVIRONMENT
.

Cultural Influences
The first of the influences is that of cultural variables. Culture is defined as the complex,
sum total of knowledge, belief, traditions, customs, art, morals, law and any other habits
acquired by people as members of a society. Culture of one society differs from that of
another. Many of our actions, and behaviour as consumers stem from our cultural
background for instance, the emphasis on saving schemes oriented towards saving for a
daughter's marriage or the preferred attitude towards gold as a form of saving are the
result of our unique cultural influence.

Sub-cultural Influences
Within a given culture, there are many groups or segments of people with distinct
customs, tradition and behaviour, which set them apart from other people. All Indians
share one common cultural heritage, but the Hindu Brahmins of Tamil Nadu are very
different from the Hindu Bengalis of Calcutta in the same way as Kashmiri Hindus are
different from the Hindus of Gujarat. Each of these people, within one cultural
mainstream, have uniquely distinct sub-cultures. They have their style of dress, food
habits, religious traditions and rites all of which have implication for the marketer.
Sumeet Mixer and Grinder developed special heavy duty motor to withstand continuous
running required for grinding rice for dosa, vada, idli-staple food items of the South
Indian cuisine. Similarly, marketers of spices need to modulate taste and formulation
according to the consumers taste, which varies from state to state.

Social Class Influences

Social class is a group consisting of a number of people who share more or less equal
position in a society. Within a social class people tend to share same values, beliefs, and
exhibit similar patterns of behaviour and consumption. Some social classes are ranked as
higher and lower. Social classes differ from one society to another, and their standing in
society may also change over time. Social classes may be defined by parameters such as
income and occupation. The belongingness to a social class influence dicisions such as
choice of residence, type of holiday, means of entertainment and leisure.

139

Social Group Influences

A social group is a collection of individuals who share some common attitudes and a
sense of relationship as a result of interaction with each other. Social groups may be
primary where face-to-face interaction take place frequently, such as families, work
groups and study groups. Secondary groups are those where the relationship is a more
formalized and less personal in nature. Examples of primary groups are associations of
professionals members of a political party, and social groups such as Rotory, Lions,
Jaycees etc. The behaviour of individuals as consumer is greatly influenced by other
members of the group. If executives of an office normally wear a safari suit to work, it is
most likely that a newcomer to the office would tend to conform to this pattern of
dressing, even though he may have been dressing very differently in his earlier work
situation. The change over to kurta-pajama once an individual joins politics is another
example of how social group influences consumer behaviour.

Family Influences
Family is a social group which can be defined as a primary group. It needs to be studied
in great detail as it is one of the strongest sources of influences on consumer behaviour.
The first and strongest influence on a child is that of his family and he imbibes many
behavioural patterns from other family members subconsciously and these tend to stay
with him even after attaining adulthood. Further, within a family many decisions are
made jointly with various members exerting different degree of influence. The changing
structure of families as the joint family system gradually gives way to single nucleus
families also influence the consumer behaviour.

Personal Influences
Each individual is influenced by the family, social class, sub-cultural and cultural group
to which he belongs, and yet has his own distinct personality which influences his
decisions and behaviour as a consumer. The probability of trying a new product or a new
brand will depend on the type of personality of the consumer. The process of evaluation
of different products and different brands will vary from person to person. For one, price
may be the most important parameter in making the decision to buy a water geyser, for
another it is convenience, and for yet another it may be the status symbol value.

Other Influences
All other influences not covered in any of the other specific influence headings are
covered here. National or regional level events, situational factors or any other external
influences are included here. Cricket test matches always lead consumers to buy TV sets
and transistor radios. The hosting of Asiad '82 in New Delhi brought in its wake
tremendous awareness and interest in sports. All such-events have both temporary and
permanent influences on consumer behaviour. During the period of the event, there is
increased emphasis on buying goods and services related to the event. After the event is
over, as in case of Asiad, because the infrastructure for sports has been created, an
interest amongst the people been kindled; sporting events are now held regularly with
more people participating. All this leads to greater consumption of sports goods.

140

Situational variables such as product display, price reduction offers, free gift offers, also
influence consumer behaviour. Seeing an attractive offer, a free mug with a new brand of
coffee, a regular user of a rival brand may be tempted to try the new brand,

9.6APPLICATIONS
MARKETING

OF

CONSUMER

BEHAVIOUR

IN

Marketing is defined as "human activity directed at satisfying needs and wants through
exchange processes". Thus the beginning of marketing lies in identifying unsatisfied
human needs and wants and understanding the ensuing activity which people engage in to
fulfil these. And that, as we have described, is the realm of consumer behaviour.
Consumer behaviour and marketing go hand-in-hand. Trying to do the latter without an
understanding of the former in akin to firing a shot in the dark. Consumer behaviour has a
number of applications in the area of marketing as described in the following paragraphs.

