MARKETING NOTES

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INDEX SR CHAPTER PG #

1 2 3 4 5 6 7 8 9

Introduction to Marketing Concept MARKETING ENVIRONMENT MARKETING MIX MARKETING RESEARCH CONSUMER BEHAVIOUR MARKET SEGMENTATION, TARGETING & POSITIONING Product / New product development / Product Life Cycle Branding / Packaging / Logo DISTRIBUTION, PRICING & PROMOTION

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CHAPTER – 1 – Introduction to Marketing Concept Introduction: The terms "market" and "marketing" are used frequently in the business as business includes basically production and marketing activities. Production is the base of marketing and marketing has wider social significance. Marketing is one essential and useful economic activity. It is an exchange process. It is essential for the satisfaction of human wants and also for raising social welfare. Marketing is useful to manufacturers, traders, consumers and the society as a whole. Production of goods and services gets significance due to marketing activities. Needs of consumers are satisfied due to marketing activities. Marketing is, now, treated as a massive/ global economic activity. Marketing includes marketing of goods and marketing of services. Both are equally important, useful and essential. Production and marketing are supplementary activities. In the absence of marketing facilities, production will be meaningless. Similarly, infrastructure facilities such as banking, transport, warehousing and insurance are useful for the promotion of marketing activities at the national and global levels. Marketing is a challenging and exciting subject. It refers to the mechanism due to which the ownership of goods is transferred from the seller to buyers i.e. consumers. Money acts as a useful tool/medium for the settlement of marketing transactions. Marketing as an economic activity has wider socio-economic and cultural significance. Goods produced are supplied to consumers for their satisfaction and welfare through distributive system. Marketing is a dynamic and evolutionary concept. Local marketing is now converted into global marketing. In addition, global marketing scenario is fast changing and marketing enterprises have to raise their competitiveness for survival and growth in the domestic as well as in international marketing. Marketing management is one aspect of total business management. Efficient marketing is an essential pre-requisite for success and prosperity of business enterprises. Modern marketing concept is consumer-oriented and service-oriented. In addition, the societal concept of marketing is now universally accepted. It is certainly not merely for profit maximization but for economic growth and social welfare. The concept of "Lifestyle Marketing" is now getting popularity. Lifestyle marketing is defined as "any promotional activity shaped around the interests, attitudes, opinions and way of life of consumers." It is for certain that in the 21st century, marketers will realize that lifestyle is the deciding factor that keeps their business one step ahead of their competitors and in time too. In this introductory chapter on marketing management, we propose to study the details of marketing concept.

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MEANING OF MARKET: The term "market" originates from the Latin noun "Mnrcrztus" which means "a place where business is conducted". In the ordinary language, market refers to a particular place used for the conduct of trade transactions. It is a meeting place for buyers and sellers and provides marketing services/conveniences to both the parties. Exchange/transfer of ownership of goods takes place at the market place with the use of money which acts as a medium of exchange and also as a measure of value. Money market, wholesale/retail market are the markets in this sense of the term. The term market has now acquired a wider meaning than its ordinary meaning noted above. It is no more confined to any specific area or place where the buyers and sellers meet to exchange goods. It is now generalised to mean any body of persons who are in intimate business relations and carryon extensive transactions in any commodity. DEFINITIONS OF MARKET: (1) According to William J. Stanton "A market may be defined rzs a place where buyers and sellers meet, goods and services are offered for sale, and transfer of ownership occur". (2) The American Marketing Association defines a market as "the aggregate demand of potential buyers for a product or service". FEATURES OF MARKET: (1) Group of buyers and sellers: Market is a group of buyers and sellers interested in negotiating the terms of sale and purchase of goods/services in order to facilitate exchange of goods and services with the medium of money. (2) Needs and wants of people are basic requirements: The needs of the people, their capacity to spend money, their willingness to part with more and the availability of goods and services are the essential requirements of market. (3) Geographical coverage: In a narrow sense, market refers to a particular place whereas in a wider sense, any convenient place, region and even world can be considered as a market. (4) Demand and supply: Demand from buyers for good / services and supply of goods/services from sellers are two broad aspects of a market. There is free entry to buyers and sellers in a free and competitive market.

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(5) Trading procedure: Transactions can be completed at the market either personally or through agents or even by using modem communication facilities such as telephone, fax or e-mail, internet or computer which are quick and economical. (6) Satisfaction and profit are motivating factors: Satisfaction of human wants and financial gain (profit) are two motivating factors behind market deals. Buyers/ consumers are interested in satisfaction and sellers are interested in profit. TYPES OF MARKETS: Markets can be classified into different types on the following basis: 1) Area covered: (a) Local market (b) Regional market (c) National market (d) World/Global market. 2) Commodities transacted: (a) Cotton/Tea/Vegetable market (b) Share market (c) Bullion market (d) Money market (e) Capital market (f) Real estate market. (3) Nature of transactions: (a) Cash/Spot market (b) Futures market. (4) Volume of business transactions: (a) Retail market (b) Wholesale market. (5) Final use of products: (a) Consumer goods market (b) Industrial goods market. (6) Dominance of parties on the transactions: (a) Sellers' market (b) Buyers' market. (7) Functioning of market: (a) Organized market (b) Unorganized market (c) Regulated market. (8) Nature of competition: (a) Competitive market (Perfect market) (b) Monopolistic market (Imperfect market). MEANING OF MARKETING (WHAT IS MARKETING?): Marketing is an important socio-economic activity with long history of many centuries. It is an evolutionary activity. Local marketing is now developed into global marketing. It is an essential activity for the satisfaction of human wants and for raising social welfare.

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Production is the base of marketing. It supplements production activities by distributing goods and services. Marketing is all pervasive in the present day world. It is a time-tested art and has been practiced in one form or the other from time immemorial. Marketing is viewed as being advertising, sales promotion or merely selling. In a broad sense, marketing can be understood as a concept, a process and as a managerial function. The concept of marketing is basically a concept of customer orientation. Here, consumer / customer is given special importance and attention. He is treated as the cause and purpose of all marketing activities. This is as good as giving social importance to marketing aspect. Marketing means understanding and responding to the needs, interests, way of life and expectations of consumers. Marketing links producers and consumers together for mutual benefits. It facilitates transfer of ownership of goods and services from producers to consumers. Production will be meaningless if goods produced are not supplied to consumers through appropriate marketing mechanism. Marketing activities are conducted with the medium of money. All exchanges are made through money. Such activities .are conducted regularly throughout the world. Modern marketing is global in character. Everyone participates in marketing activities for the satisfaction of needs/wants. Marketing is the world's oldest profession. Exchanges were common in the olden barter economy. They are taking place in the modern complex marketing system. In short, marketing is the study of exchange processes. Customer is the most important person in the whole marketing process. He is the cause and purpose of all marketing activities. Marketing is basically for his satisfaction and welfare. According to Prof. Drucker, the first function of marketing is to create a customer or market. All marketing activities are basically for meeting the needs of customers and also for raising social welfare. Marketing itself is a "need-satisfying process". It facilitates physical distribution and creates four types of utilities viz., Form, Place, Time and Possession. Need For Marketing: The need for marketing is universally accepted since the early period of human life. The following points justify the need for marketing: (1) Marketing is needed in order to satisfy human needs/wants and also for raising social welfare. (2) Marketing is needed as it acts as a base of production activities. It encourages largescale production and uses such production for meeting the needs of people. (3) Marketing is needed as it provides various conveniences to manufacturers, traders and consumers.

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(4) Marketing is needed as it facilitates economic and industrial growth of country. (5) Marketing is needed as it has wider socio-economic significance. It facilitates largescale production, promotes economic and social welfare, creates massive employment opportunities, creates utilities and facilitates cultural exchange. (6) Marketing is needed for the transfer of ownership from producers to consumers. Definitions of Marketing
1. “Marketing is an exchange process by which needs & wants of an ultimate

customer is satisfied.” - Philip Kotler 2. Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. - American Marketing Association (AMA) 3. “Marketing is a system of business activities, designed to plan in advance, produce a right product, price reasonably, distribute effectively & promote efficiently want satisfying goods to present & future potential customer.” W. J. Stanton (This definition is known as SYSTEM CONCEPT) SYSTEM: Co-ordination of various functions. Plan: Future course of action, recorded in advance. Market: “A group of customers (people) constitute market. People with needs & wants & also have willingness to pay.” Marketing includes diverse disciplines like sales, public relations, pricing, packaging, and distribution. In order to distinguish marketing from other related professional services. Features of Marketing: (1) Regular and continuous activity: Marketing is a continuous process/activity in which goods and services are manufactured and distributed to consumers. Assembling, grading, packaging, transportation, warehousing, etc., are the activities which are supplementary to marketing but are useful for smooth and orderly conduct of marketing operations/ activities. .

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(2) Facilitates satisfaction of human wants: Marketing activities are basically for satisfying the needs of consumers and also for raising social welfare. Marketing activities are those activities which are devoted to finding out what the customers want and then satisfying those wants. Marketing is particularly useful for satisfying physiological needs which consist of needs for food, shelter, and clothes. Identification of consumer needs should be the starting point of marketing activity this is natural as marketing is for meeting such needs and wants. Goods and services are useful for the satisfaction of wants. In this sense, marketing begins before a product is launched. (3) Brings transfer of ownership: Marketing activity brings transfer of ownership of goods and services and facilitates physical distribution. Production (goods and services) acts as a base of marketing as marketing relates to the goods produced or manufactured. The essence of marketing is a transaction- an exchange. (4) Creates utility: Marketing activity creates utilities (time, place and possession) through which human wants are satisfied. (5) Wider socio-economic significance: Marketing activity has wider socio-economic significance as it facilitates large-scale production, creates massive employment and promotes social welfare. Even industrial development and cultural exchanges are through marketing activities. Paul Mazur defines marketing as "the delivery of a standard of living to society." (6) Importance of 4 Ps: Marketing is the sum total of 4Ps. These are: product, price, promotion and physical distribution. Large scale marketing is possible through the combination of 4Ps called marketing mix. (7) Core aspect of business: Marketing is core aspect of business. It is within the scope of the term business and is also linked with other functional areas of business which include production, finance, and personnel and so on. Marketing is a managerial function. It involves analysis, planning and control of marketing activities in an organization. (8) Evolutionary concept: The concept of marketing has undergone many significant changes. It is not merely an activity for profit maximization. It has social significance. It is for the satisfaction of human wants and for raising social welfare. Marketing is now treated as consumer oriented socio-economic activity. It is an evolutionary concept. ' (9) Precedes and follows production: Production and marketing are closely related. Goods are produced for marketing. Here, marketing follows production. In addition, marketing suggests what consumer wants and production is conducted accordingly. In

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modern marketing, production is adjusted as per the needs and expectations of consumers. Thereafter commercial production is undertaken and the product is launched in the market. Such product gets consumer support as it is as per the market need. This suggests the importance of marketing. It precedes and follows production. Different Marketing Concepts: Every firm has a different idea to run its firm. It depends upon its perception about business and orientation to the market place. Following are different concepts of marketing:
? The Exchange Concept: Here, the marketer considers that exchange of product

between buyer and seller is the central idea of marketing. Marketing is not merely exchanging of products. It also covers customer’s satisfaction, advertising, promotion etc. whereas exchange gives priority to only distribution and price mechanism. Although they both are important parts of marketing concepts, but other aspects as indicated above are completely overshadowed in the exchange concept.
? The Production Concept: In many organizations, production concept plays a

dominating role. Here, the marketer believes that mass production with low cost per unit will be acceptable to the consumers. In many cases, this doesn’t happen as consumers, besides the price part, are motivated by other aspects such as quality of product, their satisfaction level etc. as a result, this concept fails to serve the purpose of an organization.
? The Product Concept: The production concept gives priority to low cost-high

volume and thereby win markets, the product concept gives priority to product quality, improvement in product, introducing new product etc. An organization depending upon this concept believes that consumers would accept high quality product, thereby spending their time in MR and development. The entire concentration is on quality side and on engrossed Marketing Research. Such organizations at times fail to understand what consumers needs and what they will accept.
? The Sales Concept: This concept gives priority to aggressively promote and push

its product. Huge amount is spent on advertising, sales promotion, personal selling, price discounts and publicity. Companies accepting this concept actually confuses sales concept with marketing concept, thereby failing to understand the difference between both. Marketing Myopia: All above indicated concepts when implemented individually gives rise to marketing myopia. Marketing Myopia is related to short-sightedness to marketing. Excessive importance to sales, product, production or exchange creates Marketing Myopia.

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Selling V/S Marketing: SELLING Intention: MARKETING 1. Marketer attempts to create want Satisfying goods for potential Customers 1. Seller pushes goods & services to thru exchange process. Consumers. Priority to profit / cons. Satisfaction. 2. The priority is given to profit First Priority 3. The consumer is given last priority 2. The priority is given to consumer’s Satisfaction 3. The consumer is given top priority; infact entire marketing activity rotates around consumer’s needs & wants.

4. Price is given major attention as it is 4. Not only cost of production & arrived on the basis of cost of production & distribution but market demand, consumer’s distribution. preference & competition also decides price of the product. 5. Marketing importance. research is given less 5. Marketing research is the main aspect of marketing.

6. The seller considers entire market as 7. The entire market here consists of homogeneous market where groups having heterogeneous groups having dissimilar similar choice, buying habits etc. buying habits. (give e.g. of HLL’s products, Colgate Palmolive) 7. Selling starts with producing the goods & 7. Marketing starts with the needs of selling it to the final consumer without consumers and making sure that the goods thinking about the consumers. are not only purchased but also consumed.

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8. The aspects such as branding, packaging, 8. Branding, labeling, packaging labeling are not given much importance. integral parts of Marketing activity.

are

The scope of marketing Marketing is typically seen as the task of creating, promoting, and delivering goods and services to consumers and businesses. Marketers are skilled in stimulating demand for company products. Marketing people are involved in marketing 10 types of entities:
1) Goods – Physical goods constitute the bulk of marketing effort. The physical

goods include consumer goods – usables & durables, & industrial goods. Not only do companies market their goods, but thanks to the Internet, even individuals can market goods. For example – today eBay is the world’s largest person to person online trading community. Individuals can use eBay to sell or buy items in thousands of categories: paintings, stamps, coins, toys etc.
2) Services – The service sector plays an important role in any economy. In

developed economies, the services contribute over 70% of the GDP. In India, it contributes about 50% of GDP of India, and the remaining 50% is contributed by agriculture, & industry. Services include the work of banks, airlines, hotels etc. For example, a hotel provides both food (physical good) & service. To promote services, there is a need for efficient & effective marketing.
3) Experience – By organizing or arranging several goods and services one can

market experience. There is a market for different experience, such as spending an evening with a famous star over a dinner, attending a summer camp, learning horse riding and so on.
4) Events – Marketer promote time-based events, such as World cup Football/

Cricket, hockey and other sports events, art exhibition, flowers shows, trade shows etc.
5) Persons – Nowadays, celebrities or personalities try to become a brand. Every

major film star or sports star or high-profile professionals like artists, doctor,

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lawyers, etc., hires a personal manager, an agent or a public relation agency to market himself or herself.
6) Places – Places including countries, regions, states & cities compete at the market

place to attract tourists, business firms, and competent persons. For instance, in India states like Goa, kerala and others promote themselves as tourist destination.
7) Properties – Properties are intangible rights of ownership of financial assets,

intellectual property (patents, trademark, etc) and real property (buildings, plots, etc.). Properties can be bought and sold through effective marketing.
8) Organization – Like persons, organization also sell themselves. Organizations try

to build corporate image through corporate advertising, & also through community service. Companies spend money on corporate identify ads. Philip, the Dutch electronic company, puts out ads with the tag line “Let’s Make Things Better.”
9) Information – Information can be marketed like a product. Dictionaries,

encyclopedias, travel guides, etc., trade journals, web sites, etc., market a lot of information. Effective marketing is required to market such information
10)

Ideas – Now a day’s not only goods and services are marketed, but also ideas. Ideas are marketed by religious organization, political parties, social organization, & so on. Ideas are communicated such as concern for the girl child, family planning & welfare, etc. through effective advertising and publicity. For example, market offering of cosmetics consists of a physical goods, and also the idea or hope of a beautiful person.

The decision marketers make Marketing managers face a host of decision, from major ones such as what product feature to design into a new product, how many salespeople to hire, or how much to spend on advertising, to minor decision such as the exact wording or color for new packaging. Consider the following 4 markets –
1) Consumer markets – Companies selling mass consumer goods & services such as

soft drinks, toothpaste, television sets, & air travel spend a great deal of time trying to establish a superior brand image. This requires getting a clear sense of

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their target customers. Consumer’s marketers decide on the feature, quality level, distribution coverage, & promotion expenditure that will their brand achieve a number-one or-two position in their target market.
2) Business markets – companies selling business goods & services face well-trained

& well-informed professional buyers who are skilled in evaluating competitive offerings. Business buyers buy goods for their utility. Business marketers must demonstrate how their product will help customer achieve higher revenue or lower costs. Advertising, sales force, price, & the company’s reputation plays an important role for reliability & quality.
3) Global markets – Companies selling goods & services in the global marketplace

face additional decision and challenges. They must decide - which country to enter, - how to enter each country, - how to adapt their product & service feature to each country, - how to price their product in different countries in narrow enough band to avoid creating a gray market for their goods, - and how to adapt their communication to fit the cultural practices of each country. 4) Nonprofit & governmental markets – Companies selling their goods to nonprofit organization such as churches, charitable organization, or government agencies need to price carefully because these organization have limited purchasing power. Much government purchasing calls for bids, with the lowest bids being favored, in the absence of extenuating factors.

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Chapter – 2 - MARKETING ENVIRONMENT Understanding the elements of market environment helps a marketer to understand the behavior of key environmental forces that have an implication on marketing decisions and it also helps to grasp the techniques available for environmental scanning. Many of the industry titans lost their competitive advantage to relatively new entrants in 1980 and thereafter. The following examples give us an idea about the same:? Hindustan Motors and Premiere Automobiles lost their important positions in the Indian market to Maruti Udyog’s Maruti 800. Likewise the giant Mahindra and Mahindra were shaken up by Maruti Udyog’s Gipsy Petrol Jeeps which caught the imagination of the youth. ? Titan watches brought a new era of watches and shooked the giant HMT. A whole new range of fascinating designs and exciting marketing strategies which included Titan Show Shops, announced that Titan was all set to win the war. ? Hindustan Lever’s Surf was cornered by Nirma. Despite repeated incentives to housewives and dealers Hindustan Lever’s Surf’s decline could not be stopped. It was only when the marketing team of Lever realized that they were serving different market segments requiring different responses , that the declining market share in the detergents market could be satisfied. ? Television giants like NELCO, Crown, Weston and Bush lost out to absolutely new firms and brands like Onida and Videocon who subsequently lost out to BPL and Sony. ? Videocon launched its washing machine in 1988 and suddenly there- after one saw an explosion in the market with half a dozen brands and this is not the entire story, there are another half a dozen firms wanting to enter the market and try their luck. All the above given cases and likewise others both nationally and globally point to an important aspect of the organization and industry functioning-

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Sensitivity to external environment is extremely critical. Analysis and diagnosis of external environment on a regular and continuous basis is the main reason of successful companies. Analysis of external environment consists of identification of opportunities and threats and tracing it to a particular source. For eg :- A small family with one child means the emergence of a child market where all parental attention is focused on the child. What could this imply to a toy firm, a readymade garment firm or a video film production unit? To further understand the importance of the child market, for eg. At what rate is the market growing? Are these patterns visible only in metros and urban centres or also in rural markets? What does the child read, watch and listen to? How much are the parents concerned about the wellbeing and proper growth? Based on the factors marketing decisions can be taken regarding these changes in the market place. Definition: The Marketing Environment can be defined as everything that surrounds an organization’s marketing function and can impinge on it. The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the 'Macro-Environment,' the 'Micro-Environment' and the 'Internal Environment'. THE MICRO- ENVIRONMENT The MICRO ENV is also known as Immediate Environment of the firm. This environment influences the organization directly. It includes following factors: ? Suppliers (R.M Suppliers, Service Providers (Banking, Transporters, Insurance [high in case of Intl. Mktg]) ? Distributors ? Target Consumers THE WORD “MICRO” TENDS TO SUGGEST SMALL, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence.

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THE MACRO-ENVIRONMENT This includes all factors that can influence an organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. (3 phased competition due to globalisation) Globalisation means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology. Following are the parts / factors of External or MACRO environment. ? ? ? ? ? Demographic Economic Technological Political Environment Social and Cultural Environment

The Political Environment The political environment can be one of the less predictable elements in an organization’s marketing environment. Marketers need to monitor the changing political environment because political change can profoundly affect a firm's marketing. Political stability can be key for market stability. Governments pass legislation, have a major influence on the economic environment and can influence the culture of a country. For e.g. govt. decided to reduce duty on small car which increased sale of Maruti 800 cars. Excisable goods, non-excisable goods are other examples (exemption from excise duty or coming under excisable goods) The Social and Cultural Environment:: Culture represents RELIGION, LANGUAGE, UPBRINGING AND EDUCATION of any human being. Social Class comprises of Income, Occupation, location of residence etc. In India, there are 7 major religious groups such as Hindu, Muslim, Sikhs, Christians, Zoroastrians, Buddhists and Jain. There are 17 different languages spoken in 28 different states of the country.

