Annamalai University: Directorate of Distance Education

023E1140
1 – 24
ANNAMALAI UNIVERSITY
DIRECTORATE OF DISTANCE EDUCATION
Master of Commerce (M.Com.)

First Semester
MARKETING MANAGEMENT
LESSONS: 1 – 24
Copyright Reserved
(For Private Circulation Only)
M.Com.
FIRST SEMESTER
Editorial Board
Chairman
Dr. N. Ramagopal
Dean
Faculty of Arts
Annamalai University
Members
Dr.R. Singaravel
Director Director,
Directorate of Distance Education Directorate of Academic Affairs
Annamalai University Annamalai University
Dr. K. Govindarajan Dr. R. Elangovan

Professor and Head Professor and Coordinator
Department of Commerce Commerce Wing. DDE
Internal
Dr. K. Sundar Dr. N. Ramu
Professor Asst. Professor
Department of Commerce Department of Commerce
External
Dr. P.Natarajan Dr. Revathy
Professor of Commerce Professor of Commerce
Pondicherry University Manonmanian Sundaranar University
Puducherry Tirunelveli
Lesson Writer
Dr. Rm. Chidambaram
Professor and Head (Retd.)
Dept. of Bank Management
Alagappa University
Karaikudi
M.Com.
FIRST SEMESTER
SYLLABUS
Objective : To teach the baisc concepts of marketing skills and equip them to
face the challenges in marketing.
UNIT - I : Introduciton To Marketing
Marketing – Definition -Importance – Concepts I Marketing –Marketing

Environment, marketing Strategies –Kinds of Marketing Strategies –Market
Segmentation –Bases for Segmenting Consumer and Industrial Markets –
Consumer Behaviour – Factors influencing consumer behaviour –Marketing Mix
Concept.
UNITS - II : Product Planning and Development
Product – Meaning –Classification of Goods –Products Planning and

Development – Product Life Cycle –Innovation –Product Obsolescence – Elimination
–Product Related Strategies – Branding Packaging, Labeling, Warranting, Trade
Mark –Copy Right – Patents.
UNITS - III : Pricing and Promotion
Meaning and Objectives of Pricing – Pricing Policies and Strategies –Pricing

methods – Promotion – Purpose of Promoting – Promotion Strategy –Sales
Promotion – Advertising – Uses of Advertising – Kinds of Advertising Budget – Sales
management – Salesmanship Qualities – Effective Selling – Sales Process.
UNITS - IV : Channels Of Distribution
Distribution –Selection of Channel of distribution – Wholesalers and retailers

distribution network – Ware housing decisions – Management of physical
distribution – marketing Research and Information – Objectives and Process of
Marketing research.
UNITS - V : Consumarism
Consumerism –Problems of consumer protection – Government and

Marketing ISI, BSI and AGMARK, Public Distribution of essential commodities –
The Indian Marketing Environment – Ethics in Marketing.
ii
M.Com.
FIRST SEMESTER
CONTENTS
Lesson Title Page
1 Marketing Definition and Importance 01

2 Concepts of Marketing 11
3 Marketing Management Tasks 18
4 Marketing Environment 24
5 Marketing Strategies 35
6 Market Segmentation, Market Targeting and Product

43
Positioning
7 Buyer (Consumer) Behaviour 54
8 Sales Forecasting 65
9 Marketing Mix 75
10 Product 80
11 Product Planning and Development 87
12 New Product Development 94
13 Product Related Strategies : Branding 103
14 Product Related Strategies : Packaging and Labeling 111
15 Pricing 122
16 Promotion 135
17 Advertising 147
18 Sales Management 161
19 Distribution Channels 179
20 Physical Distribution 195
21 Marketing Research 202
22 Consumerism 214
23 Government and Marketing 224
24 The Indian Marketing Environment 230
UNIT – I
LESSON – 1
MARKETING: DEFINITION AND IMPORTANCE