1. Analyzing Market Opportunity: Study of consumer behaviour helps in

identifying needs and wants which are unfulfilled. This is done by examining trends in
income, consumers lifestyles and emerging influences. The trend towards increasing
number of working wives. and greater emphasis on leisure and convenience have
signalled the emerging needs for household gadgets such as vacuum cleaner, washing
machine and mixer grinder. Tortoise Mosquito repellant coils and Good Knight electrical
repellants were marketed in response to a genuinely felt need of the people. Its rapidly
rising sales graph is an indication of how well the product has satisfied the consumer's
need.

2. Selecting the Target Market: The study of the consumer trends would reveal
distinct groups of consumers with very distinct needs and wants. Knowing who these
groups are, how they behave, how they decide to buy enables the marketer to market
products/services especially suited to their needs. All this is made possible only by
studying in depth the consumer and his purchase behaviour.
A study of potential consumers for shampoo revealed that there was a class of consumers
who would like to use shampoo only on special occasions and who otherwise use soap to
wash their hair. Further, this consumer class would not afford to spend more than three or
four rupees on shampoo. Having identified this target market, companies with leading
brands launched their shampoos in small sachets containing enough quantity for one
wash and priced just at two or three rupees.

3. Determining the Product Mix: Having identified the unfulfilled need slot and
having modified the product to suit differing consumer tastes, the marketer now has to
get down to the brass tacks of marketing. He has to determine the right mix of product,
price promotion and advertising. Again consumer behaviour is extremely useful as it
helps find answers to many perplexing questions.
Product: The marketer has the product that will satisfy hitherto unfulfilled consumer
need, but he must decide the size, shape and attributes of the product. He must figure out
whether it is better to have one single product or a number of models to choose from.
141

Does the product require any special kind of packaging? Does it need any guarantee or
after sales service? What associated products and services can be offered alongside?
Maggi Noodles were first launched in the most common flavours such as masala and
capsicum. Having succeeded with these, other flavours such as garlic and sambhar were
launched with the objective of appealing to specific regional tastes. However, these
flavours did not succeed. Recently, exotic flavour such as prawns has been launched. All
these are attempts to modify the product by adding special features, attributes which
might enhance the product appeal to the consumers.
The study of consumer behaviour also guides the marketer in making decisions regarding
packaging. Pan Parag was first introduced in tins. But study of consumer behaviour
revealed that people wanted smaller packing which they could conveniently carry on their
person and in response to this the individual pouches were introduced. Further study of
consumers revealed a problem with, these pouches. Once opened and kept in the purse or
pocket, the pan masala would spill out of the pouch into the purse or pocket. To
overcome this problem, Pan Parag has now launched a pouch with a zip. You eat as much
as you want, zip up the packet and put it in your pocket without fear of spillage and
wastage.
The study of consumer needs revealed the need for a water storage facility. in the kitchen
and bathroom but which didn't occupy floor space. In response to this need, Sintex added
the overhead indoor loft tank to their existing range of outdoor. roof top water storage
tanks.
Price: What price should the marketer Charge for the product? Should it be the same as
that of the competing product or lower or higher? Should the price be marked on the
product or left to the discretion of the retailer to charge what he can from the customer?
Should any price discounts be offered? What is the customer perception of a lower or
higher price? Would a lower price stimulate sales? Or is a lower price associated with
poor quality?
These are the kinds of questions facing a marketer when taking a decision regarding
pricing. The marketer has to determine the price level which makes the image of the
product and which also maximises the sales revenue. For doing so he must understand the
way his product is perceived by consumers, the criticality of the price as a purchase
decision variable and how an increase or decrease in price would affect the sales. It is
only through continuous study of consumer behaviour in actual buying situations that the
marketer can hope to find answers to these issues.
Distribution: Having determined the product size, shape, packaging and price, the
next decision the marketer has to make is regarding the distribution channel. What. type
of retail outlets should sell the products? Should it be sold through all the retail outlets or
only through a selected few? Should it be sold through existing outlets which also sell
competing brands or should new outlets selling exclusively your brand of product be
created? How critical is the location of the retail outlets from the consumers' viewpoint?
Does the consumer look for the nearest convenient location or is he willing to travel some
distance for buying the product?
The answers to all these questions can only be found when the marketer has a good
understanding of the consumers' needs which are being fulfilled by his product and the
manner in which consumers arrive at the dicision to buy. A few years ago, Eureka Forbes
introduced a vacuum cleaner in the Indian market. It was not only launch of a new brand,
142