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In such an environment, it is crucial for marketers to fully understand the cultural values of a society, especially where an organization is seeking to do business in a country where social and cultural values keep changing in all areas and they are given top priorities (Daily Soap {serials} work successfully in India). Attitudes to specific products change through time and at any one time between different groups. Key issues relating to the social and cultural environment include the changing role of women; the importance of leisure time and the role of the family. The Demographic Environment Demography is the study of populations in terms of their size and characteristics. Among the topics of interest to demographers are the age structures of a country, the geographic distribution of its population, the balance between male and females, and the likely future size of the population and its characteristics. Changes in the size and age structure of the population are critical to many firms' marketing. (More from NP-Cutting) The Technological Environment The pace of technological change is becoming increasingly rapid and marketers need to understand how technological developments might affect them in four related business areas: ? New technologies can allow new goods and services to be offered to consumers ? New technology can allow existing products to be made more cheaply, thereby widening their market ? Technological developments have allowed new methods of distributing goods and services ? New opportunities for companies to communicate with their target customers have emerged. The Economic Environment The economic environment affects the demand structure of any industry / product. At the same time Indian Economy is witnessing growth rate of 6% plus on an average per annum. In order to assess the impact of these forces, it is necessary for the marketer to examine the following factors in a greater detail. 1. 2. Gross National Product Per Capita Income

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Balance of payment position Industry life cycle and current phase through which industry is passing. (Boom, Recession and depression) 5. The inflationary or deflationary trends. 6. Rate of Interest charged by commercial banks. These factors can be threat or opportunity to a firm. The marketer needs to understand the impact of these economic forces on his company’s products and services. LEGAL ENVIRONMENT. Businesses have to operate within the frame work of the prevailing legal environment. They have to understand the implications of all the legal provisions relating to their business. In recent times, the world over, legislation regulating businesses has been steadily increasing. It is particularly true for India. Over the past many decades, a great deal of legislation concerning business and industry has entered the statute books. Though a reversal of these trends commenced with reforms & liberalization business firms operating in India are still required to grapple with a heavy load of legislation. Business legislation can be classified into the following broad categories based on the area covered by them. 1) Corporate Affairs. 2) Consumer Protection. 3) Employee Protection. 4) Corporate Protection [Protecting Companies from each other, preventing unfair competition]. 5) Protection of Society as a whole against improper business behaviour. 6) Regulation on product, price, distribution. 7) Control on Trade practices. Business firms have to understand these legislations & adopt to them. THE INTERNAL ENVIRONMENT All factors that are internal to the organization are known as the 'internal environment'. They are generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and Minutes (Time). The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.' Essentially we use marketing approaches to aid communication and change management.

3. 4.

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SWOT analysis Business firms undertake SWOT analysis to understand the external and internal environment. Through such an analysis, the strengths and weaknesses existing within an organization can be matched with the opportunities and threats operating in the environment so that an effective strategy can be formulated. An effective organizational strategy, therefore, is one that capitalizes on the opportunities through the use of strengthens and neutralizes the threats by minimizing the impact of weaknesses. OBJECTIVES OF SWOT ANALYSIS The basic objective of SWOT analysis is to provide a framework to reflect on the organizational capability to avail opportunities or to overcome threats presented by the environment. In fact, the dimensions of organizational capabilities have relevance in so far as they relate to the environmental conditions. Hence, organizational analysis and environmental analysis should be interlinked. SWOT analysis can be applied in different ways in strategy formulation. 1. SWOT analysis provides a logical framework for systematic discussion of various issues bearing on the business situation, generation of alternative strategies, and finally the choice of strategy. Differences in managerial perceptions about organizational strengths and weaknesses and environmental opportunities and threats may lead to differences in approaches to particular strategies and ultimately, the choice of strategy takes place through an interactive process in a dynamic setting. 2. SWOT analysis presents the information about external and internal environment in structured form whereby key external opportunities and threats can be compared systematically with internal capabilities and weaknesses. Thus, organization’s external and internal situations can be matched so as to form distinct patterns and strategy can be chosen on the basis of these patterns. These patterns may be in the form of combinations of the following: a. High opportunities and high strengths, b. High opportunities and low strengths, c. High threats and high strengths, and d. High threats and low strengths. Naturally, in all these situations, different strategies are suitable, for example, in the case of first situation, while aggressive growth strategy may be suitable, defensive strategy like divestment may be suitable in fourth situation.

Page 19 of 129 -----------------------------------------------------------------------------------------------------------------------------SYBMS – III – MARKETING MANAGEMENT 3. A problem is experienced by the strategists when their organizations cannot be

placed in one of the four situations as discussed above because a business may have several opportunities but at the same time some serious threats. Similarly, the organization may have some strong capabilities but some major weaknesses in the light of critical success factors. This is the reality of the situations. In such situations, SWOT analysis guides the strategists to visualize the overall position of the organization and helps to identify the major purpose of the strategy under consideration. PUSH V/S PULL STRATEGY. (also there in the chapter PROMOTION) The promotional mix is heavily influenced by whether the company chooses a pull or push strategy to create sales. A push involves strategy involves manufacturer marketing activities directed at channel inter-mediateries (primary sales force and trade promotion). The goal is to induce the inter-mediateries, to order & to carry the product & promote it to n users. Push strategy is especially appropriate where there is low brand loyalty in a category, brand choice is to be made in the stores, the product is an impulse item and product benefits are well understood. A pull strategy marketing activities (primarily advertising & consumer promotion) directed at the rate an users. The purpose is to induce them to ask inter-mediateries for the product & thus induce the inter-mediateries to order the product from the manufacturer. Pull strategy is especially appropriate. When there is high brand loyalty n& high involvement in the category. People perceive differences between brands & people choose the brand before they go to the store. Companies in the same industry may differ in their emphasis on push or pull. Eg:- Lever bros. realize more heavily on push. Proctor & Gamble more heavily on pull.

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Chapter – 3 – Marketing Mix The “Marketing Mix” is probably the most famous phrase in marketing. The elements are the marketing 'tactics'. Also known as the 'four Ps', the marketing mix elements are price, place, product, and promotion. McCarthy identified the four P's of the marketing mix Product: Defines the characteristics of your product or service that meets the needs of your customers. It includes Pricing Policy, Margins, Discounts and rebates. Terms of Payment, Credit Terms and installment purchase facilities. This includes all the weapons in the marketing armoury - advertising, selling, sales promotions, Public Relations, etc.

Price:

Promotion:

Place Some of the revolutions in marketing have come about by changing this (or route of P. Think of telephone insurance and the internet! A bit of lateral thinking distribution): here might reap rewards for your business.

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MARKETING MIX

PRODUCT
Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns

Place
Channels Coverage

PRICE
List Price Discounts Allowances Payment Period Credit Terms

Locations

PROMOTION
Sales Promotion Advertising Sales Force Public Relations Direct

Inventory Transport

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“A Marketing Mix is a set of Marketing Tools that the firm uses to pursue its marketing objectives.” The Marketing Mix can be expressed in a more customer orientated way as the '4Cs':
? ? ? ?

Customer Value 'product' benefits from the buyers point of view Cost to the customer 'price' Convenience for the buyer equivalent to 'place'/channels of distribution Communication a two-way dialogue - not just 'promotion'.

The understanding about Marketing Mix states that: ? Marketing Mix elements can be combined in an Infinite Number of Ways and… ? Depending on the combinations, he can select the Optimum among the many possibilities. Such selection of combination highly depends upon the final aim of the company. For e.g. if the company gives the priority to higher sales in short period of time, then sales promotion and personal selling will be given more weightage and if the priority is to develop higher market share then advertising and brand building will be given more weightage. Thus promotion mix can be utilized in different ways depending upon what company aims at. Steps involved in determining the marketing mix: Every component of MM should be coordinated and integrated with each other in required and rational quantity. It helps achieving marketing objectives in terms of turnover, profit and market share. This is called “programming of marketing mix.” MM is decision making in regard to the use of different components. The purpose of determining MM is to satisfy the needs of customers in the most effective manner. The steps involved in determining the MM are as follows: • Identification of market • Collection of information of rival sellers • Selection of suitable strategy MARKETING, AN INTERACTION BETWEEN MARKETING MIX AND ENVIRONMENTAL VARIABLES:-

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Marketing can basically be looked upon as the interaction between marketing mix variables and environmental variables. Using the marketing mix variables, the marketing manager tackles the environmental variables. He intelligently selects and adjusts the marketing mix variables and brings them in alignment with the env. Variables. In fact, it is by choosing the marketing mix variables, the alignment with the env. variables that the marketing manager formulates his marketing strategy. Marketing Mix elements can be combined in an infinite number of ways:It is obvious that theoretically the marketing mix elements can be combined in an infinite number of ways. In practice too, marketing managers usually consider a number of combinations and select the best out of them. Without considering several alternatives, the objectives of optimization cannot be realized. The marketing mix elements are substitutable by one another to some extent. This means that the marketing manager can take away the sources from one element and assign them to another and achieve his marketing objective. It means that he can achieve his marketing objectives using different combinations of marketing mix. Selecting the optimum among the many possibilitiesepending on the objectives and context, relevant weightage has to be assigned to each of the element. Even within an element, weightages have to be assigned to the various sub-elements, depending on the objectives and context. To give an example, within promotion, advertising and brand building, efforts will get a higher weightage, if the objective is higher market share over the longer term; and Personal Selling and Sales Promotion will get a higher weightage, if the objective is higher sales in the immediate run. Moreover, there are different possibilities given with regards to the sales level. The sales level itself is not a static figure. One can fix a higher or lower sales target and go about achieving it in a cost effective manner, achieving overall optimization in the process. In other words, the marketing manager can work out different combinations or same in level and marketing mix spending and choose the optimum one from the profit and other relevant angles. Example of Lifebuoy’s Marketing Mix:-

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HUL’s popular soap lifebuoy is currently sold at Rs.8.50 per unit of 100 gm pack. Currently, the company sells about 1,50,000 MT[Metric Tones] of the soap per annum. It means that the annual sales revenue from Lifebuoy is Rs.1,275 crores. Suppose HUL currently incurs a total expenditure of Rs.1,070 crores to achieve the above sales revenue, and suppose out of this expenditure, Rs.150 crores goes towards fixed cost. It means that HUL incurs an expenditure of Rs.920 crores on its marketing mix for Lifebuoy. Mix 1:Now the question is how the above marketing mix level is shared by the different marketing mix elements. One combination is shown in table 1. In that table it can be seen that with Mix 1 Lifebuoy brings a profit of Rs.205 crores. Table 1 – Marketing Mix 1 Price[per 100 gm pack] Sales Quantity[MT] Allocation To Marketing Mix Elements [Rs. Crores] Product Rs.8.50 1,50,000 600 Place 270 Promotion 50 Total 920

Note:- a) Allocation to product indicates material cost, conversion cost, package cost etc. b) Allocation to place/distribution includes margin to channel, transportation cost, warehousing cost etc. c) Allocation to promotion includes cost of advertising, sales promotion, publicity etc. Mix 2:Here HUL hits the price, sales volume and total expenditure on marketing mix at the same level but considers a different combination of marketing mix as shown in table 2. It juggles the allocation to the elements keeping the total allocation same. HUL might now have found it feasible to procure its goods- especially oil- more economically and thus reduce the allocation to product. It might have also found it feasible to reduce to some extent, the allocation to distribution by slightly reducing the extra incentives

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offered to the trade. On the contrary, it may now commit a higher allocation to promotion with the objective of strengthening the brand equity of the product and reaping higher sales subsequently. Table 2 – Marketing Mix 2 Price[per 100 gm pack] Sales Quantity[MT] Allocation To Marketing Mix Elements [Rs. Crores] Product Rs.8.50 1,50,000 580 Place 260 Promotion 80 Total 920

Note:In Mix 2 the allocation among the mix elements is changed. Mix3:Here, HUL considers a significantly different proportion. HUL now feels that Lifebuoy can take a price increase by 50 paise per unit of 100 gram and even at this price it can attain the sales level 1,50,000 metric tones. At the new price of 100 gram pack sales of 1,50,000 MT will give a revenue of Rs. 1350 crores, Rs.75 crores more than the revenue generated in the earlier 2 examples. In the context of the price increase, HUL may like to strengthen the product attributes to such extent. HUL knows that the product must be enriched a bit to justify the price increase. HUL also knows that enrichment has to be strongly propagated. The below given table of Marketing Mix 3 shows that compared to Marketing Mix 1& 2, HUL now spends Rs.50 crores more on the marketing mix. It now makes an additional revenue of Rs.75 crores. So even after reckoning the additional expenditure on the mix, HUL’s profit is up by Rs.25 crores compared to Mix 1 & 2. Table 3 – Marketing Mix 3 Price[per 100 gm pack] Sales Quantity[MT] Allocation To Marketing Mix Elements [Rs. Crores]

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Product Rs. 9.00 1,50,000 620

Place 260

Promotion 90

Total 970

Note:- Sales volume remains the same but price, total expenditure and allocation pattern (product, place, promotion) is changed. Mix 4:Here HUL considers yet another proposition. It feels that it is feasible and appropriate to hike the price of Lifebuoy by another 25 paise per unit of 100 gram. HUL is also confident that at this higher price it can aim at a higher sales volume, say 100,000 MT’s. So at the new price level of Rs. 9.25 per 100 gram pack, a sale of 1,60,000 MT’s will give HUL a total sales revenue of Rs. 1,480 crores. In the context of the increasing value, HUL may have to increase its marketing mix spent assuming that HUL goes for an exactly proportionate increase in product and place and somewhat more than proportionate increase in promotion. HUL’s new marketing mix will be shown in table 4 where it can be seen that Lifebuoy brings a profit of Rs.270 crores. Assembling the marketing mix requires knowledge of the effect of each element of the mix on sales and inter-relationship between the elements. They also use judgement in predicting the outcome of the different options. In fact, both quantitative analysis and judgement have their duo roles in deciding an optimal mix. Table 4 – Marketing Mix 4 Note:In mix 4, sales volume, price, total expenditure and allocation pattern are all Sales Quantity[MT] Allocation To Marketing Mix Elements [Rs. Crores] Product Rs. 9.25 changed. 1,60,000 660 Place 300 Promotion 100 Total 1060

Price[per 100 gm pack]

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Chapter – 4 – Marketing Research Market research and marketing research are often confused. 'Market' research is simply research into a specific market. It is a very narrow concept. 'Marketing' research is much broader. It not only includes 'market' research, but also areas such as research into new products, or modes of distribution such as via the Internet. Here are a couple of definitions: Marketing research is the function that links the consumer, customer, and public to the marketer through information - information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Marketing research specifies the information required to address these issues, designs the methods for collecting information, manages and implements the data collection process, analyses, and communicates the findings and their implications. MR implies a discipline approach to marketing problems of various kinds. With development of business organizations and changing nature of consumer behaviour, these problems tend to become more complex. Definition of marketing research: “The systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services.” American marketing association The above definition stresses on: ? MR is a systematic process and not a haphazard activity. ? It includes not only collection but also analysis of data collected. ? The data so collected and analyzed is used to solve various marketing problems relating to goods and services. Why marketing research? 1. MR helps the organization to target right product to right consumers. 2. Helps to know changing demand of consumers and its effect on product’s growth. (ORG-MARG database of 2001) 3. New comers can very well study the market before entering. (Toyota’s research)

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Scope of marketing research / classification of MR 1. Research on consumer a. Motivation research b. Overall drawing of consumer profile. c. Study consumer taste, reactions, and preferences. d. Changes in consumption pattern. e. Sources of consumer’s dissatisfaction. f. Price relationship Research on market a. Research on market size. b. Study on market profile and characteristics (growing or stagnant) c. Market segments d. Sales forecasting – short & long range. Research on product a. Study on product line, design and features b. Usage of product c. New product testing d. New product concept testing e. Study on competitor’s product / line f. Study on packaging, design of packaging, packaging material Research on competition a. Intensity of competition among competitors b. Study competitor’s marketing mix Research on distribution a. Verifying different types of intermediaries b. How effective they are in relation to your products c. Measuring dealer’s reaction to the company & its products and services. d. Declarer’s preference for competitor’s products vis-à-vis company’s product. e. Measuring warehousing efficiency. f. Distribution cost analysis. Research on price a. Evaluating the pricing strategy of the firm. b. Measuring pricing pattern followed by competitors c. Relation ship of price and demand Research on advertising and promotion a. Availability of media. b. Govt rules and regulations

2.

3.

4. 5.

6.

7.

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c. Effectiveness of each media. d. Analyzing efficiency of sales promotion measures 8. Research on sales methods a. Testing new sales programmes b. Analysing problems of selling c. Analysing sales territories d. Analysis of salesman’s effectiveness e. Study of sales compensation f. Analysing various sales quota.

Process of MR A. Defining the problem: this is the starting in the marketing research. Never conduct research for things that you would 'like' to know. Make sure that you really 'need' to know something. The problem then becomes the focus of the research. For example, why are sales falling in thane region? In problem definition, it is important to be specific, avoid ambiguities and generalization. The researcher must recognize the fact that marketing research has a cost and if it doesn’t yield results, then the viability of such a project will always be suspect. Another important point to be taken into consideration that whether the question posed by decision maker can be researched or not? At times an understanding of problem may in itself involve some exploratory research. It is also very important to have co-ordination of research agency and the company consultant incase, if the research is to be conducted by some external agency. B. Determine data needs: the designed research problem now guides the researcher to determine the data needed to complete the research. To test the problem that the sale in thane region is falling down, the researcher would want to know: ? Customer’s expectation about the product price. ? The price of the competitor’s products. ? What products customers consider being substituted? ? The effectiveness of distribution network. Researcher use primary and secondary data. Primary data are collected specifically for a particular problem. It must be generated by originated research thru observation, inquiry, and survey etc. Secondary data is readily available information. It can be collected from

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published sources. Although secondary data are usually cheaper and faster to collect than primary data, researcher considers their relevance, accuracy, credibility and timeliness. C. Determine data sources: the sources may be internal or external. The major internal source of primary data is company personnel. Retailers, customers, wholesalers are important external sources of primary data. The major internal source of secondary data is company records. Libraries, trade journals and govt. Publication are important external sources of secondary data. (Later in this session explained in detailed) D. Create the research design:

The research design is the grand plan for conducting the research investigation. It provides a guideline for the researcher to enable him to keep a track of his actions and to know that he is moving in the right direction in collecting the data. Generally, this design includes following: The type of data required, the method of collecting data, the fund required and arrangement for the same, the time required for completion of the project v/s actual time available in the hands etc. E. Design a questionnaire:

If the researcher cannot solve the problem with the help of secondary data, he should then make efforts to collect primary data from the field for which he generally requires a questionnaire. While designing a questionnaire, following points must be kept in mind: ? What type of information required? ? What type of technique will be used for conducting the research, i.e. whether telephone, personal or mail? F. Selecting and training of field staff: after designing the questionnaire, the researcher then proceeds to select the required number of field staff, i.e. Interviewers. The field staff so chosen must be given specific training to handle the interviews and recording the data. G. Collection of data:

Problem solving is essentially a process of collecting more and more information. Information can be collected from various sources, both internal and external, while collecting information following care should be taken:

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? Information is up to date and free from bias. ? It is objective and relevant to the needs of problem. ? Info is complete in all respects.

H.

Organization of data:

The collection of info accounts for major part of any research work. The data when collected is mostly available in crude form and as such it has to be processed. To process data, it must be organized. The techniques and tools like editing; coding, classification and tabulation are commonly used to process the data. Editing helps to weed out unwanted data, whereas coding, classification and tabulation makes the data ready for applying statistical techniques for analysis purpose. I. Interpreting & reporting the finding: the researcher interprets the findings and draws the conclusion and reports it to the management. Here, the attempt should not be made to overwhelm the managers with number and fancy techniques. The researcher should present important findings, which are useful in major decisions, without being biased about it. But, interpretation should not be left only to the researcher, as they are good in conducting the whole process. The marketing manager knows more about the problems and the decisions that must be made. The managers will also want to check that the research was carried out properly and that all necessary analysis was completed. The best research is meaningless if manager blindly accepts faulty interpretations from the researcher. Similarly, managers may also be biased; they might tend to interpret, what they want to see. So the managers and researcher must work together so that proper research can be conducted and proper findings are obtained. J. Preparation & presentation of research report:

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Entire finding and its interpretations are then to be presented in formal report format. The report is divided into number of paragraphs or chapters, depending upon the nature of the problem. The same report should be presented to the manager. K. Follow-up of report:

After preparing and presenting the report, the researcher should find out whether his report is accepted, recommendations are implemented and are they successful in solving the market research problem.