1.1. INTRODUCTION
The term “market” in its common usage is used to refer the place where actual
buying and selling take place. But, for a student of marketing, the term “market”
does not mean any particular market place in which things are bought and sold,
but the whole of any region in which buyers and sellers are in free interaction with
one another that the prices of the same goods tend to be equalized easily and
quickly. In its general interpretation it means “anybody of persons who are in
intimate business relations and carry on extensive transaction in any commodity.”
Thus the market is the some total of the situation of environment which the
resources, activities and attitudes of buyers and sellers affect the demand of
products in a given area. It should be clearly understood that the term market is
used to mean not any particular geographical meeting place of the buyers and
sellers by as the getting together of buyers and sellers in person, by mail,
telephone, telegraph, cable or any other means of communication.
“Marketing” makes goods useful to the society by getting them where they are
wanted, when they are wanted and by transferring them to those people who want
them. It is in this sense that marketing has been defined as “all the activities
involved in the creation of place, time and possession utilities”. Marketing is thus
concerned with “handling and transportation of goods from the point of production
to the point consumption”. In this journey of goods from the manufacturer’s
warehouse of producer’s granary or miner’s yard to the ultimate consumers, several
difficulties has to be removed. Firstly good are to be removed from the place of their
origin to the place or places where their need is felt. This is creation of place utility.
secondly, goods are to be made available at a time when they are needed. it means
that they must be stored and protected against fire, rain, pests, thieves etc., till that
time. This is creation of time utility. Finally, the ownership and ultimately the
possession of these goods are to be transferred from the producer or the
manufacturer to the ultimate consumer. This has been referred to as the creation of
possession-utility. To emphasize all these aspects of marketing. Clark and Clark
wrote that “marketing consists of those efforts which effect transfer in ownership of
goods and care for their physical distribution”.
To facilitate proper discussion on the subject, we shall consider a few
definitions of marketing. A cursory glance through them would reveal that there are
varying perception sand view-points on the meaning are content of marketing.
1.2. OBJECTIVES
 Distinction between Market & Marketing
 Importance of marketing
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1.3. CONTENT
1.3.1. Definitions of Marketing
1.3.2. Distinction between market and marketing
1.3.3. Marketing, Selling and Merchandising
1.3.4. Importance of Marketing
1.3.4.1. Importance of Marketing to the Society
1.3.4.2. Importance of Marketing to Individual Business Firms
1.3.1. Definitions of Marketing
1. Much of marketing is concerned with the problem of profitably disposing
of what is produced.
2. Marketing is a phenomenon brought about by the pressures of mass
production and increased spending power.
3. Marketing is the performance of business activities that direct the flow of
goods and services from the producer to the consumer.
4. Marketing is the economic process by means of which good and services
are exchanged between the maker and the user their values determined in
them of money prices.
5. Marketing is designed to bring about desired exchanges with target
audiences for the purpose of mutual gain.
6. Marketing activities are concerned with the demand-stimulating and
demand –fulfilling efforts of the enterprise.
7. Marketing is the function that adjusts the organisation’s offering to the
changing needs of market place.
8. Marketing is a total system of interacting business activities designed to
plan, promote and distribute need-satisfying products and services to
existing and potential consumers.
9. Marketing starts with the identification of a specific need on the part of
the consumer and ends with the satisfaction of that need. The consumer
if found both at the beginning and the end of the marketing process.
10. Marketing originates with the recognition of a need on the part of a
consumer and terminates with the satisfaction of that need by the
delivery of a usable products at the right time, at the right place and at an
acceptable price.
11. Marketing is so basic that it cannot be considered a separate function. It
is really the whole business seen from the point of view of the final result,
i.e., from the point of view of the customer.
12. Marketing is a viewpoint which looks at the entire business process as a
highly integrated effort to discover, create, arouse and satisfy consumer
needs.
13. Marketing is the delivery of a standard of living.
1.3.2. Distinction between Market and Marketing
Market is an arrangement to provide an opportunity to exchange goods. In the
market the forces of demand and supply operate directly or by means of
communication and fix prices. Whereas marketing is the sum-total of all those
activities that are related to the free flow of goods from the point of production to
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the point of consumption. Physical movement of goods is the point of consumption.