but rather a launch of a new product concept. No retail outlets were selling vacuum
cleaners very few consumers knew much about the product and fewer still were willing to
buy it. Under these circumstances, the company decided to sell the product only through
personal selling with the salesman calling on the consumer at his home. Here the
'

salesman had enough time to explain, demonstrate and convince the prospective customer
about the utility of the vacuum cleaner. In a retail outlet situation, all this would just not
have been possible. The retailer has neither the time nor the detailed knowledge required
to sell such a new product concept. This distribution strategy of Eureka Forbes, based on
a very fine understanding of the consumer behaviour, has yielded good sales results. The
product concept is well accepted in the urban markets and today the vacuum cleaner, in
addition to personal selling is also sold through some selected retail outlets.
Promotion: The marketer here is concerned with finding the most effective
methods of promotion which will make the product stand out amongst the clutter of so
many other brands: and products, which will help increase the sales objective and yet be
within the budget. This is possible only when the marketer knows who his target
consumers are, where are they located, what media do they have access to, what is their
preferred media and what role does advertising play in influencing the purchase decision?
Today, TV is the most powerful advertising medium in the country. And many brands
spend the greater part of their promotion and advertising budget on TV. Brands regularly
advertised on TV soon become well recognized names. But as a marketer you have to
question the suitability of any specific medium in case of your specific product and
budget. Suppose your product is sold in only a few geographical markets you may decide
to avoid TV altogether and concentrate on point of purchase promotion and local
advertising through local newspaper, hoardings and wall paintings.
In so many cases of industrial product media advertising is very negligible, instead,
brochures or leaflets containing detailed product specification and information are
directly mailed to the actual consumer, and sometimes followed up by a salesman making
a call to clinch the deal. This is primarily because buyer behaviour and informational
needs of industrial buyers are very different from that of consumer buying. You will
study organisational buying behaviour in detail in Unit 3 of this block. But you can make
these decisions only when you know your consumer and understand his behaviour.

4. Use in Non-profit and Social Marketing: The knowledge of consumer

behaviour is also useful in the marketing of non-profit or social or governmental services
of institution such as hospitals, voluntary agencies, law enforcement and tax collection
agencies.
The income tax authorities have always been perceived in negative manner by the
common man who fears them and views them in a suspicious light. To overcome this
poor image, advertisements on TV and in newspapers and magazines are regularly
released, wherein a friendly, helpful image is sought to be projected. Moreover, there is
greater dissemination of information regarding the rights and responsibilities of the
taxpayer. Similarly, Delhi Police is trying to overcome the problem of poor image by
projecting itself as always alert and available for help through regular newspaper
advertisements.

143

END CHAPTER QUIZZES

1. Marketing Research Includes:a)
b)
c)
d)

Collecting information
Analyzing results
Communicating findings
All of above

2. Various Sources of Data Collection are:a)

b)
c)
d)

Primary data
Secondary data
both a & b
Neither a or b

3. Sales analysis includes:a)

b)
c)
d)

Analyzing sales of the organization.

Analyzing purchases of the organization.
Studying production facilities of organization.
None of above

4. Scope of marketing research includes:a)

b)
c)
d)

Sales analysis.
Product management
Advertising research
All of above

5. Advertising research includes:a)

b)
c)
d)

Media research
Copy research
Name of above
Both a & b

6. Individual determinates affecting consumer behaviors includes:a) Motivation

b) Attitudes
c) Personality
d) all of above

144

7. External environment includes:a)

b)
c)
d)

Cultural influences
Sub- cultural influences
Social class influences
All of above

8. Consume behavior help in:a)

b)
c)
d)

Studying behavior of consumer.

Studying behavior of supplier.
Studying shareholders behavior.
Studying behavior of creditors.

9. Personality means:a)
b)
c)
d)

Studying individual characteristics.

Learning from past experience.
Studying attitude.
Motivating individual.