Methods of collecting data Methods of data collection: (for secondary data) 1. Desk research: with the help of desk research, the researcher can collect secondary data. It is called “desk research” because the information is readily available at the desk to the researcher. The information can be collected both from internal and external sources: Internal sources: it comprises of sales, purchase, profit & loss, balance sheets and other financial statements. Since the sales people are in direct contact with the dealers and consumers. They collect first hand information and prepare reports, which they submit to the company. The researcher to solve the research problem uses such preserved reports. External sources: Secondary (or desk) research uses data that has been collected for other objectives than your own i.e. It already exists. There are a number of such sources available to the marketer, such as:
• • • •

Trade journals: (business world, financial express, indian trade journal, economic & commercial news etc. National and local press National/ international governments Web sites

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• • • • • •

Informal contacts Trade directories Published company accounts Business libraries Professional institutes and organizations Previously gathered marketing research

Advantages of secondary data: ? It is economical from time and cost point of view. ? It offers the benefit of convenience to researcher. ? Secondary data may also offer solution to the research problem, as most problems would have some past history. Disadvantages of secondary data: ? Many times the information is unreliable. ? It may not be latest or up-dated. ? The data also suffers from the problem of lack of availability. (Give India today example)

Method of data collection: (for primary data): A. Survey method: it refers to all those techniques that collect information by asking questions. The researcher has to design a questionnaire to collect information. The techniques used here are personal interview, telephone interview or mail survey. 1. Telephone interviews: Telephone ownership is very common in developed areas in the country. It is ideal for collecting data from a geographically dispersed sample. The interviews tend to be very structured and tend to lack depth. Telephone interviews are cheaper to conduct than faceto-face interviews (on a per person basis). Advantages of telephone interviews

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• • •

Less time consuming. Less expensive as compared to personal interviews. Random samples can be selected

Disadvantages of telephone interviews
• • • • •

Respondents can simply hang up Interviews tend to be a lot shorter Visual aids cannot be used Researchers cannot judge the behaviour or body language of the respondent. Live demonstrations are not possible.

2 face-to-face interviews Face-to face interviews are conducted between a market researcher and a respondent. Data is collected on a survey. Some surveys are very rigid or 'structured' and use closed questions. Data is easily compared. Other face-to-face interviews are more 'in depth,' and depend upon more open forms of questioning. Advantages of face-to-face interviews
• • • •

They allow more 'depth' Physical prompts such as products and pictures can be used Body language can emphasize responses It allows sorting of any queries, doubts and questions.

Disadvantages of face-to-face interviews
• • •

Interviews can be expensive. It can take a long period of time to arrange and conduct. Some respondents will give biased responses when face-to-face with a researcher. Mail survey:

3.

This method involves sending questionnaires to the respondents with a request to complete them and return them by post. ? This can be used in the case of educated respondents only. ? The questionnaire should be simple and can be easily understood by the respondents.

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? The researcher should prepare mailing list of the selected respondents by collecting the addresses from the telephone directory or from any relevant places. ? A covering letter should accompany a copy of the questionnaire indicating the intention of the research. At the same time sponsor’s identity must be revealed. ? A self-addressed stamped envelope should be enclosed in the covering letter. B. Observation:

Observing what consumer is buying and doing in the store. Here also how customers behave in the shopping area, what they say, how they react to a product is observed. Closed vide monitoring is very common technique to see buyer’s behaviour to the product. This technique also suffers from interpretation problems. Researcher and decision maker may interpret the same behaviour in different ways depending upon their perception. C. Experimentation:

(Here please write about how a new product is experimented in the market, {one of the stages of new product development}).

Advantages of primary data are: ? It is more accurate and reliable. ? It is fresh and first hand information. ? It is useful to solve specific marketing problem.

Limitations of primary sources: ? ? ? ? It requires considerable time to collect data. It is quite expensive. Supervision and control is required to monitor field interviewers. Poor response on the part of interviewees in India.

Limitation of MR

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? The research provides an indicator and not the final solution to the problem. ? Errors can creep in any of the above procedure. The process is extremely expensive and time consuming

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MARKETING INFORMATION SYSTEM The marketing environment is changing at an accelerating rate, so the need for real time market information is greater than at any time in the past. As companies expand their geographical market coverage, their managers need more information more quickly. As incomes improve, buyers become more selective in their choices of goods. To predict buyers responses to different features, styles, & other attributes, sellers must turn to marketing research & they require information on the effectiveness of the marketing tools. THE COMPONENTS OF A MODERN MIS Some firms have developed marketing information systems that provide management with rapid and incredible detail about buyer wants, preferences, and behavior. For example, the Coca-Cola Company knows that the customers put 3.2 ice cubes in a glass, see 69 of its commercials every year, and prefer cans to pop out of vending machines at a temperature of 35 degrees. Marketers also have extensive information about consumption patterns in other countries. On a per capita basis within Western Europe, for example, the Swiss consume the most chocolate, the Greeks eat the most cheese, the Irish drink the most tea, and the Austrians smoke the most cigarettes.3 Nevertheless, many business firms lack information sophistication. Many lack a marketing research department. Others have departments that limit work to routine forecasting, sales analysis, and occasional surveys. In addition, many managers complain about not knowing where critical information is located in the company; getting too much information that they cannot use and too little that they really need; getting important information too late; and doubting the information's accuracy. In today's informationbased society, companies with superior information enjoy a competitive advantage. The company can choose its markets better, develop better offerings, and execute better marketing planning. Every firm must organize and distribute a continuous flow of information to its marketing managers. Companies study their managers' information needs and design marketing information systems (MIS) to meet these needs. A marketing information system (MIS) consists of people, equipment, and procedures to gather, sort, analyse, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. An internal MIS committee can interview a cross-section of marketing managers to

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discover their information needs. Some useful questions are:

1. What decisions do you regularly make? 2. What information do you need to make these decisions? 3. What information do you regularly get? 4. What information would you want that you are not getting now? 5. What information would you want daily? Weekly? Monthly? Yearly? 6. What magazines and trade reports would you like to see on a regular basis? 7. What topics would you like to be kept informed of? 8. What are the four most helpful improvements that could be made in the present marketing information system? A marketing information system is developed from a. b. c. a. Internal company records, Marketing Intelligence activities, and Marketing research Internal record system:

Marketing managers rely on internal reports on orders, sales, prices, costs, inventory levels, receivables, payables, and so on. By analyzing this information, they can spot important opportunities and problems. The order-to-payment cycle The heart of the internal records system is the order-to-payment cycle. Sales representatives, dealers, and customers dispatch orders to the firm. The sales department invoices and transmits copies to various departments. Out-of-stock item are ordered. Shipped items are accompanied by shipping and billing documents are then sent to various departments. Sales Information systems

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Marketing managers need timely and accurate reports on current sales. McDonalds for example, knows the sales of each franchise product by franchise store and total each evening. Companies must carefully interpret the sales data so as not to get the wrong.

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Databases, Data Warehouses, and Data-Mining

Today companies organize their information in databases-customer databases, product databases, salesperson databases, and so forth-and then combines data from the different databases. For example, the customer database will contain every customer's name, address, past transactions, and even -demographics and psychographics (activities, interests, and opinions) in some instances. Instead of a company sending a mass "carpet bombing" mailing of a new offer to every customer in its database, it will score the different customers according to their purchase preference, frequency, and monetary value. It will send the offer only to the highest scoring customers. Thus, Companies warehouse these data and make them easily accessible to decision makers. b. Marketing Intelligence System Whereas the internal records system supplies results data, the marketing intelligence system supplies happenings data. A marketing inte1ligence system is a set of procedures and sources used by managers to obtain everyday information about developments in the marketing environment. Marketing managers collect marketing intelligence by reading books, newspapers, and trade publications; talking to customers, suppliers, and distributors; and meeting with other company managers. A company can take several steps to improve the quality of its marketing intelligence. First, it can train and motivate the sales force to spot and report new developments. Sales representatives are positioned to pick up information missed by other means. Yet they are very busy and often fail to pass on that information. For instance, the Prentice Hall sales representatives who sell this textbook let their editors know what is going on in each discipline, who is doing exciting research, and who plans to write cutting edge textbooks. Second, the company can motivate distributors, retailers, and other intermediaries to pass along important intelligence. 3rd, companies can collect competitive intelligence by purchasing competitor’s products, attending open houses and trade shows, reading competitor’s published reports, talking to employees, dealers, distributors, suppliers, and so on… Fourth, a company can set up a customer advisory panel made up of representative customers or the company's largest customers or its most outspoken or sophisticated customers. For example, Hitachi Data Systems holds a three-day meeting with its

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customer panel of 20 members every 9 months. They discuss service issues, new technologies, and customers' strategic requirements. The discussion is free-flowing, and both parties gain: The company gains valuable information about customer needs, and the customers feel more bonded to a company that listens closely to their comments. c. Marketing Research system

Marketing managers often commission formal marketing studies of specific problems and opportunities. They may request a market survey, a product-preference test, a sales forecast by region, or an advertising evaluation. It is the job of the marketing researcher to produce customer insight into the problem. We define marketing research as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company.

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Chapter – 5– Consumer Behaviour Introduction: Consumer behaviour plays a decisive role in different marketing activities. Naturally, businessmen/business enterprises have to study the behaviour of consumers minutely and adjust their business/marketing policies and strategies accordingly. Marketer has to study buying behaviour to formulate the strategies of market segmentation and marketing mix, tailor-made for each target market. Consumer psychology needs special attention in the present highly competitive and consumer-oriented marketing system. Consumer is the cause and purpose of all production and marketing activities. He is the centre of all marketing activities as marketing is with the consumer and also for the satisfaction of his needs. Modern marketing is consumer-oriented and not profit oriented. Naturally, consumer behaviour, his motives behind purchasing goods and services (buying motives) and his psychology should be given due attention by the marketers. This is necessary for the expansion of marketing activities. Consumer behaviour is normally flexible and uncertain as it is based on various economic, social and cultural considerations. Before developing their marketing plans, marketers need to study consumer behaviour. Meaning of Consumer Behaviour: Consumer is the most important person in business. His attitude, behaviour, needs and reactions play an important role in regard to marketing plans and policies of companies. Companies study the behaviour of consumers constantly for their benefits. Consumer behaviour is comparatively new area within the scope of business management. The purpose of study of consumer behaviour is to understand human actions and reactions in the best possible manner. Business enterprises have to study the behaviour of consumers in order to adjust marketing policies or marketing mix accordingly. This is necessary in order to win the confidence of consumers in the present consumer-oriented marketing system. Study of consumer behaviour is essential due to growing importance of consumers in buying (Buyers' markets), consumer legislation and consumerism. He is the focal point of all marketing activities. Naturally his behaviour (psychological, social and physical) needs to be noted clearly by the marketers. Moreover, the consumer buying behaviour is constantly improving and thereby forcing marketers to refine their marketing efforts.

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Buying Decision-making: Buying process is lengthy and involves many steps. A consumer (knowingly or unknowingly) passes through these stages of buying process. The typical buying process includes the following sequence of events: problem recognition, information search, evaluation of alternatives, purchase decision and post purchase behaviour. The marketer's job is to understand the buyer's behaviour at each stage and finding out the influences that are operating on his behaviour. Such study facilitates large scale selling with satisfaction to consumers. At the time of purchasing a new product, a consumer has to go through lengthy decisionmaking process. He arrives at the final purchase decision after completing a series of logical stages included in the buying process. Buying decision-making process may be defined as “the series of logical stages a prospective purchaser goes through when faced with a buying problem." As a normal rule, a consumer has to take the following decisions while purchasing a product in the market: (1) Need recognition: A consumer has to take decision to purchase a product in order to satisfy a need, which is genuine and recognized. (2) Decision on involvement level: The consumer decides how much time and effort to invest in order to satisfy the need. (3) Identification of alternatives: The consumer collects information about products, brands, etc. available in the market. Information is the fuel that drives the buying decision process. Without adequate information, there would be no decisions. Information for buying decisions comes from commercial environment and social environment. Availability of alternative products facilitates selection of appropriate product for purchasing. (4) Evaluation of alternatives: The consumer studies the pros and cons of the alternatives identified. He finds out the most suitable product to meet his needs. (5) Buying decision: The consumer decides to buy a specific product, which is most suitable to him. (6) Post-purchase behaviour: The consumer attempts to resolve anxieties about the

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choice made.

It may be pointed out that the buying behaviour of a consumer will be reflected during these stages in the buying process. Definitions and Features of Consumer Behaviour: (1) According to Walters and Paul, "Consumer behaviour is the process whereby individuals decide what, when, where, how and from whom to purchase goods and services." (2) According to Webster, "Buyer behaviour is all psychological, social and' physical behaviour of potential customers as they become aware of, evaluate, purchase, consume, and tell others about the products and services." These definitions suggest the following features of consumer’s / buyer behaviour: (1) Consumer behaviour involves individual aspect as well as social aspect. (2) It is reflected through satisfaction or non-satisfaction on the part of consumers after actual purchase of product. (3) Consumer behaviour is the result of interaction of consumer with the environmental forces. (4) Consumer behaviour is the net result of various external environmental factors. Such factors are mainly social and psychological in character. (5) Consumer behaviour includes behaviour of consumers/ buyers of consumer goods, consumer durables and industrial products. (6) Consumer behaviour is always uncertain, as the thinking process in human mind is uncertain. Consumer behaviour is very complex and dynamic. It is constantly changing. Determinants Behaviour: of Consumer (Buyer) Behaviour/Factors influencing Buyer

Purchase decision is the final result of buyer's behaviour. There are a number of factors that influence the behaviour of a buyer, which are stated as follows:

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Factors influencing buyer (consumer) behaviour are as noted below: (1) Social Factors (2) Economic Factors (3) Cultural Factors (4) Personal Factors (5) Physiological Factors (6) Psychological Factors Let us, now, consider the details of the factors influencing buyer behaviour: 1. Social Factors: Buyer behaviour is influenced considerably by social factors, which include family, social class, status symbols and so on. Practically all buyer behaviour is influenced other people i.e. members of the family, friends and members of the community. Social influences act in two directions. Firstly, they provide information and secondly, the standards of behaviour against which alternative buying behaviors are measured. A buyer is now exposed to a veritable flood of information. He gets information on new products, services and so on. The buyer gets information from family members, friends, relatives, etc. The impact of such information on buyer behaviour is substantial. Even social status and location affect the buyer behaviour considerably. 2. Economic Factors: Economic factors such as income and purchasing power affect buyer behaviour. A rich buyer may not be very alert about the price and may purchase a product with high price. A person from low-income group will be very sensitive/alert about the price and may not purchase the product even with limited price rise. The middle class buyers prefer to collect information on prices from different sources and take appropriate buying decision. Buyer behaviour is affected due to high or low purchasing power. 3. Cultural Factors: Cultural factors include values, beliefs, faith and traditions accepted willingly by buyers or specific class of buyers. Culture is the social heritage. It relates to social values, attitudes towards work, beliefs, morals, language and so on. Cultural influences are so pervasive that they are hard to identify and analyze. Cultural influences act as basis for market segmentation, product development and advertising. The Gujaratis, Maharashtrians, Tamilians and people from V.P. have diverse cultural

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background and need different products/utensils/clothing for their daily life. Cultural factors exert deepest influence on consumer behaviour. A marketer needs to be aware of these cultural influences on buyer behaviour. He has to adjust his marketing activities as per the cultural background of his customers. Cultural factors are varied in a country like India where people with different cultural background stay together in cities like Mumbai and Kolkata. The patterns of buyer behaviour need careful consideration promoting/advertising different products. while marketing/

4. Personal Factors: Personal factors include age, occupation, life style, social and economic status, personal likes and dislikes, cultural and family background, beliefs and attitudes. All these factors (individually and collectively) influence buyer behaviour. Personal likes and dislikes depend on education, economic status, cultural family background and so on. People with sound economic background prefer costly / luxury articles and their behaviour is not price sensitive but quality sensitive. Middle class buyers give preference to decency. Thus, buyer behaviour is very much influenced by personal factors. 5. Physiological Factors: Physiological factors include sex, age and physiognomy. Here, age is one important factor. Buyers and their behaviour are related to maturity, experience and requirements and these aspects are related to age. 6. Psychological Factors: Psychological factors are many. They include perceptions, motivation, attitudes and beliefs, personality, life style and learning. These factors influence buyer behaviour in different ways. The psychological factors dominate other factors, as they are closer to the mind of the buyer. His personality, attitudes, beliefs and life style affect his behaviour relating to products, marketing process and so on. The forces noted above are external forces but they influence consumer behaviour considerably. The marketer has to consider his product and the satisfaction it offers to consumers. In addition, he has to see that his product is as per modern culture and life style. The marketer has to consider the social and cultural influences on consumers while designing his marketing strategy. Steps in Selling/Buying Process:

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Selling process is the system in which goods are actually sold out to the customers. This process starts with the entry of the customer in the shop and comes to an end with customer purchases goods, pays money and moves out of the shop along with the goods purchased. This process may be completed within 10 to 15 minutes. Selling process and buying process are rather identical in nature. This is because seller (salesman) and buyer (customer) are the two parties to a trade transaction and both have to take certain steps in order to complete a sales/trade transaction. In this process, the role of a salesman is more active and hence the term selling process is used extensively in salesmanship. The following six stages are involved in the selling process: (1) Prospecting: The selling process starts with prospecting. A prospect is a likely customer or a potential buyer. The seller must try to find out who are his probable customers. The selling activities will be adjusted accordingly. Prospecting is finding out likely buyer. A retail salesman is not concerned with this step as a customer comes to his counter and asks for certain products as per his need and desire to purchase. (2) Pre-approach: After finding out the potential buyers, the salesman should try to collect additional information about his would be customers. This information should be regarding their income group, status, size of family requirements, tests, standard of living, habits, likes and dislikes. Actual salesmanship starts with the next stage. This is also called 'sizing of the customer'. (3) Attention: It is the starting point of selling process. Here, the attention of the customer will be attracted to various goods. This is possible through window display, posters and internal advertising. No one will like to purchase goods unless his attention is diverted towards them. This will be followed by approach by the salesman. The salesman will establish direct contact with the customer by asking him about his requirement. This approach is a constructive and bridge-building step in selling. The next step is to create interest in the products available in the shop / store. (4) Interest: The salesman can create interest in certain goods by showing the article and giving all the information regarding the same to his customer. Sales talk or demonstration is useful for creating interest. Telling the customer the advantages and specialties of the product creates interest. (5) Desire: In this fifth stage, the salesman has to convert the interest into desire to purchase an article. This is possible through persuasion. The salesman should try to create a keen desire to purchase a specific article. He can use selling points for this

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purpose. He should also clear the doubts, objections, etc. of the customer at this stage. This facilitates quick decision and action on the part of buyer / customer. (6) Action: This is the final and the most important stage in selling process. Action is actually decision to purchase. The customer takes action when he gives order to prepare cash memo and pack the article. A salesman has to bring the customer to this point in a tactful manner. His success depends on this last action of the customer. After booking the order, the salesman should execute the order as per the normal sales routine. He should thank the customer and assure him early delivery and after sale service, if required. This completes the selling/buying procedure. The stages noted above normally exist in every trade transaction. All the stages are equally important. The success of a salesman depends on his performance in all these stages. Buying Motives of Consumers/Customers: Buying motives are the thoughts and emotions, which arouse in the mind of the customer a desire to buy. Buying motive is a complex urge which creates desire to buy a specific article/ product. A salesman has to understand the buying motive of his customer and adjust his sales talk accordingly. He has to understand the psychology of his customer and adjust his sales strategy to suit the buying motive of customer. Main buying motives are as noted below: (1) Fear (2) Profit/Gain (3) Pride (4) Fashion (5) Love and Affection (6) Health (7) Comfort and Convenience (8) Curiosity (9) Admiration (10) Jealousy (11) Patronage. The buying motives influence the buying behaviour of customers. In fact, buying motives and buying behaviour are closely related. The buying behaviour is based on buying motives. This aspect needs careful consideration by manufacturers as well as by salesmen at the selling counters: Importance of Buying Motives in Salesmanship:

The study of buying motives is important and essential for every salesman. Such study offers the following advantages: (1) A salesman understands the mind of the customer clearly and precisely.

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(2) A salesman can discuss only those features of a product (selling points) which satisfy the buying motives of the customer. (3) A salesman can talk with confidence and make his sales talk impressive and resultoriented. (4) A salesman can anticipate the possible objections from the customer and deal with them properly. (5) A salesman can give proper guidance to the customer in his shopping activity. (6) A salesman can remove possible resistance of the buyer. (7) A salesman can increase the sale of goods.

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CHAPTER – 6 - MARKET SEGMENTATION, TARGETING & POSITIONING Market segmentation is the process of dividing a heterogeneous market into homogeneous sub-units. Consider the Indian market, which consists of 1 billion people. For a consumer product company making toiletries, this is a big number and hence a big market. However, not all the 1 billion people believe in the same product, not all people look for same features, not all people look for same brand and quality and not all are willing to pay the same amount. Some people may prefer expensive product where as some may prefer cheaper. Now the same firm may look at the census in detail. As per the record, there are 438 million men and 406 million women. 64% of the men, and 39% of women are literate. The firm may decide, should the firm make the products for both? In India, 74% population lives in rural area. Should the company make product for rural Indians? Or the company should consider only urban people? Thus, the census report indicates only the market size. This, however, does not indicate anything more. It is up to a company, to study the entire census, and then decide which market to be targeted. Bases for segmenting the market The market can be broadly classified into following segments. I. Geographic location of customers: this segmentation does help the firm in planning its marketing offer. The market divided on the basis of rural and urban is quite common. The assumption in using this segmentation is that people in a particular area have identical preferences and consumption pattern. Again, in both markets different marketing mix has to be applied. The same pricing strategy, distribution network and product quality may not work in urban as well as rural market. With the advent of new media the rural customer is far more aware and buys the same branded products which urban customer would prefer to buy. Ii. Demographic characteristics: The next basis for market segmentation is the demographic characteristics. Factors like age, education, income, occupation, sex, family size and marital status. A. Age: this factor can be divided into following sub segmentation

Infant market (0-1 year) Child market (1-12 years)

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Teen market (12-19 years) Youth market (20-35 years) Middle aged market (36 - 50 years) Senior citizen market (50 years and above) People Population: Age structure: India 1,095,351,995 (July 2006 est.) 0-14 years: 30.8% (male 173,478,760/female 163,852,827) 15-64 years: 64.3% (male 363,876,219/female 340,181,764) 65 years and over: 4.9% (male 27,258,020/female 26,704,405) (2006 est.)