Physical movement of goods is the hallmark of marketing. That is, once the price
fixation is done, the journey is to start from sellers to buyers.
1.3.3. Marketing, Selling and Merchandising
Sometimes the terms ‘Marketing’, ‘Selling’ and ‘Merchandising’ are used inter-
changeably. But that is not correct. Some difference exists in their meaning.
Marketing is a comprehensive term, while the others are only one part of the
marketing system. Merchandising may be defined as “product planning”. It includes
the “internal planning need to get the right product or service to the market at the
right time, at the right place, and in proper colours, quantities, and sizes”. Selling is
“one method of promotion,” and promotion is only a part of the total marketing
programme.
The studying of marketing aims at:
1. Developing an intelligent appreciation of modern marking practices and the
influences in marketing situations.
2. Developing a broader framework for thinking about marketing.
3. Providing guiding policies regarding marketing procedures and their
implementations.
4. Intensifying one’s felling of participation in marketing.
5. Creating an open-minded, hopeful attitude towards the efforts of those
scholars in marketing who are trying to develop it into a science.
6. Indicating the sources from which further information can be obtained
concerning marketing problems or situations.
7. Supplying the factual background and analytical judgement necessary for
dealing with marketing problems.
8. Helping oneself to decide whether his career shall be marketing.
1.3.4. Importance of Marketing
The importance of marketing has been so beautifully expressed by Peter
Drucker:
“Marketing is the distinguishing, the unique function of business. A business
is set apart from all other human organizations by the fact that it markets a
product or a service. Neither Church, nor Army, nor State does that. Any
organisation that fulfills itself through marketing a product or a service is a
business. Any organisation in which marketing is either absent or incidental is not
a business and should never be run as if it where one”. The importance of
marketing in business planning and decision making can be understood from a
following quotation:
“In this existing age of change, marketing is the beating heart of many
operations”.
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It must be considered a principal reason for corporate existence. The modern

concept of marketing recognizes its role as a direct contributor to profits, as well as
sales volume.
“No longer can a company just figure out how many gadgets it can produce
and then go ahead and turn them out. To endure in this highly competitive change
infested market, a company must first determine what it can sell, how much it can
sell and what approaches must be used to entice the wary customer. The president
cannot plan; the production manager cannot produce, the purchasing agent cannot
purchase; the chief financial officer cannot budget, and the engineer and designer
cannot design until the basic market determinations have been made”.
Marketing has even greater importance and significance for the society as a
whole than for any of the individual beneficiaries of the marketing process, and can
be expressed as follows:
1.3.4.1. Importance of Marketing to the Society
1. Marketing helps to achieve, maintain and raise the standard of living of the
society : Despite the differences in the level of living, every member of the society
requires certain commodities and services to enjoy, to make his living decent and
gracious. There for everything and anything, everybody has to depend completely
on this gigantic system i.e. marketing. Thus the shirts and pants you wear, the hair
oil and toothpastes that you apply, the face powder and now that you use in make-
up, the medicines you consume, the cycle you ride on, the cars and scooters that
you drive, the food you eat, the drinks cold or hot you drink –all are made available
by marketing. Marketing is the means through which production and purchasing
power are converted into consumption. Hence Paul Mazur states that marketing is
the delivery of standard of living. Prof. Malcolm Nair improved Mazur’s statement
and has said that “Marketing is the creation and delivery of standard of living to the
society”.
Marketing process brings new variety of useful and quality goods to
consumers. This raises the standard of living. Better marketing gives room for mass
production. Under mass production, cost of production will be low and hence price
of the article will be low. Since price is low people can buy more goods for their
money. This will result in a higher standard of living.
2. Marketing increases employment opportunities : Marketing process increases
employment opportunities. Just as every industry provides employment
opportunities to thousands of skilled and unskilled labour in various capacities,
marketing also provides employment to millions of people. Marketing is a complex
mechanism involving number of functions and sub-functions which call for
different specialized persons for employment. The major marketing functions are
buying and selling, transport, warehousing, financing, risk bearing, market
information and standardization. In each such function, different activities are to be
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performed by a large number of individuals or institutions. It is said that roughly