10.Family influence the decision of a consumer

o Yes
o No

145

BIBLOGRAPHY
1. Kotler, Philip, Marketing Management, Prentice Hall, 2000
2. Sontakki, C.N., Marketing Management, Kalyani publishers.
3. Saxena, Rajan, Marketing Management, Tata Mcgraw hill
4. Ramaswamy and Namakumatri, Marketing Management, Macmillan
India Limited.
5. Marchannd & B. Vardharajan, An introduction to Marketing, Vikas
Publishing House.
6. Maurice & Mondell & larry Rosenberg Marketing, Prentice Hall of
India Ltd.
7. Mohammad Amanatuallh: Principles of Modern Marketing. Kalyani
Publications

146

KEY TO END CHAPTER QUIZZES.

CHAPTER I
1(b); 2(a); 3(a); 4(a); 5(d); 6(d);7(b); 8(d); 9(a);10(d)

CHAPTER II
1(c); 2(d); 3(b); 4(b); 5(d); 6(a);7(d); 8(b); 9(d);10(a)

CHAPTER III
1(c); 2(d); 3(d); 4(b); 5(d); 6(a);7(a); 8(a); 9(d);10(a)

CHAPTER IV
1(b); 2(b); 3(d); 4(a); 5(c); 6(b);7(d); 8(b); 9(d);10(a)

CHAPTER V
1(a); 2(d); 3(a); 4(c); 5(a); 6(a);7(a); 8(d); 9(a);10(d)

CHAPTER VI
1(a); 2(a); 3(c); 4(b); 5(d); 6(b);7(c); 8(b); 9(d);10(a)

CHAPTER VII
1(a); 2(a); 3(d); 4(d); 5(d); 6(d);7(a); 8(b); 9(c);10(d)

CHAPTER VIII
1(a); 2(c); 3(d); 4(a); 5(b); 6(a);7(a); 8(b); 9(b);10(c)

CHAPTER IX
1(d); 2(c); 3(a); 4(d); 5(c); 6(d);7(d); 8(a); 9(a);10(a)

147

ASSIGNMENT A
.
1. The length of the product life cycle is governed by the rate of technological
change, the rate of market acceptance and the case of competitive entry Discuss.
2. The marketing concept is a customer orientation backed by integrated marketing
aimed at generating customer satisfaction as the key to satisfying organisational
goals. Comment.
3. What are major reasons for market segmentation and what are its advantages?
4. Briefly explain the steps involved in new product development.

ASSIGNMENT B
1. Explain any two pricing policies with their relative advantages and disadvantages.
2. As Marketing Director of Kelloggs evolve a market driven distribution system for
the market.
3. Which type of sales promotion vehicles will you use to promote the sale of a
premium brand of toilet soap?

CASE STUDY
M.K.B. products was an industrial company, undertaking the manufacture of chewing
tobacco products. For the packing of these products, tin containers were required in huge
quantities. The company was buying these containers from Shaz Metals, who were
supplying the empty containers to M.K.B. products @ Rs. 1.60 per tin container. This
arrangement carries on for more than ten years.
M.K.B. products was later joined by a young M.B.A., who advised the owner of M.K.B
products, to go in for backward integration (To make the tin containers themselves,
instead of buying them from Shaz Metal Works.
The matter was put under deliberation and it was decided to join for partial backward
integration, i.e. to start the manufacture of their own tin containers, as well as, keep
buying from the supplier(Shaz Metal) in a lesser quantity, till such time that the company
M.K.B. products could become self sufficient.
In the pursuit of backward integration, another semiautomatic tin container
manufacturing plant was set up by the company, and it started its production and initially
faced a lot of teething troubles. They however, overcame them and started functioning
smoothly.
A number of suppliers were interested in supplying tin sheets for M.K.B. products. After
buying randomly from a number of suppliers, the company came to the terms with one
148

Mr. Wali, who undertook all the raw material supplies of the tin sheets to the company at
reason able rates. He would make deliveries as and when necessary, and developed a
good relationship with the company. This arrangement lasted for a decade. Later, Mr.
Wali, the tin supplier told the company that they would be charging an additional two
percent on the prices quoted by them and delivery time would have to be rescheduled and
the company would have to pick up, or order for the entire material consumed by the
quarterly, instead of monthly arrangements.
This sets the company thinking whether to agree to Mr. Wali terms or to look for another
supplier. After a little research, they came across a supplier in tin industries, who was
happy to supply the goods at same terms and conditions.
When the deal was about to finalised with the scrap tin industries, Mr. Wali sent a
telegram that the increase in rated was cancelled, and they were willing to renew their
contract, or continue with the suppliers at the earlier rate for the next 12 months.
This again set the company thinking, because they had good relations with Mr.Wali for a
long period of time and also the fact that in industrial buying, market price plays a
secondary role but the quality, timely and regular suppliers are the dominant factors.
QUESTIONS:
1. What should the company do in this situation and why?
2. Should the company try scrap industries who are an unlisted supplier and what
precautions should the company take for the future?