B. Income: another factor to be considered while segmenting the market. It is believed that as consumer's income increases, his lifestyle / behavior also changes. With an increase in income, expenditure on other branded products, luxuries like holiday packages, expensive home appliances etc. Increases. The marketer here may consider either customer's income or his family income together. It highly depends here, how many earning members are there in the family. On the basis of income, the market can be segmented as being: I. Ii Iii Iv V Low income low middle income middle income upper middle income higher income

Marketing to each of these segments require not just appropriate price but even customized products. The Indian market is price sensitive. So understanding the income concept is very important. (Give Bata e.g.) C. Gender: this concept is used to divide the male market from female market. Certain products can be served differently for both markets (cosmetics and toilettories) where as some items are used for both i.e. unisex. (Jeans)

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With changing time Indian women are becoming more aware about themselves. The working women trend is also increasing in Indian towns and urban. Educations are spreading very fast among them. D. Occupation: another important variable in market segmentation. A person is selfemployed, or is doing job, working for full time / or part time, his position in organization also affects the consumption behavior. Depending upon their profession, marketer can segment the market. For e.g. in books market, the choice of professor is going to be different than the choice of a graduate who is working in an organization full time. E. Education: education level of customer reveals his choice and his level of awareness. As literacy increases and people get educated, they become more aware about the environment and different products. Based on education, Indian market can be segmented as illiterates, literates, high school educated, and university educated individuals. F. Marital status: it is assumed that the consumption pattern of single and married people differs. Married couples are more prone to fast food and ready to eat packages. Also they are more likely to be spendthrifts or frugal in spending. At the same time they are the consumers of many expensive and luxuries as well as gift items. G. Iii Family size and structure: Psychographics segmentation:

In Psychographic segmentation, buyers are divided into different groups on the basis of their lifestyle and personality. Here, marketer may study the life-style / personality of the customers and decide to target the market on that basis. For e.g. a marketer may decide to manufacture his clothes differently matching different life styles of college-students (more fashionable), office goers (more sober) and so on. iv Behavioural segmentation:

Here, the marketer divides the market into groups on the basis of their knowledge of, attitude towards, use of or response to a product. Certain behavioral factors such as occasion, benefits, Occasion: the buyer can be distinguished according to this variable. Occasion segmentation can help the marketer in expanding a product's usage. For e.g. simple card making company can decide various occasions like, mother's day, father's day, diwali etc and target that particular market in definite occasion.

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Benefit: the marketer can divide the market as per the benefits sought by the buyers. Take an e.g. of a company making toothpaste. How many different types are available in toothpaste, for freshness, for protection against cavity, for strong teeth, toothpasteprotecting gums.

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Tasks involved in segmentation Whatever be the base for segmentation, the tasks involved here are very important. These tasks are shown below: • Checking differences between one customer group and another one in terms of their needs and their likely responses to the product and other marketing mix elements. • Finding out by what descriptive characteristics can consumers of a particular habit be tagged on to a specified segment? • Disaggregating the consumers into suitable segments based on (i) and (ii) above. • Analyzing whether it is possible to formulate separate marketing programme / mix for different segments. • Finding out which segments will be particularly happy with the offerings of the firm and can be considered as the natural targets of the firm. • Selecting those segments which offer higher potential and which will also be amenable to the offerings of the firm. MARKET TARGETING Targeting is the second stage of the SEGMENT, target & POSITION process. After the market has been separated into its segments, the marketer will select a segment or series of segments and 'target' it/them. Resources and effort will be targeted at the segment. It's like looking at a dartboard or a shooting target. You see that it has areas with different scores - these are your segments. Aiming the dart or the bullet at a specific scoring area is 'targeting'. There are three main types of targeting. They are considered below.

The first is the single segment with a single product. In other word, the marketer targets a single product offering at a single segment in a market with many segments. For

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example, British Airway's Concorde is a high value product aimed specifically at business people and tourists willing to pay more for speed.

Secondly the marketer could ignore the differences in the segments, and choose to aim a single product at all segments i.e. the whole market. This is typical in 'mass marketing' or where differentiation is less important than cost. An example of this is the approach taken by budget airlines.

Finally there is a multi-segment approach. Here a marketer will target a variety of different segments with a series of differentiated products. This is typical in the motor industry. Evaluation of a segment: • Is it sizeable? • Is it growing? • Is it profitable?

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• Is it accessible? • Is it compatible with the firm’s resources POSITIONING The third and final part of the SEGMENT - TARGET - POSITION process is 'positioning.' Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market. Positioning is all about 'perception'. The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer? A six-step question framework is suggested below for successful positioning: 1. What position do you currently own? 2. What position do you want to own? 3. Whom you have to defeat to own the position you want. 4. Do you have the resources to do it? 5. Can you persist until you get there? 6. Are your tactics supporting the positioning objective you set? POSITIONING IS THE ART OF CREATING A DISTINCT IMAGE FOR A PRODUCT IN THE MINDS OF THE CUSTOMERS. IT INVOLVES IMPLANTING THE BRAND’S UNIQUE BENEFITS AND DIFFERENTIATION IN CUSTOMER’S MINDS. FOR E.G. ATM WHICH MEANS “AUTOMATED TELLER MACHINE” BUT FOR CUSTOMERS IT IS “ANY TIME MONEY” WHICH MEANS INSTANT CASH. SO AUTOMATED TELLER MACHINE IS A PRODUCT AND ANY TIME MONEY IS POSITIONING. POND’S MAGIC: DEODORANT ACTION. TALC USED AS A DEO. (DEO-TALC)

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VICCO VAJRADANTI: AN AYURVEDIC MEDICINE. FOR HEALTHY GUMS AND TEETH. ENO: FOR RELIEVING ACIDITY INSTANTLY (IN 6 SECONDS) DEFINITION: “AN EFFORT AIMED AT CREATING AND MAINTAINING IN THE MIND OF TARGET CONSUMERS THE INTENDED IMAGE FOR THE PRODUCT OR BRAND, RELATIVE TO OTHER BRANDS SO THAT THEY WILL PERCEIVE THE PRODUCT AS POSSESSING THE ATTRIBUTES THEY WANT.” THUS B.P IS A MARKETING STRATEGY THAT ATTEMPTS TO OCCUPY AN APPEALING SPACE IN A CONSUMER’S MIND IN RELATION TO THE SPACES OCCUPIED BY OTHER COMPETITIVE PRODUCTS. A PRDT MUST BE POSITIONED CAREFULLY. CO CAN USE ONE POSITIONING OR MULTIPLE POSITIONING. IN OTHER WORDS, POSITIONING IS THE PROCESS OF OFFERING THE BRAND TO THE CONSUMER. IT IS POSITIONING THAT MAKES THE BRAND APPEAR TO BE DIFFERENT AND BETTER THAN ALL COMPETING BRANDS. STEPS IN POSITIONING: 1. IDENTIFY COMPETITIVE DIFFERENCES: WHICH CAN BE: a. PRODUCT DIFFERENCES SUCH AS FEATURES, DESIGN, PACKAGING ETC. b. SERVICES DIFFERENCES SUCH AS DELIVERY, AFTER SALES SERVICE ETC. c. IMAGE DIFFERENCES SUCH AS THE GOODWILL OF THE PRODUCER, BRAND NAME ETC. SELECTING IMPORTANT DIFFERENCES: WHICH WOULD DIFFERENTIAL THE BRAND FROM COMPETITORS. DEVELOPING POSITIONING STRATEGY: THE MARKETER SHOULD THEN MAKE EFFORTS TO DEVELOP POSITIONING STRATEGY. IT CAN BE DONE BY FOLLOWING ANY OF THE FOLLOWING POSITIONING STRATEGY. a. USING SPECIFIC PRODUCT FEATURES. b. POSITIONING BY PRICE. c. POSITIONING BY USE d. POSITIONING BY COMPETITORS ETC. SELECT PROPER MEDIA TO COMMUNICATE POSITIONING.

2. 3.

4.

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5.

FOLLOW UP OF POSITIONING. THRU SALES OF BRAND.

REPOSITIONING: IT IS CHANGING THE POSITION OF BRAND. SOMETIMES A PARTICULAR POSITIONING MAY NOT WORK IN THE CONSUMER’S MARKET, AT SUCH TIME, IT BECOMES IMPORTANT FOR COMPANIES TO CHANGE POSITIONING. FOR E.G. DETTOL TOILET SOAP WAS EARLIER POSITIONED AS BEAUTY SOAP. WHICH WAS NOT IN LINE WITH ITS CORE VALUES. DETTOL, THE PARENT BRAND WAS KNOWN FOR ITS ABILITY TO HEAL CUTS (LIQUID). THE EXTENSION’S “BEAUTY” POSITIONING WAS NOT IN TUNE WITH PARENT’S “GERM-KILL” POSITIONING. THE SOAP WAS THEN REPOSITIONED AS A “GERM-KILL” SOAP AND IT FARED EXTREMELY WELL AFTER ITS REPOSITIONING.

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Chapter – 7 - Product / New product development / Branding / Packaging / Labeling / Product Life Cycle Product: “a product is anything that can be offered to a market to satisfy a want or need.” (See scope of marketing). A product or a service is the heart of marketing mix. No company can use other elements of marketing mix i.e. Place, promotion or price without the base element i.e. Product. The product / product line also must be changed according to consumer preference, technological development and competitor’s strategies. Companies, which have ignored this element, have suffered badly. Product mix and product line: Product mix and product line of any company’s product denote the range and variety of the products of a firm. Product mix: a complete set of all products offered by a company for sale. Product mix is composed of several product lines. Width of product mix: it denotes the number of product lines. Length of Product Mix: it denotes total number of items offered by a company A product line is a broad group of items having similar features with similar usage. Length of product line: length denotes number of brands in one product line. Depth of product line: depth indicates total number of items under each brand in the line, in terms of difference, shades, model, pack sizes etc. Assessment of product line and each product in the line: Not all products enjoy same demand and occupy same market share through out its life span. Every product has its own life cycle. A product of a company may not be doing well because the competitor has entered the market with better quality, or the price may be another factor which may be leading to failure of the product. Changes in the types of product due to technological changes may be another reason why a product has failed. All earlier examples indicate that product may have entered the last stage of its life cycle i.e. Decline stage. In such circumstances, the company may have to take one among

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various decisions. These decisions include, withdrawal of an existing product, stricter quality control in respect of some product (food and medical items), improving the utility of product by adding a new feature to it, or change the position of the product (Dabur honey, Dettol). A. Tasks in product line assessment:

No company can afford to bring changes in its product line – length immediately. Certain analysis is required for the same. The company must evaluate each product line in depth. For e.g. Proctor and Gamble has to undertake product line appraisal, it has to evaluate each product line - fabric care, hair care, health care etc. The analysis of individual product line is done in following ways:
? How fabric care line is faring? (this line covers items like Ariel total compact,

Ariel front-o-mat and tide) ? Is the line achieving full sales target? ? How about maintaining its share in the market? ? Are there too many brands in the product line, making it non-manageable? Within the same product line, ? ? ? ? How is individual brand doing? Is it capable of achieving its sales target? Which is the best performing and poor performing brand? The reasons behind that?

The most important factor for any marketer is to find whether this particular product line needs any pruning (cutting down)? ? Can the brand accept more varieties leading the increase in the depth of the product line? ? Should the line stretch to new market segment? Such assessment in context to all product lines should take place by all companies. B. Increasing the line length: companies depending upon its status start with one or two product line or may be one product in that line. Over the years, depending upon its experience, the companies grow in terms of product line, product line depth, and in

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product mix over all. There are two different ways in which a company can increase its product line length. i.e. Line stretching and another is line filling. B.1. Line stretching: a company’s product line states total range of the products offered by the company. For e.g. BMW automobiles targets upper price range of the automobile market. Line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line down-market, up market, or both ways. Down market stretch: a company positioned in the upper market, may want to introduce a product for middle market – due to any of the following reasons: ? Strong growth opportunities in middle market. ? Stagnating or declining of upper market. Up market stretch: a company which has initially positioned its products for the lower end market decides to make higher priced offers for the top slots. ? Stretching line involves changes in positioning and targeting. Two-Way Stretch: company serving middle market so far, now decides to serve both – up market and down market. This process is known as Two-Way stretch. B.2. Line filling: here, the firm introduces more items to the line to fill in certain gaps in its current range of offers. The intention is to capture the customers and do not let them go the competitors for other models in particular price slot. For e.g. Company A has its personal care product line – skin care, oral care and health care. Its tough competitor company B has in its personal product line – skin care and oral care. Here this company is facing competition from company A in case of health care product. The company B may decide to introduce all healthcare item, and thereby facing tough competition. B.3. Line pruning: the companies over the period of time, to sustain and survive in the market, might have expanded its product line. But the situation in the market keeps changing. The expanded product line may become unnecessary long over the years, may be leading to a loss in one or few products. The company may prefer to withdraw some of the items or brands or pack size from the line and serve the market thru a better organized line. This concept is known as line pruning (trimming). The concept is just opposite to line stretching. Here a conscious decision is taken to reduce the number of items in the

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line thereby trying to save the cost and maximize efficiencies in production, distribution and promotion.

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Consumer product and business product: Consumer goods are the products purchased for personal or household consumption by consumers. And, business goods are products purchased for either reselling, remarking, manufacturing other products or for consuming as utilities in the running of a business enterprise. For e.g. A bottle of dettol purchased by an individual for his personal use is consumer product and a carton of dettol purchased by a hospital is a business goods. The marketer has to apply different strategies to convince the consumers and to hospitals. Classification of consumer goods 1. Convenience goods: (C.G.) - Low priced, available throughout the country. As they advertised throughout the nation, the purchase frequency is high. 3 sub classes of C.G. A. Staple Product: bread, milk, grocery bought regularly. Not required planning. However few households prepare a list of item before buy. B. Impulse Product: purchase completely unplanned. They get exposed to the product as and when they see in shops. E.g. Magazines, pens, soft drinks etc. C. Emergency Product: purchases results due to emergency reasons. E.g. Raincoats, medicines, ambulance etc.

2. Shopping goods: items such as clothes, shoes, electrical appliances are not purchased so frequently. ? ? ? ? 3. There is an element of planning involved as goods are expensive. Not available at all retail shops. High amount of comparison in price, quality, pattern etc from stores to stores. Distribution channel is very short. Speciality goods: ? High priced goods such as cars, luxury watches, ornaments, designer outfits etc. ? Leads to substantial amount of investment and frequency of purchase are less compared to shopping goods. ? Normality in decision making of such products, entire family participates.

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? Various aspects of purchase such as utility, prestige, alternative availability are analyzed. Classification of business product Business goods cover wide area. Depending upon their nature of use, they have been classified into 4 categories:

a. Raw material: (i) Natural Product: Fish, ore, crude oil etc. (ii) Farm Product: Wheat, Eggs, and Rice etc. b. Installations such as land sites, plants; factories, warehouses, etc. C. Accessory equipment such as products similar to small-standardized major equipment. E.g. Typewriter, copier machines. D. Supplies such as maintenance supplies, which are used to preserve plants in good conditions. E.g. Brooms, wiping cloths. Repair supplies also forms part of supplies, which is used to keep equipment in operating condition. E.g. Nuts & bolts. Operating supplies such as coal, fuel oil, natural gas, pencils, and typewriter ribbons also falls under supplies. ? Why product classification is required? o Formulation of marketing strategy. o Proper moulding of marketing mix. o Select proper target market.

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CHAPTER – 8 - BRANDING, PACKAGING & LOGO INTRODUCTION: Managing brands is a major task in marketing. Meaning of Brand A brand is defined as a name, term, symbol, design, or a Combination of them, which is intended to identify the goods & services of one seller & to differentiate them from those of competitors. A trademark Is a brand that has been given legal protection, thus ensuring its use exclusively by one seller, Trademark is a legal term, while brand is a marketing term. In marketing, the brand name is a major selling tool and one of the most important components of the ‘Total product personality’. We are in fact, living in a age of brands. The intensive brand promotions undertaken by marketers of various products have made consumers extremely brand conscious. These days no consumer asks for just toothpaste. He specifically asks for Colgate, or Close-up, or some other brand. No woman asks for bath soap, she wants her brand similarly, a woman who wants a steel cupboard may ask for Godrej, without even thinking about several other brands of cupboards that are available. The brand name is the mantle the product puts on. The brand image, developed through advertising and other promotional measures, creates strong brand awareness and loyalty among consumers. Corporations spend long years, lot of money and effort to build brands. A good brand is an invaluable asset for the owner. We shall discuss the various dimensions of brand management in this chapter on Managing Brands and Brand Equity. WHAT IS A BRAND? WHAT IS ITS SIGNIFICANCE IN MARKETING? A good brand can serve as a powerful competitive advantage for affirm. Infact, strong brands are major assets for companies. It is a valuable, renewable & lasting asset, capable of working & earning for a company for years. The battle in the market takes place not between companies, but between brands. Consumers buy brands; & brands generate income for the firm.

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THE MAIN TASKS IN MANAGING BRANDS :In any given product category, only a handful of brands are successful. Years of uninterrupted nurturing, with the support of a good marketing programme, are required to develop a winning brand & get it established in a market. Such a marketing programme includes a meaningful product differentiation & an apt positioning for the brand, accompanied by the right distribution & promotion support. The entire activity is resource intensive as well as time intensive; it also involves meticulous planning as well as careful execution. No wonder, brand building is a very difficult task. The character & personality of brand has to be developed, sustained & protected from a number of conflicting demands. As already mentioned, nonstop rearing for long duration, an expert handling of the brand’s quality attributes, sustained marketing communication & commitment of build a brand. A good brand is the direct outcome of a corporation’s long-term commitment in this direction. SELECTION BRAND NAME & LOGO:Selecting a brand name &logo is the first task in brand management SELECTING BRAND NAME Let us take brand name first. A good brand name will be distinctive; it will be easy to pronounce, recognize & remember; it may denote something about the nature/function of the product; it will also be appealing. Different Approaches There are different approaches in selecting brand name. Names communicating the function/Attributes of the Product Most companies select brand names, which communicate the function/ some key attributes of the product. For e.g., Good Knight, the mosquito repellant, offers a good night’s sleep; Boost is the energy booster drink; Aqua guard gives protected water and Fair & Lovely promises fair & lovely skin. Names, which communicate the Specialty of the Product

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Some others try to communicate the specialty of the product through the chosen name GM’s Opel, Ford’s Ikon, Mitsubishi’s Lancer, Suzuki’s Zen are names intended to communicate the specialty of the respective brands. Shampoos with names Halo, Sunsilk, and Velvette, are also trying to communicate certain special product effects/claims. The name Taj given to the hotel chain of Indian Hotels is an attempt to recapture and reflect the Moghul splendour. Use of Acronyms Sometimes brand names are acronyms. Amul originated from Anand Milk Union Ltd. MRF originated from Madras Rubber Factory. FIAT too has similar origin. Use of Company Name The temptation to use the company name as a brand name is also strong. Some of the most famous brand belongs to this category: Bata, Cadbury’s Samsung, Philips, and Sony are good example. SELECT THE LOGO Along with brand name, companies also use a logo for visual identification. Logo enhances recognition by the provision of a symbol of identity. A logo is a pictorial symbol intended to communicate with the consumers. It is an accompaniment to the brand name and the two together identify a company’s product. The logo can be made of anything; words, alphabets, pictures, graphics or even a splash of colors. The logo is a piece of creativity. Marketers have understood that a logo/mascot, with a well defined personality, cans greatly increase memorability aid recall and help sales. Changing the Logo Though a logo is a relatively permanent entity for a company, sometimes changes are warranted. And, companies do change logos with passage of time. They completely alter the logo or modify it depending on the need. Brand Name, Logo and Slogan The three go together; they must be compatible, one reinforcing the other. Let us see a few examples.

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Brand Name

Logo

Slogan

Onida

The green-eyed devil

Neighbour’s envy, Owner’s pride.

MRF radial

The man with steel muscles

India’s answer to world-class car.

AT&T anywhere

The globe

Connecting people anytime,

Individual Brand Names Here, each product of the company is given an independent brand name. Hindustan Lever, for examples, gives separate brand names for most of its products. HLL-individual brands: In its bathing soaps line, HLL has several brands like Dove, Lux, Pears, Lifebuoy, Liril and Haman. In detergents, it has Surf, Rin, and Wheel. The washing soaps line carry brand names like Sunlight and 501. In toothpastes, it has brands like Close-Up and Pepsodent. Its coconut hair oil the name Nihar. Its cooking oil is Dalda. So, HLL has built numerous brands in its different lines. They are individual brands, each moving in its own right, independently. Family/Umbrella Brand Family branding/umbrella branding does not mean that entire product mix of the company should go under a single name. A company may resort to different branding approaches for different product lines. When a group of products are given the same brand name, it becomes a case of family brand/umbrella brand. HLL has umbrella brands, too:- However, it does not mean that HLL is totally dependant on individual branding. HLL has also developed a couple of umbrella brands for certain

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product categories. Brooke Bond is being developed as an umbrella brand for its tea and coffee products. And, Kissan is becoming an umbrella brand for its foods line.