30 to 40% of the population depend directly or indirectly on marketing.
3. Marketing helps to increase national income: The narion’s income is
composed of goods and services which money can buy. Efficient system of
marketing reduces the cost to the minimum, this in turn lowers the prices and the
cons numer’s purchasing power increases this will increases the national income.
4. Marketing helps to maintain economic stability and development: Economic
stability is the sign of any efficient and dynamic economy. Economic stability is
maintained only when there is a balance of supply and demand. If production is
more than demand, the excess goods cannot be sold at acceptable prices. Then the
stocks of goods would be piled up and there would be glut in the market, resulting
in fall in price. Similarly, if production is less than demand, prices shoot up
resulting in inflation. In such a situation, marketing maintains the economic
stability by balancing production and consumption.
5. Marketing is connecting link between the consumer and the producer:
Marketing process brings new and new to retail shops from where the consumer
can have them.
6. Marketing removes the imbalances of supply by transferring the surplus to
deficit areas, through better transport facilities.
7. Marketing helps in creation of utilities: Marketing as an economic activity
creates possession, place, time, and information utilities. Exchange creates
ownership and possession utilities. Transport creates place utility. Storage creates
time utility. Promotional activities create information utility.
1.3.4.2. Importance of Marketing to Individual Business Firms
1. Marketing generates revenue to firms: Profit is the core on which the whole
super structure of business is built. Marketing alone generates revenue or income
to an enterprise. Functions of marketing development and widen the markets.
When markets are widened sales increases and thus profit to the firm increases.
2. Marketing as a basis for making decisions: The problems of the entrepreneur
are what, how, when, how much and for whom to produce. In the past, the
producer was in direct contact with consumers. Hence the problems were tackled
very easily. However, to-day the producer does not have any direct contact with a
consumers. Therefore, the problem of the procedure become very acute and
complicated.
Now a days, these problems are solved by the marketing departments. The
marketing department collects all information regarding what, how when, how
much and the whom to produce and these informations are passed on to the top
management. The top management uses all these informations for decision making.
3. Marketing helps the top management to manage innovations and changes:
Marketing and innovation are the two basic functions of any business. We are living
in a dynamic world. There is nothing permanent except change. Change is the
essence of life and change means progress. To-day the minds of the consumers are
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not firm, but fluctuating or changing. Hence, in order to run a business

successfully a business man should adapt himself to the changing preferences,
changing styles, changing fashions etc. and innovate new customers, new product,
new markets, new methods and procedures. Marketing helps to adopt change and
innovate. Retailers communicate to the wholesalers about consumers demand.
Wholesalers, in turn, communicate to manufacturers about market demand.
Market research also acts as a source of marketing information on consumer
behaviour and market trends. Salesmen of a market oriented concern are its ears
and eyes for information feedback.
Marketing, in sum, tries to find out the right type of production that the firm
should manufacture, the right place where it is to be made available for use; and
the right price at which it is to be made available, and the right channel, through
which it is to be brought to the notice of the consumers.
Marketing is, thus, the father of innovation and product development,
prompter of entrepreneurial talent, developer of economy, stimulator of
consumption and higher standard of living and guardian of price system.
1.4. REVISION POINTS
1. Market
2. Selling
3. Merchandising
1.5. INTEXT QUESTIONS
1. Describe the various importance of marketing.
2. “All organizations need marketing”. Do you agree to this statement? If so
give reasons
3. “Marketing orientation goes beyond selling”. Examine this statement.
1.6. SUMMARY
If the functions of marketing are not performed properly the economic system
may get out of balance resulting in piling of goods with retailers, wholesalers and
manufacturers, closure of factories and retrenchment of workers. Marketing
secures a closer balance between output and consumption. In this age of mass
production, modern marketing has enabled a smooth system of mass distribution.
Hence, marketing plays an review role in the economic stability of country.
1.7. TERIMAL EXERCISES
1. Define Marketing?
2. What is Market?
1.8. SUPPLEMENTARY MATERIALS
1. Indian Journal of Marketing.
2. Journal of Marketing.
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1.9. ASSIGNMENTS
1. How would you judge, whether a firm is really consumer-oriented or not?
1.10. SUGGESTED READING/REFERENCE BOOKS/ SET BOOKS
1. Philip Kotler – Marketing – Prentice Hall.
2. Pillaice Bhagavathi, Marketing Management, S.Shand, New Delhi.
1.11. LEARNING ACTIVITES
Your company has decided to introduce the modern marketing concept into its
business activities. The firm is in the line of manufacturing quartz watches. Give a
write up as to how you could make the company really “Consumer-oriented”?
1.12. KEYWORDS
1. Marketing
2. Merchandising