ASSIGNMENT C
MULTIPLE CHOICE QUESTIONS
1. All of the following would be ways to segment within the category of psychographic
segmentation EXCEPT:
a. social class.
b. occupation.
c. lifestyle.
d. personality.
2. The orange juice manufacturers know that orange juice is most often consumed in the
mornings. However, they would like to change this and make the drink acceptable during
other time periods during the day. Which form of segmentation would they need to work
with and establish strategy reflective of their desires?
a. gender segmentation
b. benefit segmentation
c. occasion segmentation
d. age and life-cycle segmentation
149

3. Using a successful brand name to introduce additional items in a given product

category under the same brand name (such as new flavors, forms, colors, added
ingredients, or package sizes) is called a(n):
a. line extension.
b. brand extension.
c. multibranding.
d. new brands.
4. If a company's objective were to reach masses of buyers that were geographically
dispersed at a low cost per exposure, the company would likely choose which of the
following promotion forms?
a. Advertising
b. Personal selling
c. Public relations
d. Sales promotion
5. Successful service companies focus their attention on both their customers and their
employees. They understand ___________________, which links service firm profits
with employee and customer satisfaction.
a. internal marketing
b. service-profit chains
c. interactive marketing
d. service differentiation
6. Anything that can be offered to a market for attention, acquisition, use, or consumption
that might satisfy a want or need is called a(n):
a. idea.
b. demand.
c. product.
d. service.
7. ______________ is the general term for a buying and selling process that is supported
by electronic means.
a. Internet commerce
b. Web commerce
c. Computer commerce
d. Electronic commerce
8. ________________ consists of dividing a market into distinct groups of buyers on the
basis of needs, characteristics, or behaviour who might require separate products or
marketing mixes.
a. Product differentiation
b. Market segmentation
c. Market targeting
d. Market positioning
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9. __________________ is the process of evaluating each market segment's

attractiveness and selecting one or more segments to enter.
a. Mass marketing
b. Market segmentation
c. Market targeting
d. Market positioning
10. The fact that services are sold, produced, and consumed at the same time refers to
which of the following service characteristics?
a. Intangibility
b. Inseparability
c. Variability
d. Perishability
11. _______________ factors are the most popular bases for segmenting customer
groups.
a. Geographic
b. Demographic
c. Psychographic
d. Behavioral
12. The stage is the product life cycle that focuses on expanding market and creating
product awareness and trial is the:
a. decline stage.
b. introduction stage.
c. growth stage.
d. maturity stage.
13. A set of interdependent organizations involved in the process of making a product or
service available for use or consumption by the consumer or business user is called a(n):
a. retailer.
b. wholesaler.
c. distribution channel.
d. logistics.
14. In evaluating messages for advertising, telling how the product is better than the
competing brands aims at making the ad:
a. meaningful.
b. distinctive.
c. believable.
d. remembered.
15.___________________ is the practice of adopting policies and developing strategies
that both sustain the environment and produce profits for the company.
a. Environmentalism
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b. Environmental sustainability
c. Consumerism
d. Consumer accountability
16. Consumer goods with unique characteristics or brand identification often requiring a
special purchase effort are called:
a. custom products.
b. specialty products.
c. convenience products.
d. shopping products.
17. A price reduction to buyers who buy in large volumes is called a(n):
a. quantity discount.
b. cash discount.
c. seasonal discount.
d. trade discount.
18. R&D and engineering first produce the product concept into a physical product
during which of the following stages of the new product development process?
a. Concept development and testing
b. Marketing strategy
c. Business analysis
d. Product development
19. The primary reason that many companies work to become the "low-cost producers" in
their industry is because:
a. they can generate more advertising.
b. they can please top management.
c. they can gain tax advantages.
d. they can set lower prices that result in greater sales and profits.
20. Conflicts between different levels of the same channel of distribution are referred to
as:
a. horizontal conflicts.
b. vertical conflicts.
c. layer-based conflicts.
d. parallel conflicts.
21. ________________ is a philosophy holding that a company's marketing should
support the best long-run performance of the marketing system.
a. Enlightened marketing
b. Myopic marketing
c. Fundamental marketing
d. Conceptual marketing