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EXAMPLES:1. Amul is an example of family/umbrella brand. Amul is the common brand name

for company’s milk powder, butter, ghee, and milk chocolates.
2. Johnson’s is another family brand. The company, Johnson & Johnson sells many

of its baby care products under the Johnson’s brand name-Johnson’s Baby Powder, Johnson’ Baby Shampoo, etc. Benefits of Family Branding It is convenient to adopt a family brand for related products. Promotion of such products becomes easier and less expensive under a family brand. But the marketer in such cases has to ensure that all the products offered under the family brand maintain the same standards of quality. If one product in the group becomes a low quality product, it will affect the entire range of products under it. In other words, in family branding, there is a composite responsibility among the products coming under the brand. A major benefit in giving family brand name is that advertising and promotion effort can be combined for all the products falling under the family brand; the advertising budget can be stretched over several products. Another advantage is that under family branding, new product launch become easier and cheaper. New products would enjoy a ready recognition and a market set-up. Retailers too would find it easier to push new products under a popular ongoing brand name. Company Name as Brand Name In certain cases, the company names it self is used as brand name under which varied products and marketed. Companies like Bajaj, Godrej, Philips, Cadbury’s, Johnson & Johnson, Videocon, BPL, HMT and Samsung use the company name as brand name for their products. The sheer power and sway reputation is utilized in marketing the products. Company name is used in branding only when the company is confident that lending its name to its products gives a better identify and image. Middlemen’s Brand/Store Brand/Private Label

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Sometimes, some manufacturer leave their products for branding by the distributors/retail chain as per the latter’s choice. Such brands are called middleman’s brand; they are also known by as store brand or private labels. Small manufacturers, who do not possess the financial and management resource for building brands and doing marketing and promotion on their own, usually take this route. There are many small scale producers of products like bulbs, fans, soaps. Detergents, food products, garments, etc. who leave their products for branding and marketing by distribution houses. Spencer’s: Spencer’s is a middleman’s brand (store brand).Many products ranging from bread and soda to consumer durables like storage water heaters are sold by Spencer’s distribution chain under the brand name Spencer’s. Stop: is another store brand; it is the brand of the retail chain Shopper’s stop. Food world is a store brand owned by the Food world chain store. The products that go under these brands are manufactured by other companies—big and small—whose identities do not go with the products. The distribution house/retail chain brands and sells the products. KEEPING THE BRAND LIVE THROUGH EXTENSIONS, BRAND REJUVETION, RELAUNCH By locating brand name and logo, the marketer is through with only the most preliminary task in brand building. The crucial tasks begin only then. As mentioned at the outset, tasks such as differentiating and positioning of the brand, and deciding and implementing appropriate distribution and communication strategies have to be attended to. These topics have been covered in the respective chapters. We shall move on the task of keeping the brand live through brand rejuvenations/extension/other innovations. A brand needs various kinds of support as it goes along. The customers have to be reminded about the brand; competitors may deflect even loyal customers’ attention. Sometimes, the brand may look stale after some time; new entrants with various selling propositions may appear more attractive. So, there is continuous work for the marketing man, even in respect of his well performing brands. He has to monitor his brands consistently and bring out various improvements in them. Brand Extension

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Brand extension is an effective tool/weapon in brand management, and it basically means extending a brand name to more products. Types of Brand Extensions A brand name can be extended in three ways: 1. Extended to other items in the same product line Sunrise coffee was extended to other Sunrise Premium and Sunrise Extra coffee catering to different segments. This is called line extension. All are products in the same linecoffee. 2. Extended to items in a related product line Maggi initially was a brand of noodles. Later, the brand name was Extended to other product lines in the related category foodMaggi Ketchup, Maggi Soup, etc. It is a case food items. This is called related brand extension or category extension. 3. Extended to items in an unrelated product line The brand name Enfield, initially used for motorcycles, was later Extended to television and gensets. Here, the products belong to different and unrelated categories. It is a case of unrelated brand extension, or outside the category extension. Line Extension Line extension has earlier been dealt with to an extent in the chapter on Managing the Product, while discussing product line enlargement. In this chapter, we shall analyse it further in the context of a firm’s brand strategy. Line extension is the simplest from of brand extension. The idea is to make some additions to the line and cater to different segments of users of the product. In line extensions, the key criteria are whether the core strength of the parent brand can be leveraged for the new items. This is known as the principle of ‘benefit transfer’. The new items (extensions) also give back some benefits to the parent brand. Lifebuoy’s line extension into Lifebuoy Plus is an example of line extension working well when this criterion is fulfilled. Surf:-In detergents, HLL launched Surf Ultra, Surf Excel, Surf Excelmatic and International Surf Excel as line extensions of Surf. 2. Extending a Brand name to products in a related line (Category extension)

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Here, the brand name is extended over different products, but the products are related in some way. In order words, they belong to a category. The Maggie example cited earlier fits this description. Dettol can be cited as another example. Dettol : For years, Dettol has been a well known brand of Antiseptic lotion. When the company, Reckitt & Colman, decided to expand into new antiseptic products, they decided to launch them under the Dettol brand name, i.e., as brand extensions in related category. They felt that it would enable the new products to gain immediate identification as sister products of Dettol and they would easily move under the Dettol name. The Dettol brand name was extended to number of related products as shown below: Dettol soap – Dettol Plaster Dettol Hand wash – Antiseptic Soap Antiseptic Bandage Antiseptic Wash

Line and Category extensions by Ponds:
? ?

? ? ? ? ?

Ponds Dreamflower talc. Ponds Dreamflower talc magic. Ponds Sandal talc. Ponds Cold soap. Ponds Cold cream. Ponds moisturising lotion. Ponds moisturising cleansing bar.

3. Extending a Brand Name to Products in an unrelated line (Outside category extension) : Here, the Brand Name is extended across completely new and unrelated products, falling under all together different product categories. It is here that brand extension is put to the severest test and the value of the brand is leveraged to the maximum. In other words, it is when a brand name is extended to products in unrelated lines that the reward, as well as the risk, is the maximum. The reward arises from the substantial savings in the cost and time involved in developing and all together new brand. We will understand this dimension when we analyses the basic condition for success of brand extensions.

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Main requirements for success of brand extensions. For Brand extensions to succeed, three basic requirements covering the mother brand and the extensions must be met. These are: (i) (ii) (iii) In customers perception, there must be consistency between the parent brand and the extensions. Extension should be in the brands area of expertise, so that there is scope leverage. Benefit Transfer.

Let us discuss them one by one. Consistency Factor: Consumers must perceive the extended item to be consistent with the mother brand. In the case of Ponds in consumers perception, there was no consistency between the mother, ponds talcum powder, and the extension, ponds toothpaste.
(i) (ii)

Brands Area of Expertise : As a rule, extension of brand name has a better chance of success when it is to a product, which is within the brand area of expertise. For example: Surf extension to Surf ultra and lifebuoys extension to lifebuoys plus were within the parent brand area of expertise. Similarly, Lipton had great expertise in Tea. On the contrary, maggies extension of its instant culinary expertise across food categories – from Noodles to Ketchups, Soups and Pickles- look natural to the consumer

Benefit Transfer : Another tenet in brand extensions is that the mother brands benefit must be transferable and be transferred to extensions, because consumers expect and desire the benefit offered by the parent brand in the extensions. It is difficult to fulfill all the 3 conditions. And that is why the risk of brand extension is higher in such cases.
(iii)

BRAND REJUVENATION : Brand rejuvenation involves adding value to an existing brand by improving product attributes and enhancing its overall appeal. Brand rejuvenation helps to overcome the consumer’s borebom in seeing the same products on the shelves year after year. A consumer’s psychological desire for change is one key factor behind brand rejuvenation by companies.

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Quite often, we see ongoing brands appearing as new, super, special, premium, deluxe, and extra strong and fresh. They appear in new shapes, new packsize, new containers, new flavors and colours. Corn products re-introduced Rexjam with pieces of root in it and pack them in new containers. Objectives: The main objectives of Rejuvenation are as follows: 1. Rejuvenation aims at revival of a brand. The intention is to breathe some new life into a brand that may be showing sign of decline. 1) Even healthy, successful brand may need occasional rejuvenation. Because of competition, some re-formulation and refinement becomes necessary from time to time. It ensures the steady success of the going brands. 2) It helps to keep the brand life and in focus. Some companies are constantly playing the rejuvenation game. Cadburys, Procter & Gamble and Hindustan Lever are examples of companies which believe in giving their products the occasional facelift through brand rejuvenation. Hindustan Lever tops the list. It keeps the updating most of its brand – Surf, Closeup, Rexona, Lux, the list is fact in long. An essential part of the rejuvenation exercise is the promotion campaign surrounding it. Companies launch advertising and sales promotion campaigns to drive home the brand new arrivals. BRAND RELAUNCH: Some brands fail to take of some other face declined after a spell of profitable life, and yet other cases, the rate of growth is not enough for the firm. The companies having invested money and effort in them, do not want to give up. They usually like to give the brand one more trial, some improvements/changes are incorporated and the brand are relaunched with the support of a new campaign. Santoor: Wipro’s santoor soap ended up as an also – ran soon after its launch. The company after some time relaunched it with some changes in the formulation as New Santoor supported by a new promotion campaign; New Santoor soon became a major brand in the premium soaps category

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Marvel : Similarly, Godrej Marvel launched in 1986 failed to take off. In 1990, it was relaunched; it came into 2 colours with the support of a new campaign. Marvel soon picked up and gained a 4% share of the market segment. Close-Up: Close-Up provides another instance of successful brand relaunch. Though it was launched in mid-1970’s as the gel toothpaste, it was relaunched in 1989 in red and blue variants supported by an extensive products samplings and promotions campaigns that catapulged close up to the no. 2 position in the toothpaste market. BRAND PROLIFERATION: Brand proliferation is the opposite of brand extension. While in brand extension, new items are added using an existing brand name and several products are offered under the same brand name, in brand proliferation, more items are brought in with new brand names. In other words, the firm has several brands in the same product/product category. For instance, Unilever has more than 25 brands of Ice creams and P&G has more than a dozen brands of detergents. Brand proliferation can help expand the market as well as the company’s market share in the category. New brand also generate excitement for the sales team of the company. More brands from a companies stable enhance competition in the market. It also paves the way for the company’s brands to compete among themselves, a phenomenon known as brand cannibalization. In particular, when a firm introduces a number of brands in the same product line with an amount of parity among them, the danger of cannibalization is high, the share of individual brands can come down. Having brands with distinctive positioning is, strategically, the best way of minimizing cannibalization. If different brands are designed to deliver different benefits to different segment of markets, it can restrict competition among brands. It is not essential either, but one has to be sure whether net incremental benefit that justifies the additional cost and complexity, accrues by adding one more brand. A good marketing strategy strikes a fine balance so that too many brands do not result in brand cannibalization and erosion of profits. For instance, HLL manages it well. It enjoys a 70% share of the 4 lakh tones personal wash market, and 30% share of the 20 lakh tones fabric wash market. It resolves to both brand extensions and brand proliferation in a balanced manner in these categories. HLL finds that both strategies are required to fight competition; they have to be blended appropriately.

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Branding Branding is a commonly used trade practice by manufacturer of consumer and industrial goods. Branding means giving an attractive name or symbol to the product by which it will be identified in the market and remembered by traders and consumers. A brand name is a name, term, symbol, mark, design, or a picture put on the product itself. It is an identification mark or stamp. Branding gives in-depth status and identity to a product. The concept of branding is very old and very common and is similar to a family practice in which a newly born is given some name by which the baby will be identified. Once a brand is used, it becomes an integral part of the product itself. The American Marketing Association has defined a “brand” as a name, term, symbol, or design or a combination pf them which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. The primary concern of brand is to offer product differentiation in the market i.e. to single out a product from its rivals. In the absence of branding, products cannot be differentiated, distinguished and their producers cannot be remembered and quality cannot be guaranteed. Requirements/Features/Essentials of a good brand: Simplicity: simple to pronounce. Distinctive Suggestive Impressive Protectable: It should be able to protect in the court of law. It should be acceptable for registration. It should not resemble any other brand name. ? Unsuitable for imitation ? ? ? ? ? Branding Policies There are a number of possible policies.

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Company name Often, especially in the industrial sector, it is just the company's name which is promoted (leading to one of the most powerful statements of "branding"; the saying, before the company's downgrading, "No-one ever got fired for buying IBM"). Family branding In this case a very strong brand name (or company name) is made the vehicle for a range of products (for example, Mercedes or Black & Decker) or even a range of subsidiary brands (such as Cadbury's Dairy Milk, Cadbury's Flake or Cadbury's Fingers in the United States). Individual branding Each brand has a separate name (such as Seven-Up or McDonald's), which may even compete against other brands from the same company (for example, Persil, Omo and Surf are all owned by Unilever). Brand Development In terms of existing products, brands may be developed in a number of ways: Brand extension The existing strong brand name can be used as a vehicle for new or modified products; for example, after many years of running just one brand, Coca-Cola launched "Diet Coke" and "Cherry Coke"; although its subsequent change to its main brand and the retrenchment to 'Classic Coke' demonstrated some of the problems this may cause! Procter & Gamble (P&G), in particular, has made regular use of this device, extending its strongest brand names (such as Fairy Soap) into new markets (the very successful Fairy Liquid, and more recently Fairy Automatic). PACKAGING

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Developing new product Every product goes through a life cycle. The life cycle of every product presents two major challenges: first: how good a firm is, at developing new products to replace old ones. & Second: adapting the marketing strategies in the face of changing tastes, technologies and competition as product pass thru life-cycle stage. Necessity for new product development Developing a new product is a major decision taken by a company. Companies prefer to take the decision of new product development to have further growth, expansion and development in their product line. However, there are certain reasons which forces companies to go for new product development: 1. Meeting consumer’s changing demand: following are the factors relating to changing consumer’s demand. a. Change in life style, b. Habits, expectations, comfort level. (Seen earlier in Env. Factors) c. Changing role of women, more working women trend led to the introduction of products such as washing machine, dishwasher, and other kitchen appliances. 2. Increasing the profit: 3. To face constantly changing environmental factors: Following are the categories in which new products can be identified: ? New-to-the world products: new products that create an entirely new market. ? New product line: new product that allows a company to enter an established market for the first time. For e.g. P & g after introducing the fabricare and health care product line successfully it decides to introduce an entire and wider range in hair care. ? Additions to existing product lines: new products that supplement a company’s established product lines. ? Improvements and revisions of existing products: new product that provides improved performance and replaces existing products. ? Repositioning: existing products that are targeted to new markets or market segments.

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New product development strategy: (as discussed above), a new product can be an original product, an improvement over an existing product, modification of a product as per the demand of consumers and new brands that the firm develops through its own R & D efforts. Developing new product is a risky as well as challenging task, mainly when in the market thousands of products are being dumped from different corner of the world and the taste, preferences and likes of people changing very frequently. First step - idea generation: New product development starts with idea generation-the systematic search of newproduct ideas. • Company like Dupont, takes around 3000 ideas to produce 2 products. • A company can gather ideas from following different sources: • Internal sources: through formal research & development by taking brains of scientists, engineers, manufacturing & sales people. • Customers: are good source of ideas. The co. can analyze customer questions and complaints to find new products that better solve consumer problems. Conducting surveys is one of the ways to find needs and wants of people. • Competitors are also another good source of new-product ideas by watching their products in the market or watching their ideas then making the products accordingly. • Distributors and suppliers: as they are close to various products sold by them as well as they are close to customers. The feedbacks given by customers help distributors to know the reviews of customers. • Trade magazines, journals, shows, seminars, new product consultants, advertising agencies, market research firms etc. • There are ideas which “just like that” arise in the mind of company people for e.g. New product ideas: story of sony “walkman” ? Morita: the story writer for the book “made in japan” ? Ibuka: the music lover. • Kodak gives monetary, holiday or other form of awards to employees who submit the best idea. • The employees at Toyota submit around 2 million ideas annually (1:35 is the employees : idea ratio)

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Idea management: the entire system of gathering ideas will collapse if the same is not managed properly. It is very important for every organization to make sure that ideas are gathered at a centre point in the orgn. An idea management system can be developed for the same. • A person (preferably a senior one) from the organization can be appointed for the same task. • If a committee is created by gathering people from various departments of the organization, they can meet regularly and evaluate proposed new ideas. • An e-mail address, a post box number or a toll-free number can be set up by the organization to enable any one to send ideas. • Conducting brain storming sessions by gathering people from various departments of the organization and awarding the best ideas. 2nd step: idea screening: this step reduces the number of ideas generated during first step. • The company executives, on the basis of ideas gathered, prepares a write-up in a standard form, which is then reviewed by a new-product committee. The write up describes the product, the target market, and the competition. • The ideas reviewed by committee should be sorted into 3 groups. ? Promising ideas ? Marginal ideas ? Rejects. • The product development cost rises very high at a later stage, so co prefers only those ideas, which turn profitable to them. 3rd step: concept development & testing: • A product concept is a detailed version of the idea stated in meaningful consumer terms. • Concept development is next important stage, as people do not buy ideas but they buy products. An idea is required to be converted into a meaningful concept, which talks about product, the target group, the benefit of the product etc. ? Concept: a face cream with combination of turmeric, Milk Cream, and sandalwood oil. Sandal is cooling agent for the skin, turmeric is germicidal and useful in removing pimples and milk cream again is capable of soothing the skin. This is one possibility and may be final possibility when Vicco introduced its turmeric cream in the market. But before this the company must have worked out various combinations and analysed all of them. E.g. Combination of herbal

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and turmeric or combination of turmeric and milk cream with or without sandalwood oil. 4th step: marketing strategy development: it consists of 3 parts. A. The first part describes the target market’s size, the structure and behaviour, planned product positioning and the sales, market share and profit goals sought in the first few years: ? The target market for the Vicco turmeric cream is teenager girls who have pimple problem, or who want to avoid getting pimples on their face or who are very careful about the face skin. ? The company brand will be positioned at the high quality end. ? The company will initially aim to capture 10% of the market with a loss in 1st year, not exceeding Rs. 20 lakhs. ? 2nd year the co. Will aim for 15% of the market with planned profit of Rs. 40 lakhs. B. The second part of Marketing Strategy outlines product’s planned price, distribution strategy and market budget for 1st yr. ? E.g. the product will be initially available in with turmeric, milk cream and sandalwood oil, in 15 Gms. per tube which will cost Rs. 43/- per tube to the consumer. ? 100 tubes per carton, and distributors will pay Rs. 4,085/- per carton. (5% margin per carton) ? Initially, to motivate the distributors, for first 6 months distributors will also be offered one carton free against the sale of every 10 cartons. ? Total sales promotion budget Rs. 50 lakhs. Distribute same amount in television, newspapers and other media of advertising. ? The concept of advertising is also discussed here. (models etc) C. Long run sales / profit goals, and marketing mix strategy over time. ? E.g. The Company tends to win 30% of the market and want to make net profit of Rs. ___________ so & so amount. ? To achieve this target, the quality standards will be kept very high as well as the quality will be improved and modified from time to time thru research. Like this detailed marketing mix strategy for long run sales is discussed. 5th stage: business analysis: after deciding the marketing strategies, the company can now analyze the project from the viewpoint of organization’s objectives.

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? Whether the sales, cost and profit-loss projection satisfies the overall objectives of the organization’s or not. If the analysis is positive, then the product can move to product development stage. • The manager needs to analyse whether the estimated sales will be high enough to yield a satisfactory profit. • While estimating the sales, the marketers also need to see the type of product, the sales history of similar products (if available), whether the product is one time purchase (expensive Jewellery, engagement rings etc) or frequent purchase (regular items). Here in the above example, the product belongs to FMCG category and sales will be regular. 6th stage: product development: at this stage, the company determines whether or not product idea can be translated into a technically & commercially feasible product. 7th stage: market testing: Not all companies undertake market testing. E.g. Cosmetic items from Revlon inc. – these expensive cosmetics are not meant for mass distribution and since the company is so confident of its products that they don’t think market testing is necessary. • Market testing is preferred when the product is absolutely new and company is not confident about its marketing. • When high risk and high investment is involved in the product’s marketing, market testing must be adopted, not limited to 1 or 2 cities but probably on a larger scale. Following points must be considered before going for market testing: How many cities will be chosen for testing the product? Which cities? Duration of test? Following actions must be taken immediately. ? High trial and repurchase rate ? product should be launched immediately. ? High trial & low purchase rate, customers not satisfied ? product might be modified or dropped. ? Low trial rate & high purchase rate ? more advertising & promotion techniques required. Final stage: commercialization. • • • •

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A. o o o

When (timing)

1st entry enjoys “1st comer advantage” Parallel entry (market pays more attention e.g. Of LAGAN and GADAR. Late entry: here the main advantage is that the competitor borne the expenditure of educating the market. The marketer can learn from the experience of competitor. Marketer can avoid faults incurred by competitors.

B.