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LESSON – 2
CONCEPTS OF MARKETING
2.1. INTRODUCTION
Studies reveal that different organisations have different perceptions of
marketing. And these differing perceptions have led to the formation of different
concepts of marketing. It is found that at least five distinct concepts of marketing
have guided and are still guiding business firms.
2.2. OBJECTIVES
After studying this lesson you are familiar with
 To study different concepts of marketing
 To study features and importance of marketing concept
2.3. CONTENT
2.3.1. Marketing Concept
2.3.1.1. Exchange Concept
2.3.1.2. Production Concept
2.3.1.3. Product Concept
2.3.1.4. Sales Concept
2.3.1.5. Marketing Concept
2.3.2. Features of the Marketing Concept
2.3.3. Benefits of Marketing Concept
2.3.4. Limitations of the Marketing Concept
2.3.1. Marketing Concepts
 the exchange concept
 the production concept
 the product concept
 the sales concept and
 the marketing concept
We shall now discuss each of the five distinct concepts of marketing.
2.3.1.1. Exchange Concept
The Exchange Concept of marketing, as the very name indicates, holds that
the exchange of a product between the seller and the buyer is the central idea of
marketing. While exchange does form a significant part of marketing to view
marketing as a mere exchange process would amount to a gross undermining of the
essence of marketing. A proper scrutiny of the marketing process would readily
reveal that marketing is very much broader than exchange. Exchange, at best,
covers the distribution aspect and the price mechanism involved in marketing. The
other review aspects of marketing, such as concern for the customer, the
generation of value satisfactions, the creative selling and integrated action for
serving the customer get completely overshadowed in the Exchange Concept of
marketing.
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2.3.1.2. Production Concept