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22. A company is practicing ________________ if it focuses on subsegments with

distinctive traits that may seek a special combination of benefits.
a. micromarketing
b. niche marketing
c. mass marketing
d. segment marketing
23. When a company reviews sales, costs, and profit projections for a new product to find
out whether these factors satisfy the company's objectives, they are in which of the
following new process development stages?
a. Concept development and testing.
b. Commercialization.
c. Business analysis.
d. Marketing strategy development.
24. _______________ is a strategy of using a successful brand name to launch a new or
modified product in a new category.
a. Duobranding
b. Line extension
c. Brand extension
d. Multibranding
25. The fact that service cannot be stored for later use or sale is evidence of their:
a. intangibility.
b. inseparability.
c. variability.
d. perishability.
26._________________ is the concept under which a company carefully integrates and
coordinates its many communications channels to deliver a clear, consistent, and
compelling message about the organization and its products.
a. The promotion mix
b. Integrated international affairs
c. Integrated marketing communications
d. Integrated demand characteristics
27. The course of a product's sales and profits over its lifetime is called:
a. the sales chart.
b. the dynamic growth curve.
c. the adoption cycle.
d. the product life cycle.
28. The type of trade-promotion discount in which manufacturers agree to reduce the
price to the retailer in exchange for the retailer's agreement to feature the manufacturer's
products in some way is called a(n):
a. discount.
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b. allowance.
c. premium.
d. rebate.
29. When producers, wholesalers, and retailers act as a unified system, they comprise a:
a. conventional marketing system.
b. power-based marketing system.
c. horizontal marketing system.
d. vertical marketing system.
30. ______________ is a person's distinguishing psychological characteristics that lead to
relatively consistent and lasting responses to his or her own environment.
a. Psychographics
b. Personality
c. Demographics
d. Lifestyle
31. ________________ has the advantage of being high in selectivity; low cost;
immediacy; and interactive capabilities.
a. Direct Mail
b. Outdoor
c. Online
d. Radio
32. If an advertiser wants flexibility, timeliness, good local market coverage, broad
acceptability, and high believability, the advertiser will probably choose which of the
following mass media types?
a. Newspapers
b. Television
c. Direct Mail
d. Radio
33. A(n) _______________ is a name, term, sign, symbol, or design, or a combination of
these that identifies the maker or seller of a product or service.
a. product feature
b. sponsorship
c. brand
d. logo
34. All of the following factors can affect the attractiveness of a market segment
EXCEPT:
a. the presence of many strong and aggressive competitors.
b. the likelihood of government monitoring.
c. actual or potential substitute products.
d. the power of buyers in the segment.

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35. A _______________ is any activity or benefit offered for sale that is essentially
intangible and does not result in the ownership of anything.
a. demand
b. basic staple
c. product
d. service
36. The _______________ holds that consumers will favor products that are available
and highly affordable (therefore, work on improving production and distribution
efficiency).
a. product concept
b. production concept
c. production cost expansion concept
d. marketing concept
37. A company is in the ______________ stage of the new product development process
when the company develops the product concept into a physical product in order to
assure that the product idea can be turned into a workable product.
a. product development
b. commercialization
c. marketing strategy
d. business analysis
38. The practice of going after a large share of a smaller market or subsets of a few
markets is called:
a. undifferentiated marketing.
b. differentiated marketing.
c. concentrated marketing.
d. turbo marketing.
39. ________________ is screening new-product ideas in order to spot good ideas and
drop poor ones as soon as possible.
a. Idea generation
b. Concept development and testing
c. Idea screening
d. Brainstorming
40. Technological advances, shifts in consumer tastes, and increased competition, all of
which reduce demand for a product are typical of which stage in the PLC?
a. decline stage
b. introduction stage
c. growth stage
d. maturity stage

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ANSWERS TO MULTIPLE CHOICE QUESTIONS

1(b); 2(c); 3(a); 4(a); 5(b); 6(c);7(c); 8(b); 9(c);10(b)

11(b); 12(b); 13(c); 14(b); 15(b); 16(b);17(a); 18(c); 19(c);20(b)
21(a); 22(b); 23(a); 24(c); 25(d); 26(c);27(d); 28(b); 29(d);30(b)
31(c); 32(a); 33(c); 34(b); 35(d); 36(b);37(a); 38(c); 39(c);40(a)

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