Where (geographic strategy):

• Single locality • A region • Several regions • National market • International market “Size of the company is an important factor here” Reasons of new product failure Developing a new product is an expensive, time consuming and very risky process. Not all organizations can afford this expensive practice. Very few organizations, which are quite well settled in the market not only in terms of years, but also financially can, afford to go in for a new product development. Remaining organizations prefer to be follower, entering with similar products after the pioneer establishes the new product. The entire show being so expensive that most of the firms prefer to introduce improved or modified version of their existing products. Following are the reasons contributing to the failure of new product: ? Faulty product idea: e.g. Cibaca Lime Toothpaste in 1991, cool cats – decorated ceiling fans by Polar Industries, Paloma iced tea. ? Distribution related problems: nestle dahi, nestle chocolates. Product Life Cycle (PLC) Every marketer wants its product to enjoy a good life after launching. Although no product starts making profit immediately after its inception. Every product tries to cover

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first the variable costs, and then reaches at break-even point and at third stage gives profit to the company. Not all products are that lucky to reach at third stage also, some products die at early stage. But apart from that, in normal case a product passes thru 4stages, which is known as plc. Following are the four stages of PLC ? Introduction stage: here sales growth is very slow. Profits are almost non-existence in this stage. Introduction expenditure is very high. The complexity of problems and the duration of the stage depend upon the nature of the product, its price, technological awareness and consumer’s view of the product. ? Growth stage: demand increases & soars off in the sky. Competitors enter in the market with their products. Price competition becomes very tough. Some sellers may start selling their products at lower than prescribed rates to survive in the market. At this stage profits increases. ? Maturity stage: at this stage, sales growth slows down; product has achieved enough acceptances by potential buyers. ? Decline: is the stage when sales fall off and profits drop very much. Not all products follow this PLC. Some products are introduced and die quickly; others stay in the mature stage for a long, long time. Some enter the decline stage and are cycled back into growth stage thru strong promotion or repositioning. Let’s see above stages in detail: Introduction stage: This stage starts when a product is being launched for the first time. Introduction takes time, and sales growth is very slow. ? Huge investments required attracting distributors, and developing distribution channels. Higher margins should be offered to the dealers or distributors. ? Huge amount required promoting the product; much money goes in making people aware about the product. ? This is the right chance to position the product and develop product (brand) equity. ? Huge amount of marketing efforts required. A proper planning for balanced marketing efforts is very important. Depending upon the target consumers, proper marketing mix should be adopted to get the best advantage at this stage. ? The main aim of marketer should not be to make profits but to create more and more customers for its products. ? The success in the second stage of PLC highly depends upon the direction of efforts in this stage.

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Another important and crucial decision which company has to take is to take pricing decision for the product. The company can take the decision of skimming strategy that means introducing the product at high price and thereby taking the cream. This is possible when the product is introduced for the first time in the market and the target is premium consumers who associate quality with price. Second strategy which a company has is to follow penetration pricing which involves low pricing and covers mass market. This strategy is adopted for a group which is price sensitive. Growth stage: ? A product reaches at this stage only if it has satisfied the consumers at first stage. ? Sales climbs quickly at this stage. ? The earlier consumers continue buying the product and new consumers are also developed at this stage. ? Word of mouth plays important role at this stage. ? Many competitors try to enter the market; as they are lured by high profits. ? It leads to increase in number of distributor’s outlets. ? The main task of the marketer now is to meet tough competition, maintain product quality, and offer attractive and reasonable price and overall satisfaction of consumers thru service. ? Manufacturing cost reduces because, due to high promotion cost and product demand production increases. ? Seeing the market scenario, the marketer also, may change product quality, add new features in current product, enter new market segment and increase distribution channel. ? The marketer shifts some advertising from building product awareness to product conviction and purchase. ? The price of the product might remain same or be brought down. Maturity stage: ? This stage generally lasts longer than previous stage. ? At this stage, sales growth will slow down, and stabilize at a particular point. ? Profits levels off (becomes steady) or decline because of increased marketing expenses to defend the product against competition. ? An absolute new version of the product, if introduced by the marketer can help the marketer to boost the sale. ? A marketer, instead of sitting peacefully, should do more in terms of modifying product, marketing mix or modifying market.

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? In modifying the market, the company tries to increase the consumption of the current product by targeting new users and market segments. ? In modifying the product, the company tries to bring the new version of the product, changes the quality, features of the products, performance of the product, by making it more durable, reliability etc. ? Finally by modifying marketing mix; co changes one or more elements of marketing mix, say by changing packaging, or by reducing the price, offering discounts etc. The company tries to launch better advertising campaign or use aggressive sales promotions. In short, at this stage all possible efforts are made, either to stabilize the sale, or to increase the sale or to renew the life of the product. Decline stage: ? Originator finds it difficult to survive due to pressure of competition from all sides. ? Slowly demand tends to slow down and sales drift downwards. ? Sales may decline due to various reasons like technology change, shifts in consumers taste and preference and increased competition. Continuing with the product at this stage proves to be highly expensive to the company, so the company may withdraw the product from the market or may cut one or two segments, or reduce promotion budget thus possibly continue selling the product till the sales becomes zero.

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Chapter –9 - DISTRIBUTION, PRICING & PROMOTION DISTRIBUTION: INTRODUCTION In product distribution, the products manufactured are supplied to consumers through certain channels called distribution channels. Wholesalers and retailers are two known middlemen in this distribution process. Distribution system needs to be efficient for speedy distribution, consumer satisfaction and welfare, price stability and quick turnover. Different distribution channels are available. Manufacturers should select the most convenient channel or channels for their use. In product pricing, the market price of the product is fixed and the consumers are asked to pay that price while purchasing goods. Price fixation is a delicate area of decisionmaking as the sales, consumer support and profit margin depend on the price fixed. Price fixation is a practical aspect and needs a fair combination of calculation and judgment. Many factors need careful consideration while fixing market price. Pricing strategy needs periodical adjustment as per the need of the situation. In product promotion, efforts are made to promote sales of the product through different sales promotion techniques such as impressive advertising, cordial public relation, special incentives to traders and distributors, special attractions to consumers and so on. Effective use of different sales promotion techniques is essential in the present competitive and consumer-oriented marketing system. DISTRIBUTION Goods produced at production centers must move to final consumers for actual use. For this; large-scale and efficient distribution system is essential within the country a well as at the global level. The process of delivering the product to the customer at convenient outlets is termed as distribution. Distribution management is an important area of marketing management. It consists of two major parts. They include: A. Physical distribution and (b) Management of distribution channels.

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Distribution management is a key area for large-scale sales/ marketing. Efficient marketing needs the support of different services which includes transport, insurance, warehousing and so on. Distribution system provides place utility, time utility and price utility to a product. It is the distribution that makes the product available at the right place at the right time and also at the right price. Efficient physical distribution system facilities large-scale production and marketing. MEANING OF PHYSICAL DISTRIBUTION: Manufactured goods need quick and economical distribution over a wide area so that goods will reach final consumers for actual use. Large scale distribution in essential requirement of large scale production. Efficient distribution system is also necessary for regular supply of goods to consumers and also for raising their welfare. Production and distribution are two continuing activities and are essential for the progress and well being of the society. Distribution means an operation/ activity or a series of operations, which physically bring goods manufactured into the hands of the final consumer/ user. Thus, distribution means to distribute, spread or supply goods over large geographical area. The terms “distribution” is sometimes loosely used to mean more or less the same as “marketing”. However, marketing is a term with wide meaning and scope as it includes various other operations useful for the movement of goods from the factory function is to distribute or spared the total production of manufacturer into various market spread over a wide geographical area. Distribution of goods is the last but the most important and crucial phase of the process of marketing. Distribution has two aspects: the first is organizational aspect i.e., channels of distribution and the second is operational aspect which is concerned with physical distribution. DEFINITION OF PHYSICAL DISTRIBUTION: Physical distribution is the process of sending/ forwarding the product to the final consumers. It encompasses all the activities involved in the physical flow of products from producers to consumer. NEED OF PHYSICAL DISTRIBUTION: (1) In order to satisfy the needs of consumers and for raising social welfare. (2) In order to give meaning and importance to production as production without distribution will be of no use.

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(3) In order to provide place and time utility to production. (4) In order to avoid artificial scarcity and price rise. (5) In order to aid the process of demand generation. (6) It is the most promising area for cost reduction. IMPORTANCE OF PHYSICAL DISTRIBUTION:
1. Distribution is as important as manufacturing. Goods/ services are manufactured

in order to meet the needs of consumers. For meeting such needs , efficient and economical physical distribution system is essential. Production will be meaningless if goods produced are not distributed to all consumers as per their needs. This indicates the positive role of physical distribution in the working of an economic system.
2. Distribution is akin to veins through which the life blood must flow. Distribution

is not merely transportation of goods. It, in fact, covers all the services necessary to place the product in the hands of the consumers. Distribution such as wholesalers and retailers undertake various functions and offer services to manufacturers and consumers. Large scale production is possible only because of the cooperation and support of marketing middlemen. This suggests the importance/ role of distribution in the present economic system. Unfortunately, the distribution function is often not fully appreciated in marketing management.
3. Physical distribution also facilitates the process of demand generation. It serves

as an effective tool for building up a clientele/ market. Physical distribution is a very important area for cost savings. Unfortunately, physical distribution cost has remained one of the neglected areas for cost reduction. Physical distribution is most promising area of cost reduction but is the most neglected. The following benefits of physical distribution also suggest it importance: ? ? ? ? Physical distribution provides place and time utility to products. It facilities cost reduction in most businesses. Physical distribution facilitates the process of demand generation. Physical distribution serves as an effective tool for building up a clientele/ market

MAJOR ELEMENTS OF PHYSICAL DISTRIBUTION:

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The major elements of physical distribution are as noted bellows: (1) Transportation. (2) Warehousing. (3) Inventory management/ control. (4) Material handling. (5) Insurance. (6) Packaging. (7) Order processing/ execution. (8) Accounting. (9) Communication. These elements/ components facilitate the process of physical distribution. Every element in physical distribution is useful for large scale, quick and economical distribution of goods over a wide area. The scope of every element of physical distribution is vast as many activities and operations are conducted under inventory control, warehousing, order processing and so on. All the elements of physical distribution play a supporting role. Orderly physical distribution in a continuous manner will not be possible without the support and active participation of all elements. MIDDLEMEN IN DISTRIBUTION SYSTEM: Distribution is a lengthy process and is managed by middlemen in the distribution process. Manufacturers rarely take direct interest in the process of distribution. In fact, distributors provide convenience and service to manufacturers in the large scale distribution of their products. Middlemen in distribution are those merchants who act as intermediaries between the producers and consumers in the distribution of goods among the consumers at large. There are two categories of middlemen in the distribution process. They include:
(a) Merchant Middlemen buy and sell goods on their own account and their

own risks. They include wholesalers and retailers. Merchant middlemen act as link in many channels of distribution. Their elimination in the process of large scale distribution is practically impossible even when their elimination is advocated on certain valid grounds.
(b) Agent Middlemen do not take ownership of title to such goods but only

negotiate the transfer of ownership from the seller to the buyer. Such middlemen are also called mercantile agents or functional middlemen.

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Selling commission agents, Brokers and other mercantile agents such as factor and auctioneer are the examples of agent middlemen.

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ELEMINATION OF MIDDLEMEN IN DISTRIBUTION: Middlemen in the distribution network are indispensable as they perform various marketing functions such as buying, selling, transportation, warehousing, risk-taking, financing and collection and dissemination of market intelligence. Middlemen in the distribution process can be eliminated but not their function. Their function will have to be performed by the manufacturers or by some other agencies. Complete elimination of middlemen is neither possible nor desirable considering the important marketing functions conducted by them and the useful services offered by them. The question of elimination of middlemen in the distribution process is restricted to wholesaler s only. It suggested that wholesaler s are unnecessary and are also engaged in many undesirable practices such as price rise, artificial scarcity, inadequate supply and adulteration. In brief, wholesalers can be eliminated (but not their functions) from the distribution process to a certain extent but the elimination of retailers is out of question as it is neither feasible nor possible in practice. A NOTE ON RETAILING: Nature of Retailing / Retailer: According to W.J.Stanton, “Retailing includes all activities directly related to the sale of goods or services to the ultimate consumer for personal, non-business use.” Retailing is a trading activity directly related to the sale of goods/ services to the ultimate consumer for personal use. It is the last link in the distribution of goods. Retailing is always selling in small quantities to ultimate consumers for final use. Similarly, in retailing, different varieties of goods are supplied to consumers in small quantities as per their family need purchasing capacity, etc. Retail distribution is important as production is essentially for meeting the needs of final consumers. Selling goods to consumers spread in the whole country needs an elaborate network of distribution. A number of intermediary agencies are operating to distribute goods to the consumers and retailers constitute the most important link in this distribution process. In spite of the fact that corporate world is growing into bigger and biggest organizations, the small retailers have survived in the competition for a long period in India. This is

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because of the presence of “human touch” in retailing. Retailers provide various facilities and services to their customers. “The warmth of human heart governs the business.” The concept of retailing is fast changing due to liberalization, globalisation, urbanization and growing popularity of shopping mall culture. Corporate groups such as Reliance and others are entering in retail business with huge funds and new organizational and marketing techniques. This trend is creating uncertainty in retailing in the near future. Type of Retailers/Retail Stores Retailers supply goods directly to consumers. Very few retailers move from place to place for small scale selling to consumers. Majority of retailers sell goods through fixed places called stores. The types of retail stores are as noted below: (1) Speciality stores (2) Departmental stores (3) Supermarkets (food land, shopping malls, etc) and Hypermarkets (Spencer’s hypermarket or RPG’s giant market in Hyderabad). (4) Convenience stores (food stores, home delivery store, etc). (5) Discount stores. (6) Chain stores and Multiple stores. (7) Manufacturer’s showrooms and Factory outlets. (8) Co-operative stores, Grahak Bhandars, Apna Bazaars, etc. (9) Direct Retail Marketing through in home selling, Telemarketing, vending machines, etc. (10) Public distribution system (Fair Price Shop). Features of Retailers: Traders engaged in retailing are called retailers. They need limited capital. They operate in the local market and supply different types of goods to local consumers. Personal selling plays an important role in retailing as retailers keep direct and close contact with consumers. Retailer has to keep contact with varied types of customers and deal with them tactfully. He gets supply from the wholesaler s and naturally he acts as a link between wholesaler and final consumer. The organisations of retail trading are not uniform. Such organisations include small dealers, big departmental stores, chain shops, cooperative stores and so on. Small retail shops are quite common in rural areas whereas departmental stores and supermarkets are popular in urban areas and big cities.

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Retailer offers the following services to consumers: (1) Retailer provides goods to his customers regularly as per their requirements. (2) He gives credit facility to selected customers and also provides services to his customers. (3) Retailer guides his customers in their marketing/ shopping activities. (4) Retailer also provides wide choice to his customers and provides new articles available in the market. In short, retailers are absolutely essential for efficient distribution of goods. They play an important role in promoting internal trade and also in providing better life and welfare to consumers. There is no question of elimination of retailers. In fact, consumers support retailers for meeting their day-to-day needs. Their presence is necessary in the channels of distribution and in the distribution system itself. New Trends in Retailing in India Recent trends in marketing are likely to bring revolutionary changes in retailing in India. India’s retailing boom has acquired further momentum with international giants eager for entry and the country’s big business groups taking bold new steps for large-scale participation in retailing. $300 billion Indian retail market is extremely attractive to Indian and international giants. Liberalisation has resulted in providing unlimited choice to consumers. The opening up of our economy has brought many changes in the whole marketing system. India has opened its doors to foreign brands. Imported goods are easily available to Indian consumers. This includes cars, watches, TV sets, cell phones and many others. Added to this, buy now, pay later becomes the catch-world of current marketing. In addition, India has strong 300 crore middle class population. They represent huge and attractive market. New marketing techniques such as E-COMMERECE, INTERNET, Green marketing, Gray marketing, etc are getting popularity and also support from the new generation of Indian consumers. The details noted above are important as they are closely connected with new trends in retailing in India. Brief details of new trends in retailing are as noted below: (1) Increased use of computers. (2) Popularity of non-store retailers: (a) Automatic vending machines: (b) Direct selling

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(c) On-line shopping (3) Popularity of shopping malls: (4) Rise of exclusive joints: (5) Interest of corporate sector (6) Franchise outlets or exclusive stores: (7) The focus of FDI inflow is slowly shifting from infrastructure and natural resources to areas like retailing, tourism, construction and offshore services. A NOTE ON WHOLESELLING: Meaning and Definition of Wholesaling: Wholesaling means selling in large quantities. Wholesalers purchase goods in large quantities from the manufacturer and provide to many retailers as per the requirement of retail trading. Wholesalers proper are individuals who purchase goods from the manufacture in large quantities and supply to retailers in smaller quantities for reselling to final consumers. Wholesaling establishments are rightly described as the link-roads along which goods move from producers to those who sell on retail basis. According to Evelyn Thomas, “A wholesalers is himself neither a manufacturer nor a retailer but acts as a link between the two.” Features of Wholesalers:
(1)Wholesalers operate in the central market and act as first outlet in the process

of distribution.
(2)A wholesaler requires huge capital, regular administrative office and also

adequate storage facility for keeping stocks of goods. (3)A wholesaler normally specializes in the distribution of one or two commodities only. He acts as a link between manufacturer and retailers and offers various services to them (4) This suggests his special position in the distribution of goods. (5) The elimination of wholesalers from the distribution process is difficult. (6)A wholesaler is neither a producer nor a supplier to final consumers but only an intermediary between manufacturer and retailers. (7)A wholesaler gets high profit due to trade discount, rebates/ cash discounts granted by manufacturers. His functions include buying/ assembling, dispersion of goods, warehousing, risk-bearing, and financing and transportation. CHANNELS OF DISTRIBUTION: Meaning of Distribution Channels:

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Consumer goods move from manufacturer to consumer through a specific route called channel. Goods are distributed/ sold out over wide geographical area through such channels called channels of distribution. In brief, distribution channel is the route taken by goods on their journey from the producer to the ultimate consumer. Distribution channels are also called trade channels/ marketing channels. Every distribution channel starts with the producer and ends with consumers. Definitions of Channels of Distribution/ Distribution channels:
(1) According to Richard M. Clewett, “A channel is the pipeline through which a

product flows on its way to the consumer. The manufacturer puts his product into the pipeline or marketing channel and various marketing people move it along to the consumer at the other end of the channels.” (2) According to William Stanton, “A channel of distribution for a product is the route taken by the title to the product as it moves from the producer to the ultimate consumer or individual user.” IMPORTANCE OF CHANNELS OF DISTRIBUTION: Marketing channels plays a vital role in the distribution of consumer goods. At present, goods manufactured at one place are sold in all parts of the country only because of the network of marketing channels. Marketing channels are more useful to manufacturers than to consumers. They facilitate quick and large-scale distribution of goods and services. The following points suggest the importance of marketing channels in the distribution of consumer goods: (1) Marketing channels facilitates large-scale distribution of goods. (2) Marketing channels bring division of labour and specialization in the business field. (3) Marketing channels are useful for price determination of goods. (4) Marketing channels enable a marketing firm to achieve its marketing targets/objectives. (5) Channels perform financial function by providing finance for movement of goods from producers to consumers. (6) Marketing channels enlarge the scope of marketing and facilitate sales promotion. Channels perform the role of salesmanship (7) Marketing channels help manufacturers to distribute their goods quickly throughout the country. In addition, they provide market information to manufacturers for finalizing their production plans.

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(8) Mass production needs the support of mass distribution which is possible through marketing channels. They occupy strategic position in the field of distribution and this suggests their importance. (9) Marketing channels are useful for meeting the diversified needs of consumers economically, quick and continuously.

DISTRIBUTION CHANNELS FOR CONSUMER GOODS: Important channels available for the distribution of consumer goods are as noted bellow: (1) Manufacturer--- Wholesaler--- retailer--- consumer channel. (2) Manufacturer--- sole selling agent--- Wholesaler--- retailer--- consumer channel. (3) Manufacturer--- his own depots--- retailer--- consumer channel. (4) Manufacturer--- retailer--- consumer channel. (5) Manufacturer---his chain shops--- consumer channel. (6) Manufacturer--- consumer channel (Are called direct channel or zero level channel). After selecting the channel of distribution, the manufacturer has to decide the number of middlemen in the channel i.e. the intensity of distribution at the wholesaling and retailing levels. Manufacturers recognize three degrees of intensity. These are intensive distribution, exclusive distribution and selective distribution. In exclusive distribution, the manufacturer sells his products to a particular middleman in a specific area with exclusive distribution rights. In selective distribution, there will be more middlemen and in intensive distribution their number will be still more. It may be noted that consumer’s preference determines the intensity of distribution. For convenience goods, intensive distribution is convenient while for shopping goods selective distribution is better. For specialty goods, exclusive distribution base is appropriate.