According to the Production Concept, marketing is a mere appendage to
production. Production and technology dominate the thinking process of the key
people in the business. They believe that marketing can be managed by managing
production. The concept holds that consumers would, as a rule, support those
products that are produced in great volume at a low unit cost.
Organisations voting for this concept are influenced by a drive to produce all
that they can. They do achieve high production efficiency and a substantial
reduction in the unity cost of production; and in quite a few cases they also do well
with the distribution takes and make the products widely available, get, they often
do not get customers as they expected. Customers, after all, are motivated by a
variety of considerations in their purchases. Easy availability and low cost are not
the only parameters governing the customer’s buying action. And the production
concept thus fails to serve as the right marketing philosophy for the enterprise.
2.3.1.3. Product Concept
The product Concept is somewhat different from the Production Concept.
Whereas the Production Concept seeks to win markets and profits via high volume
of production and low unit costs of production, the Product Concept seeks to
achieve the same results via production excellence, improved products, new
products and ideally designed and engineered products. It also places emphasis on
quality assurance. In general, it tries to take care of the marketing task through the
product attributes.
Organisations that subscribe to the Product Concept of marketing believe that
the consumers would automatically vote for products of high quality. They
concentrate on achieving product excellence. In addition, research and development
and bring in a variety of new products. Yet, in many cases, these organisations fail
in the market. They do not bother to study the market and the consumer in depth.
They get totally engrossed with the product and almost forget the consumer for
whom the product is actually meant; they fail to find out what the consumers
actually need and they would gladly accept.
2.3.1.4. Sales Concept
The Sales Concept become the dominant idea guiding marketing as more and
more markets became buyers markets and as the entrepreneurial problem became
one of solving the shortage of customers rather than the shortage of goods. The
sales concept maintains that a company cannot expect its products to get picked
up automatically by the customers. The company has to consciously promote and
push its products. Heavy advertising high-power personal selling, large-scale sales
promotion, heavy price discounts and strong publicity and public relations are the
normal tools used by the orgnaisation that rely on this concept.
Evidently, the Sales Concept too generates marketing myopia just as the
Exchange Concept, the Production Concept, and the Product Concept do. But only
a few marketing executives realise this problem. Overwhelming attention to the
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production or product aspects or the selling aspects at the cost of the customer and
his actual needs creates this myopia. It leads to a wrong or inadequate
understanding of the market and consequently a total failure in the market-place.
The majority fee that the Sales Concept is a flawless idea. They think selling is
synonymous with marketing. The general public too perceive marketing from the
standpoint of the Sales Concept as the majority of business firms practice only
selling. But in reality, there is a great deal of difference between selling and
marketing. And that explains the evolution of the Marketing Concept as a totally
distinct idea from the Sales Concept. It may be relevant and useful to analyse the
difference between ‘Marketing’ and ‘Selling’ before we discuss the Marketing
Concept.
Marketing is much wider than selling, the much more dynamic. There is a
fundamental between the two in approach as well as in the very philosophy on
which the two processes rest. Selling revolves around the needs and interests of the
seller; marketing revolves around the needs interests of the buyer. Selling starts
with the existing products of the corporation and views business as a task of
somehow promoting these products. Marketing, the other hand, starts with the
customers of the corporation-present and potential-and views business as a task of
meeting the needs of the customers by producing and supplying those products
and services that would exactly meet the needs of the customers. Selling seeks
profits by pushing the products on the buyers. Marketing seeks profits not through
the aggressive pushing of the products but by meeting the needs of the customers
and by creating value satisfactions for them. In other words, marketing calls upon
the corporation to choose products, prices and methods of distribution and
promotion that would meet the needs of customers. It dose not unwisely limit its
role to persuading the customers to accept what the corporation already has or
what it can offer readily.
2.3.1.5. Marketing Concept
While the foregoing discussion on the difference between selling and marketing
make it clear that marketing is a more fully evolved idea compared with selling, one
has to delve a little deeper for obtaining a full understanding of the marketing
concept as such.
The Marketing Concept was born out of the awareness that marketing starts
with the determination of consumer wants and ends with the satisfaction of those
wants. The concept puts the consumer at both the beginning and end of the
business. It stipulates that the company should be organized totally around the
marketing function, anticipating, stimulating and meeting customers requirements.
The customer, not the corporation, has to be the centre of the business universe.
The concept rests on the realization that a business cannot success by
supplying to the customer products and services that are not properly designed to
serve their needs. It proclaims that “the entire business has to be seen from the point
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of view of the customer”. In a company operating on this concept all departments will
recognize that their actions have a profound impact on the company’s ability to
create a retain a customer. Marketing concept represents essentially a change in
orientation on the part of managements towards business. The change is:
From production orientation – to marketing orientation;
From product orientation – to customer orientation;
From supply orientation – to demand orientation;
From volume orientation – to profit orientation;
From sales orientation – to satisfaction orientation;
From internal orientation – to external orientation;
It is obvious that only the Marketing Concept is capable of keeping the
organisations free from ‘Marketing Myopia’. All other ideas guiding marketing, viz.,
the Exchange Concept, the Production Concept, the Product Concept and the Sales
Concept give rise to marketing myopia of one from or the other.
The marketing concept is a customer orientation backed by integrated
marketing aimed at generating customer satisfaction as the key to satisfying
organisational goals.
2.3.2. Features of the Marketing Concept
1. Consumer orientation: An overwhelming emphasis on the consumer and his
need is the first distinguishing feature of the Marketing Concept. The concept
enabled the industrial and business firms to understand the nature and the
mission of their business from the point of view of the consumer. And it meant a
revolution, as till then, the business was seen and defined from the point of view of
the producers of those who owned the business.
2. Integrated management action: The second major distinguishing feature of
the Marketing Concept is integrated management action. Integrated management
action simply means that all the different management functions in the business
must be tightly integrated with one another, keeping marketing as the pivot. This is
essential for the success of the business because every activity in every function of
management has a vital bearing on marketing consumer. All these activities should
lead to a favourable impact on the consumer. And for this to happen all functional
areas of the business has to be properly aligned with marketing.
3. Consumer satisfaction: Integrated management action explained above, is
again only a means, not an end in itself. It is the means for fulfilling the needs of
the consumer. And this leads us to the third major distinguishing features of the
Marketing Concept, namely, consumer satisfaction. The Marketing Concept believes
that it is not enough if a firm has consumer orientation. It is essential that such
orientation leads to consumer satisfaction. The concept believes that it is not
enough if a firm markets its products successfully in the short run; it must keep
growing, keeping consumer satisfaction as the foundation of it growth. It believes
that not firm can afford to ignore the its dose so at its peril. The concept effectively
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counteracts the temptations of short-sighted management attitudes, by its