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The details of channels used for the distribution of consumer goods are as explained below: (1) Manufacturer--- Wholesaler--- retailer--- consumer channel. This is one of popular and extensively used marketing channel. It is rightly called ‘traditional channel’ for the distribution of goods. Advantages:
(1) Convenient: This channel is convenient from the viewpoint of the manufacturer

as it brings about division of labour.
(2) Concentration on production: It enables the manufacturer to concentrate fully

on production and not to bother about distribution. (3) Free from tension: A manufacturer is also relieved from the anxiety regarding selling of goods. (4) Wide scope: This marketing channel widens the scope of marketing. (5) Low cost: It reduces the need of extensive advertising and publicity Limitations: Costly: Due to the existence of middlemen and their commission, goods become costlier to consumers.
(1) Malpractices: The middlemen resort to various malpractices such as adulteration,

artificial scarcity and price rise. This affects sales and the profit of the manufacturer. (2) Loss of control: The manufacturer also loses his control over the marketing of his products soon after the delivery of goods to wholesalers. (3) Dependence: The manufacturer has to depend fully on the middlemen for marketing his products. (4) Conflict with wholesalers: The general marketing trend is not favorable to this lengthy channel as manufacturers prefer to eliminate the middlemen particularly the wholesaler from the distributive process. Suitability: (1) This lengthy channel is suitable for large-scale distribution of consumer goods like soaps, detergents and cosmetics. E.g. Hindustan Lever Ltd. and Godrej make use of this channel.

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(2) Consumer goods which are durable can be distributed through this channel. (3) Consumer item which need are strong promotional support are distributed through this channel as the middlemen are useful for promoting sales. (2) Manufacturer--- sole selling agent--- Wholesaler--- retailer--- consumer channel. In this channel, the manufacturer appoints some dealers as sole distributors for his goods in a particular region or territory. The sole distributor accepts the entire responsibility of marketing of products within his area. He is paid commission for his services. The appointment of sole selling agents facilitates planned production and control over the sale of products. It also lowers overhead expenditure and provides incentive to distributors. The manufacturer gets the benefit of the reputation of sole distributors. The advantages and limitations of the first channel are equally applicable to this channel of distribution. Suitability: (1) It is suitable for the distribution of consumer goods as well as capital goods. (2) Manufacturers of mass consumption goods with nation wide market prefer this lengthy channel for distribution. (3) Manufacturer--- his own depots--- retailer--- consumer channel. In this marketing channel, the manufacturer supplies goods directly to retailers through his own marketing organization. For regular supply to retailers, the manufacturer opens his own depots at important commercial centers. Goods are directly supplied to retailers from these depots. Advantages:
(1) Better control: The wholesaler is eliminated. This gives the benefit of effective

control on the marketing to the manufacturer. (2) Limited scope for malpractices: This channel is shorter one and there is no scope for malpractices in this channel. (3) Preference: The manufacturers prefer this channel as he gets effective control on the whole marketing process. (4) Higher profit: The profit of the manufacturer is likely to increase as commission is not required to be paid to the wholesalers.

Page 101 of 129 -----------------------------------------------------------------------------------------------------------------------------SYBMS – III – MARKETING MANAGEMENT (5) Close contacts: A manufacturer maintains close contact with the market situation.

This enables him to adjust his production and marketing plans and policies as per the need of the situation. Limitation:
(1) Higher responsibility: In this channel, the manufacturer has to shoulder the

responsibility of production as well as marketing of goods. (2) Financial pressure: The manufacturer has to maintain depots at different places and engage staff for collecting orders from retailers. This puts heavy financial pressure on him (3) Higher burden: The manufacturer has to give attention to marketing functions such as pricing, packaging, transportation, advertising and risk-bearing. Naturally, this channel puts heavy burden on the manufacturer. (4) Unsuitable to small firms: Small manufacturers with limited financial support find it difficult to use this channel. They naturally prefer to use the services of wholesalers. Suitability: This marketing channel is convenient and is used mainly by large-scale manufacturers with huge financial backing. E.g. Tatas and Hindustan Lever have their own distributive system. Tea selling companies for for example, use this marketing channel for large-scale distribution. (4) Manufacturer--- retailer--- consumer channel: This marketing channel is shorter with only one middlemen i.e. retailer. Here the goods move directly from the manufacturer to retailers and finally to consumers. Manufacturers maintain huge sales organization for supplying goods regularly to retailers. Sometimes, large-scale retailers keep direct contact with the manufacturer and purchase goods for distribution to consumers. Manufacturers and retailers find this shorter channel economical. It is used for the distribution of consumer goods and durable products. Advantages:
(1) Elimination of wholesalers: It is a short channel as the wholesalers is eliminated.

This gives benefit to manufacturers and consumers. (2) Economical: The cost of distribution is brought down considerably in this channel. (3) Less malpractice: The malpractices of wholesalers are also eliminated. (4) Quick distribution: In this channel, the distribution is done quickly and hence it can be used even for the distribution of perishable goods within a small area.

Page 102 of 129 -----------------------------------------------------------------------------------------------------------------------------SYBMS – III – MARKETING MANAGEMENT (5) Less price: Consumers get goods at lower prices as they do not have to share the

commission of the wholesaler.

Limitation: Higher burden: The manufacturer has to look after the production and marketing of his goods. This puts heavy financial and administrative burden on him.
(1) Higher capital: The manufacturer has to maintain huge marketing organization

and naturally he needs more capital. (2) Additional functions: The wholesaler is eliminated and his functions are shared by the manufacturer himself. (3) Risk of marketing: In this channel, the manufacturer has to shoulder the marketing risk relating to distribution of goods. Suitability: (1) The channel is suitable for distribution of consumer items like clothing, shoes and food items. (2) It is suitable for the distribution of durable products such as machinery, automobiles and computers. (4) Manufacturer--- His chain shops--- Consumer Channel: In this shorter marketing channel, both the wholesalers and retailers are eliminated. Here, the manufacturer opens his own retail shops/ branches in different parts of the country and sell his goods directly to consumers. The services of middlemen are not used for marketing purpose. The manufacturer looks after manufacturing and retailing. The manufacturers of textile, ready-made garments, ice creams and backery products have opened their retail shops in big cities for effective distribution. The manufacturer will know the market reactions and will be able to introduce necessary changes in the marketing policies at the right time. In India, this channel is used by many manufacturers. Bata Shoe Company, for example, sells directly to consumers through its branches. Similarly, Bombay Dyeing and Raymond’s have their retail shops. Manufacturer--- Consumer Channels:

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This is the shortest marketing channel (also called as direct channel) as there is no middleman. It is a direct channel and not an intermediate channel. It is example of a simple, direct and economical channel. The other method is to appoint a large number of salesmen for canvassing and Sales promotion. The salesmen are usually paid commission on the basis of their sales. Small manufacturers sell their production in the local market directly. Direct distribution is an idea system as the middlemen are avoided while supplying goods to actual users. This benefits consumers. Direct distribution is a normal in the case of services. The services such as electricity, telephone, railway, bus transport etc. are avoided directly to consumers. Advantages: (1) Complete control: The manufacturer gets complete control over the process of distribution. (2) Complete information: The manufacturer gets first hand information about market trends (3) Higher profit: The middlemen are eliminated from the distributive process. This gives more profit to the manufacturer without charging high price to consumers. Disadvantages:
(1)Higher cost of operation: There will be increase in the cost of operation. A

manufacturer will have to maintain a large sales force for conducting door-to-door campaign. (2) Higher budget: The manufacturer will also have to spend on advertisement and publicity. He will have to spend large amount of money on his sales organization. (3)Costly: This channel is costly and not suitable for wider market. Suitability: (1) When the market is local in character. (2) When the goods to be distributed are perishable in nature. (3) When the manufacturer has financial support to establish his own distributive system. (4) When the goods to be distributed are costly and after-sale service is necessary. (5) When the goods are to be distributed in a selected market.

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(6) When the manufacturer desires to have effective control on the entire marketing mechanism.

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PRODUCT PRICING: Concept of Product Pricing: The concept of product pricing is very significant and plays a decisive role in the field of marketing. Pricing is an important element in the marketing mix and a manufacturer has to take pricing decision before bringing product in the market. The market demand, consumer support, margin of profit, ability to face competition, sales promotion, etc. are related to and dependent on the pricing. Pricing acts as a base of buying and selling transactions. A manufacturer has to decide the market price. Pricing is a very delicate area of marketing management. Price is the base of the entire marketing system. It is a matter of life and death to sellers and buyers. The price system/mechanism is an integral aspect of present money economy. We have to pay for all goods and services in terms of money. Price means the expression of value or utility in terms of money. Pricing means fixing the market price of a commodity or service. How to fix the price of commodity is an important problem before every manufacturer or trader. He has to take into consideration various factors such as cost of production, margin of expected profit, natureof market demand and the nature of competition while fixing the price. Such pricing factors are complex I nature and pricing policy needs careful consideration of various factors and forces. Basically, there are three approaches to pricing (pricing strategies): (A) (B) (C) Classical or demand-supply oriented pricing; Cost-orieinted pricing; and Market oriented pricing. Market price is to be adjusted accordingly.

Buyers and sellers are equally interested in the pricing policy. Moreover; there is a clash/conflict of interest between the two parties. Consumers prefer low prices while traders prefer to sell at high prices. As a general rule, price should cover the cost of production, marketing expenses and reasonable return (i.e., profit) on investment. Prices should be reasonable to sellers and buyers. Price mechanism should be used for the expansion of business and not merely for the exploitation of consumers. This suggests that charging too High prices for profit maximization is socially desirable. On the other than, efforts should be made to reduce product market price by reducing the cost of production, which is possible through large-scale production with modern production techniques. Moreover, charging high

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price is not necessarily profitable. High price may adversely affect the whole marketing activity. Even the sales and profit will be adversely affected. In economics, various theories regarding price determination/ fixation are given. Such theories include price under perfect competition, under imperfect competition or under monopoly. They give suitable guidance in the fixation of price. However, price fixation is not purely a theoretical proposition, but essential a practical problem. It is therefore, not fair to depend completely on such theoretical consideration in price fixation. In brief, price fixation policy is a complicated issue. It is more than mere arithmetical It needs effective combination of calculation, judgment and imagination. It is a job of experts with experience, knowledge, maturity and foresight. Pricing is a powerful marketing instrument. It is like a big gun ( AK 47 ) which needs careful handling. This is because product’s price is a major determination of the market demand. Objectives of Product Pricing :
1) Profit Maximisation : Profit maximization or at least earning reasonable profit is

one main and extensively used pricing objective . Here, the initial market demand is exploited fully by charging high price. The market is exploited fully this method. This pricing objective is essentially a short term objective and may not be useful for achieving long term pricing objectives. Many firms now adopt profit optimization rather than profit maximization as the pricing objective.
2) Target Return on Investment : Here, the price is fixed in order to achieve certain

target return on the investment made. For example, Rs. Seventy Thousand profit per month or 10% return on net sales. The profit target is decided and pricing decisions are adjusted accordingly. Here, certain rate of return on capital invested is taken as base for price fixation.
3) Price Stabilisation : Here, the pricing objective is to maintain stable prices over a

long period by taking into consideration various flexible factors such as government taxes. Thus to stabilize the product prices over a considerable period of time is the objective selected by some companies. This is a long term objective which avoids violent price fluctuations. This objective avoids price wars and facilitates sales promotion.

Page 107 of 129 -----------------------------------------------------------------------------------------------------------------------------SYBMS – III – MARKETING MANAGEMENT 4) Meet / Prevent Competition : Here, the price is fixed to avoid / prevent

competition from rival producers. The purpose is to face competition effectively or to avoid the entry of new producers in the market. Marketers may use this objective in order to discourage new/potential competitors from entering the market. 5) Sales Promotion : Here, the objective is to increase the volume of sales gradually by charging low price in the initial period of product’s introduction. The product will be made popular in the market and this facilitates sales promotion and market reputation. This objective is also called maintain / improve share of the market. Such pricing is called “ Promotional Pricing “. The purpose is to promote sales. Many companies offer their newly introduced product at lower price so as to create demand for it.
6) Cash Collection : Here, the objective is to expedite the cash collection in respect

of products sold. This pay-back / cash flow objective is useful for providing funds for meeting developmental activities or for debt servicing or debt repayments. Here, pricing is designed to facilitate cash sales in place of credit sales.
7) Paying Capacity of Consumers/Customers: In this pricing objective, the

capacity of consumers to pay is estimated and utilized fully by adjusting the price accordingly. Importance Of Product Pricing: Pricing or pricing decision is a matter of vital importance to consumers, businessmen and the national economy. In money economy, there cannot be marketing without pricing system. In fact, price is the focus point around which the entire economic system revolves. Price acts as a powerful marketing instrument /tool. It is like a double edged weapon and needs cautious and delicate handling. Pricing decisions play a very important the design of the marketing mix. Consumer loyalty and support, consumer buying psychology, consumer buying behaviour, profit margin, ability to face market competition and goodwill in the market are directly and indirectly related to pricing. Is pricing an important decision for the product marketing ? Yes, Pricing is an important decision in product marketing. In fact, market demand, consumer support, profit margin, quick sale, response to sales promotion measures are all related to product pricing. Fair or attractive pricing facilitates consumer support, large

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scale sales, quick turnover and high profits. Pricing as an important marketing tool plays a significant role in both the macro and micro levels. Large majority of companies formulate their marketing strategy taking price as a base.

Pricing is important because of its role in the following areas :
(a) Pricing acts as a demand regulator and controls the demand for the products of

the company. (b) Pricing acts as a marketing tool for successful marketing operations in a competitive situation. (c) Pricing acts a major tool determining profitability of a firm. (d) Pricing acts as an important input for various marketing strategy decisions. (e) Price can be used as a sales promotion technique by offering discount and other incentives to consumers and dealers. Relationship Between Price And Cost Of Production: Relationship between market price and the cost of production is direct and close. In fact, it acts as the base of pricing. Cost of production should be covered from the price charged. Normally, the price includes cost of production, margin of profit and other expenses incurred on transportation, etc. A manufacturer will suffer loss, if the price charged is less than the cost of production. Every manufacturer calculates the cost of production and adjust the market price so as to cover the production cost within the price fixed. Every pricing theory suggests that price should normally cover the cost of production. It is possible to bring down the cost of production by using different techniques. This includes the use of modern product technology, large scale production, elimination of wastage and inefficiency in the production process and so on. (9) DIFFERENTIAL PRICING: In this method, different prices are charged in different markets. For example, there can be differential pricing between two or more overseas markets as per the market situation available. An Indian exporter may export one product to five overseas markets and may fix different prices in different countries / markets. This is differential pricing which is favourable to exporter and enables him to face market competition effectively. In India,

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petrol and diesel are supplied at different prices in Maharashtra, Gujarat and some However, the price difference is limited and not too wide Indian manufacturer may charge one price in Indian market and may charge higher or lower price in foreign order to promote sales by marking the product popular among consumers Differential pricing may be used as sales promotion tool,

Conclusion: For price fixation, a trader / manufacturer has to consider various cost factors and market forces collectively. Cost is a major factor but not the only factor in price fixation. It is used as a base while deciding the pricing policy. A manufacturer has to consider the policy adopted by his competitors. He may follow his competitors or may charge higher or lower price than that of his competitors. The decision has to be taken independently by every producer. However, this decision is important as the success or failure of and organization largely depends on its pricing method used. Finally, it may be pointed out that pricing policy decisions taken by the management may not remain static in the long run. A flexible approach in pricing is always profitable and hence desirable. After all, price fixed or charged is not important but the sale in the market and the profit available are important. It is not possible to recommend one specific pricing method as the best and suitable under all situations every method is suitable under specific situation and also unsuitable under another situation. One can recommend all pricing methods to be used by the manufacturer as per the need of the situation, it is the market situation which is important and also determines the specific method for actual use. As a normal rule, one can say that the price fixed should be always above the cost of production and other marketing expenses involved. The margin of profit needs to be decided as per the market situation. A flexible approach on pricing is desirable. For this, constant study of market situation and suitable adjustment in the price structure are desirable. • In narrow sense price is amount of amount of money charged for a product or service. • But in broad sense, price is the sum of all the values that customers exchange for the benefits of having or using the product or service. • Price is the major factor affecting buyer’s choice.

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• It is the only element in the marketing mix that produces revenue; all other elements represent costs. • Unlike product features and channel commitments, price can be changed quickly. Price is also one of the most flexible elements of the marketing mix. • Before deciding price for a product, a company should always consider internal factors & external factors as pricing decision of a company is highly affected by both these factors.

Let’s see both factors in detail: Internal factors Marketing objectives: this is the first and important factor of a company. It depends upon every company, what target market has been chosen and what is the product positioning. If any company is clear about these two factors then the price can be charged very easily. For e.g. If ABC Ltd. Decides to manufacture toilet soap to compete with HLL’s pears soap, this suggests charging a higher price of Rs. 20/against other branded soaps which are available for Rs. 10/- or 11/- in the market. Thus pricing strategy is largely determined by the positioning of the product in the market. Apart from the positioning, the company may seek other objectives. The decision of pricing, if taken on the basis of other marketing objectives, then it is very important to have these objectives to be very clearer. Clearer the objectives, easier for the company to decide price structure. ? E.g. Of objectives are survival, profit maximization, market share leadership, product quality leadership etc. • Any company troubled by too much of competition or changing consumer wants will prefer to keep survival as main objective. A co. wanting to enjoy market share leadership, may keep lowest cost and highest longer-run profit. To become market share leader, companies set prices as low as possible.
•

o

o A company may also charge a lower price, just to prevent competitors entering his market. Prices also can be set up as loyalty and support of reseller.
•

Marketing mix strategy: marketing mix should be considered while deciding the pricing factor. The cost of packaging, distribution, promotion also should be considered. For e.g. To sell a product nationwide, the company has to appoint

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distributors on larger scale, which will also amount to distributor’s margin. The company will have to bear higher cost for margin to distributor. In this case the company should charge such a price to the buyers, which ultimately covers this cost.
•

Costs: cost is the base for the price that the company can charge for its products. A company’s cost may be an important element in its pricing strategy. Companies with lower costs can set lower prices that result in greater sales & profits.
o

Types of costs: a company’s cost mainly comprises of two different costs- i.e. fixed costs and variable costs. ? Fixed cost: which remains same irrespective of the level of production & sales. It includes cost of land & building, interest payable on loans taken, bills of electricity and telephone, salaries of staff members etc. ? Variable cost: which varies directly with the level of production and sales. It includes cost of raw material, wages, transportation of goods, commissions paid to various agents, etc. For e.g. Each computer produced by Compaq involves cost of computer chips, wires, plastic, packaging and other inputs. These costs vary with the number of units produced. ? Total cost: the sum of fixed cost and variable cost for any given level of production.

The company must watch total cost carefully. Whenever a product costs company more than its competitors to produce and sell its product, the company will have to charge higher price or make less profit, putting it at a competitive advantage. • Organizational considerations: management also must decide, who in the organization will set the price. Not all organizations have the same structure nor all organizations are big in their sizes. In small organizations some times the price is set by the top management people rather than letting the sales people decide the price. Also it highly depends whether the organization manufactures the product or directly buys the product from local manufacturers. In big organizations, apart from top-level executives divisional or product line managers also handle the price. External factors affecting pricing decisions • The market & demand: as cost sets lower limit of prices, market & demand sets the upper limit. Before setting the price, marketer must understand the relationship between price and demand for its product. The market can be monopolistic, or competitive.

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• Consumer’s perception of price & value: price should be decided after keeping consumer in center. Pricing must be buyer’s oriented. • Competitor’s pricing policy: • Bargaining power of major customers

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Pricing methods/polices Based on cost of production: Pricing is basically related to the cost of production: this is natural as every manufacturer will to cover the cost of production (I e , the average total unit cost) And some margin of profit from the price charged to consumers. There will be loss to the manufacturer if the cost of production is not covered in the price charged. this suggests that the cost of production is the basic consideration in price fixation and naturally all method of pricing are based on the cost of production. (4) Market Penetration Pricing (Market Capturing Pricing / Low Pricing): Market penetration pricing policy is exactly opposite to skimming the cream pricing policy. Under this policy, a low price (near to the cost of production) is charged initially in order to create demand and capture the market. An attempt is being made to create popularity to the product among consumers through initial low price. Benefits/Advantages: (1) An attraction is created in the minds of the consumers and they are encouraged to Purchase the product. (2) A greater volume of sales is possible by charging low price. (3) The competitors are discouraged from entering the field because of low margin of profit. (4) This policy is useful for capturing the market. Many companies initially introduce their new products in the market at low prices. However, price are raised in a gradual manner. Thus, market penetration pricing is a long term pricing and gives good results Suitability: (1) When consumers are willing to accept the new product as their regular requirement. This means the demand is likely to grow quickly . (2) When the price elasticity of demand for the product is high over a short period .

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(3) When there is a strong likelihood of rapid competitive imitation . (4) When the producer desire to adopt long term marketing policy in which he wants to create substantial demand in the initial period . Market penetration pricing policy is popular among reputed business units. They charge low price initially and raise the same gradually. The potential competitors are not eager to enter the market by charging low price for the product in the initial period . (5) BELOW COST PRICING: In below cost pricing, the manufacturer fixes the price which is actually lower than the cost of production. It is a protective pricing policy as the purpose is not to make profit but to reduce the possible loss to the minimum level. Such pricing policy is useful under special circumstances. For example, a trader may like to sell perishable goods at below cost pricing level because of limited market demand. Similarly, a producer will like to sell a product below cost, if the same is outdated and obsolete. Even defective goods are sold at below cost pricing. Thus, below cost pricing method is useful not for covering the cost, but only for reducing the loss to the minimum. It is useful for selling the available stock quickly. This method of pricing is usually found at the level of retail marketing. Perishable items are sold at below cost, if the need arises. (6) PSYCHOLOGICAL PRICING: Psychological pricing policy is based on the psychological of consumers. Here, a consumer is led to believe that he is paying less than what actually he should. The purpose is to give psychological relief to consumers while paying the price. Such policy is suitable in the case of consumer goods. For example, the price fixed may be like Rs. 29.90 or Rs 499.50. The buyer gets feeling that he is paying less than Rs. 30 or Rs. 100. However, the actual payment is nearing Rs.30 or Rs. 500 or Rs. 100. Bata Shoe Company is known for psychological pricing. The company charges Rs. 49.95 for a pair of shoes instead of Rs.250. Even prices shown on TV (Sky Shopping) are of similar type. Similarly, two similar products may be shown to the consumer. The price of one may be very high while the price of the other may be rather low. The purchaser will make comparison as regards the quantity and the price. He generally prefers an article of lower price which is actually costly to him. Thus, the consumer is given a psychological feeling that he gets some special benefit while purchasing a particular product. This is

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how, the price fixation is done with imagination and skill. In a highly competitive marketing, psychological pricing is useful for promoting sales. This method is commonly used in the marketing of products like footwear, cosmetics and other items of daily use. (7) PRICING AS PER CUSTOMER’S ABILITY TO PAY: The sale of a product partly depends upon the ability of the customer to pay. The price needs to be fixed as per his ability to pay and not necessarily as per the cost of production This makes the product acceptable to customers. Under this pricing method, the ability of consumers of the product is taken into account before fixing the price. This pricing is useful in the case of personal services. For example, advocate may charge fees as per the ability of their clients. This is actually price discrimination but is useful under special circumstances. For example, electricity company fixes different rates for domestic and industrial users of electricity. (8) TARGET ORIENTED PRICING: In the target-oriented pricing, the trader or manufacturer first fixes his target of expected profit from the sale of a particular commodity over a particular period and fixes the price after due consideration of market demand and the target fixed. Thus, price is adjusted to the expected profit and not merely with the cost of production. However, the price will be higher than the cost as profit as per the target fixed is added. The expected profit generally related to the investment made. This method of pricing is simple but may not be convenient so far as market situation is concerned. This is because price need’s to be adjusted to the market situation and not with the profit plan alone.
Pricing strategies 1. Skimming pricing: • In this type of strategy, a new product is priced high, coupled with large promotion activities. The initial stage with these two factors (high price and large promotion activities) proves to be very successful. A market, which is not very price sensitive, is targeted. Following are the reasons: o This strategy helps to take the cream of the market thru high price.

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o

o The segment, which basically likes to own a product having high price, is targeted here, so efforts are not much required to convince them to buy high priced product. o This strategy helps the manufacturers to cover the manufacturing cost. o By skimming the cream of the market through a high price, the product is fetching big funds, which could be used for market development in the initial stage. By starting at a high price it is always possible to come down on price, when the situation warrants.

However, high initial price may also prevent quick sales. • Skim the cream pricing strategy uses a very high introductory price to skim the cream of demand at the initial stage. • Price continues to remain high till the competitor enters the market. The price is reduced gradually, once the competitor enters the market. • A short range pricing object is implemented as soon as the competitors enter the market. • By this scheme the marketer takes away the cream before the keen competition starts. Penetrating pricing: • The skimming strategy cannot suit all new product contexts.

• When a new product is price sensitive and when there is no particular market for the product, the option is to go in for penetration pricing. • The intention of marketer is to penetrate a broad market thru low prices. • The income is generated thru large sales spreaded over large markets. • The main advantage here is that, due to spreaded markets, the unit cost of production is brought down. Thus when

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o The quantity of product that can be sold is highly sensitive to price, even in the early stage of production, o There is no segment willing to pay any price to possess the product, o When the product is encountering tough competition immediately after introduction, o Initially, large volume of sales is required to ensure economy in production and distribution. Penetration pricing strategy is selected.

PROMOTION: Meaning Of Product Promotion/Sales Promotion Promotion is a process of marketing communication in order to inform and persuade consumers in favor of a specific product. Such communication is essential to support marketing mix. Moreover people will not buy your product if they have not heard of it or simply they are not aware of it. Promotion gives a favorable message about the product. It acts as a bridge or connecting link between advertising and personal salesmanship. Sales Promotion is a plus ingredient in marketing mix and supports advertising and personal salesmanship which acts as basic ingredients of marketing mix. The promotional mix within the marketing mix includes advertising , sales promotion and personal selling. Product promotion means making the product popular among the consumers and raising its sales through suitable measures. The aim is to attract consumers and to capture the market for the product of the company. Every manufacturer is interested in sales promotion as his profit is directly related to the volume of sales or turnover. The manufacturer uses promotional techniques as their mode of communication with prospective buyers. Promotional activities are designed so as to inform, persuade, and encourage people to buy specific product of the manufacturer. Promotional activities can be adopted at the consumer level, trade level and also at the sales force. The basic purpose is to widen the scope of marketing. It is an integral part of the marketing effort. Sales promotion means the promotional activities other than personal salesmanship, advertising and publicity which stimulate consumer purchasing and dealer effectiveness through displays, exhibitions, demonstrations, free samples, discounts, premiums, etc.

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It is plus ingredient in the marketing mix. It acts as a supporting facility to advertising and personal selling. DEFINITIONS OF SALES/PRODUCT PROMOTION According to American Marketing Associaltion, sales promotion includes all those activities other than personal selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness, such as displays, shows and exhibitions, demonstartions and various non recurrent selling efforts not in the ordinary cause.

According to George.W.Hopkins” Sales Promotion is an organized effort applied to the selling job to secure the greatest effectiveness for advertising and for dealers help.” In the words of A.H.R Delens, Sales promotion means ”Any step taken for the purpose of obtaining or increasing the sales. Often this refers specially to selling efforts that are designed to supplement personal selling and advertising by co-ordination, help them to become more effective.” Features of Sales Promotion: (1) Sales promotion acts as a tool in marketing to lubricate the marketing efforts. (2) It is in a necessity in the present highly competitive and consumer oriented marketing It stimulates consumer purchasing and dealer effectiveness. (3)It supports advertising and personal selling and acts as a connecting link between the two. However ,sales promotion is different from advertising. It facilitates the introduction and attractive sales promotion measures. Thus, advertising is essential for sales promotion and personal selling(salesmanship).It creates favorable background for making sales promotion and salesmanship effective. Many companies introduce extensive advertising campaign followed by the sales promotion measures for capturing the market. Even salesmanship gets better scope due to effective advertising. (4)Sales promotion aims at stimulating consumer purchasing at the point of sale. (5)Sales promotion provides more sales and profits to the producers and dealers.

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NEED OF SALES PROMOTION: (1) For unloading accumulated inventory. (2) For introducing new projects. (3) For overcoming seasonal slumps. (4) For overcoming highly competitive situation. (5) For supporting and implementing salesman’s efforts. (6) For encouraging dealers to buy more or to place bigger orders. (7) For attracting more customers to purchase a specific product. (8) For supporting advertising campaign.

OBJECTIVES OF SALES PROMOTION: (1) To raise the volume of sales of the product. (2) To raise the buying response of regular and potential consumers. (3) To support and supplement advertising and personal selling efforts. (4) To encourage dealers and salesmen to take special interest in promoting sales. This means to improve the marketing performance of middlemen and sales person. (5) To stimulate end -user demand (either at business or household level). (6) To launch a new product and give trial to a new or improved product. ADVANTAGES OF SALES PROMOTION: (1)Raises the volume of sales as extra incentives are offered to customers and dealers. (2)Facilitates easy introduction of new product or new brand in the market. (3)Creates positive attitude towards the product in the minds of consumers and dealers. (4) Encourages immediate action by consumers on purchase decision.

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(5)Acts as a plus ingredient in the marketing mix. (6)Makes advertising and personal selling result oriented. It acts as a supporting element in advertising and salesmanship. IMPORTANCE/SIGNIFICANCE MARKETING: OF SALES PROMOTION IN MODERN

The advantage of sales promotion (Noted above) indicates it s importance in modern marketing which is highly competitive and aggressive in character. In such competitive marketing , sales promotion acts as an effective tool to a marketer to solve several short term hurdles in marketing. The impact of sales promotion measures is not durable and lasting like the results obtained through advertising .Sales promotion by and large is practiced as a catalyst and a supporting facility to advertising and personal selling. At market competition and also for attracting consumers towards the products.

Sales promotion campaigns are necessary due to availability of wide variety of identical products in the market. Here , consumer-oriented promotion programmes are important and useful . They generate consumer interest , generate inquiries from the target customer group , provides customers to retail outlets, motivate customers to repeat their choice and raise the rate of purchase. This indicates the importance of sales promotion in modern marketing. In fact , it is a must in the present consumer-oriented marketing system. TOOLS OF TRADE/SALES PROMOTION/PROMOTIONAL MANAGEMENT: Trade/Sales promotion is possible by using different tools/techniques. Important tools of sales promotion are covered under promotional management or promotional mix as one of 4P’s of marketing mix. Such tools are noted below: (1) Advertising and publicity. (2) Personal selling (salesmanship). (3) Sales promotion at consumer level ,dealer level and at salesman level (4) Public relations techniques used for cordial relations with dealers and consumers. (5)Display of goods for publicity and large scale sales Tools of promotional management

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Personal Selling

Product Target

Advertising Promotiona l Mix

Price Marketing Distribution Mix

Sales promotion

Publicity

Promotion

Market

Public relations

MAJOR DECISIONS IN SALES PROMOTION: (1) To decide the target to be achieved through sales promotion programme in terms of volume, profit amount ,etc. (2) To decide the sales promotion measures to be adopted at different levels for achieving sales target. (3) To decide a customer group (market segment)/sales territory for the sales promotion programme . (4) To decide the marketing mix to be used for achieving sales promotion target. (5)To decide supplementary measures (i.e. advertising and personal selling) to be introduced for achieving sales target as per the sales promotion plan /programme. TYPES OF PROMOTIONAL TOOLS:

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Promotional activities used to reinforce personal selling and advertising are normally treated as sales promotion activities/measures. They may be directed towards consumers, dealers or salesmen. Product/sales promotion measures can be broadly classified into the following three categories: (A)Sales/Product promotion at the consumer level: Consumer promotion means encouraging consumers to purchase specific products on a massive scale. In the sales promotion at the consumer level, consumers are attracted through such gifts, concessions and discounts. Consumers are motivated/encouraged to purchase goods of certain Companies due to such benefits. Consumer promotion measures are used extensively in the present competitive marketing of consumer items. (1)Over the counter premium: Here, the manufacturing company provides gift articles (plastic jar, spoon, tooth brush)to consumer through the dealers. In order to inform the prospects about the gift, an advertisement is given in the newspapers and also in TV advertisement. Through suitable advertisement, the consumers are requested to demand the gift article from the dealer along with their purchases. For exne Forhan’s Toothbrush is given free along with the Forhan’s toothpaste of 150g.Many companies offer free samples or small articles like stainless steel spoon, plastic jar etc. as a gift along with their products to consumers. Here, the gift is separately provided and the dealer may not give it to the buyer and may even sell it separately. (2) Banded premium: In order to eliminate the shortcomings of the first method, banded premium is introduced by some manufacturers. In this method, the article offered as premium is banded with the regular product package. Sometimes, two products of the same company are banded together-one of which serves as the premium or gift. For ex: Hamam soap cake is offered free with Magic washing powder. Companies manufacturing toothpaste offer one toothbrush free to consumers purchasing a bigger pack. Banded premium is commonly used for promoting sale. (3) In-pack premium: In order to ensure that the premium or gift goes directly to the ultimate consumer, the in-pack premium method is introduced. In this method, premium i.e.,gift article is kept inside the package of the product and the message regarding the same is printed on the package. This premium method is popular in India. For eg. Buornvita tin sometimes contains plastic jar inside the container. The purpose of in-pack

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premium is to supply the gift directly to consumers and also to create attraction for the product and thereby to promote sale. (4) Container premium: In container premium, the product itself is kept in a container which is a sort of gift to consumers. The containers are not only attractive but also durable and reusable. For ex. manufacturers dealing in the washing powders have started offering their powders in attractive plastic buckets or plastic jars. Similarly, NESCAFE SELECT packs are supplied to consumers in attractive tumbler packs at no extra cost. Cosmetics are supplied to attractive consumers which can be used for different purposes. Container premium is offered even in the case sweets, dry fruits, jams ,ornaments and biscuits. (5) Price deals: In the price deals special cash discount is allowed for a definite period. Such cash discount is allowed on many consumer products like soap, tea packets, glassware, stainless steel utensils and cosmetics. Such discount may be of two rupees or even more .It is usually offered when new article is brought in the market for the first time. Information about the discount is given to consumers through press or TV advertisemements. Companies initiate such price cuts for sale promotion and for encouraging consumers to purchase a specific product. Price cut by one company will lead to similar cuts by other competing companies. This is competitive price cutting which is necessary for protecting he market position. It is sales promotion technique useful for creating new market demand. (6) Quality deals: In the tools of sales promotion, more quantity of the product is offered to consumers without extra cost or at a nominal cost. Sometimes two packs of the same product are tied together and the price of a pack is kept comparatively low. On certain occasions, a small pack is offered free of cost along with the purchase of a bigger one. Sometimes even bigger packs are sold to consumers at low price. For ex. one kilo pack ODOPIC(cleaning powder) is supplied for Rs.43 while 2 kilo pack is supplied for Rs 72.Offering more quantity at a concessional rate is quite common in the case of articles like toothpaste, soaps, cosmetics, medicines, grocery items and so on. (7)Conditional consumer premium: In this method, consumer is not given premium unless he performs certain activity like collecting coupons. Under the coupon premium plan, the consumers are required to stock coupons which are issued against the purchase of a product. Self liquidating premium is another conditional premium. In this method, premium is given to the consumer against some proof of purchase plus nominal amount

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of cash or postage stamps. Proof of purchase may be in the form of a label, box top or wrapper. Another variation of conditional premium is use-the-user-technique. In this method,the manufacturer requests the trusted and satisfied customers to talk about the product to their friends and relatives and convert them into buyers. For this service, the customers are given some premium. (8)Consumer contest: Consumer contest is yet another popular consumer promotion technique. It is very popular in certain items like toothpastes, food products, soaps and toiletries, cigarettes and house hold appliances. Consumer contests may take several forms such as photographic beauty contests, sentence completion, reason why, slogan writing, brand naming, colouring, word building, picture title and story writing. Such contests are very useful in sales promotion as participants have to make certain purchases in order to participate in the contests. (B) Sales promotion at the Dealer/Trade level: 1) Sales conferences: The manufacturer periodically arranges sales conferences of dealers of a specific area. All dealers are invited and are provided accommodation and other comforts at company’s cost. Such conferences promote cordial relations between the company and its dealers. Personal contacts are established and gifts etc. are given to dealers. All this encourage dealers to take special interest in promoting sales of specific product of the company. (2)Supply of sales literature: The manufacturer may supply sales literature inadequate quantities to all dealers. Such literature provides detailed information to consumers and facilitates quick turnover. The dealers are also given product samples, display materials, carton packages, show cards, etc free to charge. Even demonstrations are arranged in retail shops for promoting sales in the shops. Such measures are useful to dealers in promoting sales. (3)Attractive terms for sales promotion: The manufacturing company offers attractive commission and liberal terms and conditions for dealership. This encourages dealers to stock more quantity and make special efforts for sales promotion. The dealers but in bulk and do their best to promote sales. (4)Provision of suitable packages and quantity discount: A dealer needs specific type(quantity wise)of packages as per the demand of his local customers. The manufacturer should provide suitable package regularly. This facilitates sales promotion.

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In addition, the dealers should be offered quantity discount by the manufacturer. This encourages dealers to order for more quantity. (5)Offerings gifts to dealers: Some companies offer attractive gifts to dealers selling their products with special interest. The gift may be portable TV sets, clock fan, steel cupboard, table etc. It is given when big order is placed. Even direct cash can be offered to dealers to promote sales. (6)Miscellaneous measures at dealer’s level: (a)Dealer stock display contests are launched by the company. For participation in such contests, dealers have to place order about a specific limit. This promotes sales. Attractive prizes are given to dealers who arrange attractive display of company’s products. Such displays give wide exposure to company’s products. Consumers are attracted and sales are promoted. (b)Advertising allowance to dealer: Dealers are given special advertising allowance by the company in order to organize advertising campaign for the products of the company. This facilitates local advertising in an economical way. Dealers take interest in such advertising as expenses are shared by the company. In the addition, the dealer gets commission on the sales. (c)Organising sales contests: A manufacturing company may arrange sales contest among the dealers. Here, the dealers have to compete with each other in terms of their sales performance during a given period. Prizes are given to dealers showing promising sales performance. (d)Providing publicity to dealers: Sometimes, a manufacturer arranges dealer listed sales promotion. Here, the manufacturer advertises the names and addresses of the retailers who stock his products This gives publicity to dealers at the cost of manufacturer. Advertising, Public Relation and Sales Promotion: Advertising and public relations are useful for promoting sales. They are the tools of sales promotion. They support various sales promotion measures introduced at consumer, dealer and salesman levels. Sales promotion measure needs support of advertising and public relations for achieving sales target.

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Advertising is one element in promotion mix. It is useful for giving information about company’s product to consumers and also for sales promotion. The use of electronic media for advertising is now common. TV channels are used throughout the day for effective and attractive publicity of goods and services. Advertising is necessary for consumer information and guidance and also for sales promotion of established products as well as new products. Companies spend corers of rupees for advertising and publicity. Advertising supports personal selling. It is an instrument of mass communication. It is must in the current competitive marketing. Even brand name and packages are made popular through advertising. The basic objective of advertising is to give information about company’s product and to induce them to purchase them regularly. In other words, advertising aims to promoting sales, capturing market, developing consumer loyalty to company’s products and thereby to maximise profit. In addition, advertising gives information, education and guidance to consumers. Advertising plays an important role in sales promotion. This is because, it is a powerful tool of persuasion. The benefit of advertising are now universally accepted. Celebrity Advertising/Endorsement and sales promotion: Celebrity advertising has become a new trend and a perceived winning formula for product promotion and brand building. Approval of a brand by a film star/ sports person fosters a sense of truth for that brand among the target audience. Celebrity advertising began in India in mid-1980’s. Initially, there were commercials featuring Sunil Gavaskar for Dinesh Suiting, Tabassum for Prestige Pressure Cooker and Kapil Dev for Palmolive. At present, Shah Rukh Khan is endorsing for Pepsi and Sachin Tendulkar for Adidas, Pepsi and MRF Tyres.

Why do corporate go for celebrity endorsement? The answer is benefits available because of association of film star/ sportsman with the advertisement of the product. The benefits are:

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1. Depending upon the product lifecycle and category, the prime benefit could be to ensure that the brand gets instant assistance and support. 2. The celebrity attracts the instant attention of public towards the advertised product and can build the brand image and also create awareness. 3. People show enthusiasm towards an ad, which is featuring celebrity. Celebrities give new dimensions and credibility to the brand. Celebrity campaign reduces a lot of burden on middlemen in reaching a large number of people. 4. The film star/ sportsperson lends credibility, almost acting as a guarantee for the product. The perfect example for this is the campaign lead by Amir Khan for Coke after its controversy. In the ad he plays the role of a guarantor to the brand, saying that it is free from all harmful substances. Even Cadbury did similar exercise through Amitabh Bachchan saying that everything is fine with Cadbury. This shows the power of celebrity in advertising world. On some occasions celebrity advertisements does not give positive results. Companies drop stars when they don’t perform well. Firms withdraw contracts that are signed with the star if they find that the performance in not up to expected level. Small companies which cannot invest large amounts in a celebrity prefer to have semi-celebrities for promoting their product. Marketer should conduct prior research regarding the product celebrity match and then proceed accordingly. There are some companies which do not have any celebrity to campaign their product, yet they do well. One such product is Timex. They do not have any ambassador to promote the product, but still people prefer it because of quality and value. Amruthanjan, with no celebrity associated with it, is another example. In short, the task of associating celebrity is at the company’s own risks There are some ethical issues involved in celebrity advertising. Should companies dump celebrities when they are in trouble of public criticism or when they have lost their popularity and should stop endorsing a controversial brand? These questions are ethical in regards to advertising. Celebrities should keep away from advertisement which are deceptive or when there is an attempt to sell dubious products and services by exploiting the sentiment of vulnerable section of society. Ethical consumerism demands celebrities to be accountable for what they endorse. It seems unethical on part of celebrities to seek people to drink controversial beverage. In conclusion, marketer uses the services of film stars and sportsmen for promoting their brands and products. Endorsement of controversial brands /products by celebrities is unethical and should be opposed by the consumers and their associations. Even

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celebrities should not join companies in making controversial products /unhealthy products popular among consumers.

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Public Relations: Public relations is one variable in the promotion mix. It is closely related to advertising and publicity. Manufacturing companies always prefer to establish cordial public relations. Companies maintain a separate public relation department for cordial public relations. It is headed by Public Relation Officer (PRO). Such PRO is appointed in case of government departments, banks, railways, utility service organizations and so on. Sales promotion and public relations are closely connected and are supplementary in character. For sales promotion, cordial relations and market goodwill are essential. This gives indirect support to sales promotion measures introduced from time to time. It is also necessary to have proper co-ordination between sales promotion, advertising and public relations. These inputs of sales promotion should be co-ordinated with elements of promotion mix. This is necessary for achieving the objective of sales promotion.

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