emphasis on consumer satisfaction.
4. Realising organizational goals including profits: Consumer satisfaction,
which is a major theme of the Marketing Concept, is again not an end in itself. The
concept does not preach that a firm must generate consumer satisfaction and forget
all the other goals of the organisation. Instead, it treats consumer satisfaction as
the pathway to all the goals of the organisation. The underlying approach is: if a
firm that the firm has given a quality product, has offered competitive price and
prompt services and has succeeded in creating a good product and company image.
It is quite obvious that for achieving these results, the firm would have tried its
maximum to control costs and simultaneously ensure quality, optimize productivity
and maintain a good organisational supporting one another, will a product with all
the attendant features organisational goals including profits is unreview to the firm.
The concept is against profiteering, but not against profits. It appreciates that
reasonable returns or surpluses are essential for the survival and as a natural
corollary of the business sequence consumer orientation and integrated
management action leading to consumer satisfaction, and the latter leading in turn
to organisational profits.
2.3.3. Benefits of Marketing Concept
A business enterprise adopting the marketing concept can enjoy the following
advantages:
1. Long –term success is assured to an enterprise only if it recognize that the
needs of the market are paramount.
2. It enables the firm to move more quickly to capitalise on market
opportunities. Marketing risks can be reduced only by knowing and
understanding the market.
3. Customer needs, wants and desires receive top consideration in all
business activities.
4. Greater attention is given to the product planing and development so that
merchandising can become more effective.
5. Demand side of the equation of exchange is honoured more and supply is
adjusted to changing demand. Hence, more emphasis is given to research
and innovation.
6. Marketing system based on the marketing concept assures integrated view
of business operations and indicates interdependence of different
departments of a business organisation.
7. Interests of the enterprise and society can be harmonised as profit
through service emphasized.
8. Marketing research is now an integral part of the marketing process and it
is a managerial tool in decision –making in the field of marketing.
Thus Marketing Concept brings benefits to the organisation that practices the
concept, the consumer and the society. Hence a clear understanding of this concept
is fundamental to the study of marketing.
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Marketing as an Ideology
Critics recognize the importance of customer orientation, but ask why after
decades of trying has the concept not been fully implemented. They argue that
there are other valid considerations hat companies must take into account when
making decisions (for instance, economies of scale) apart from giving customers
exactly what they want. There has to be a conl.promisc betweer: the satisfaction of
customers and achievement of other company requirements.
Marketing and Society
The marketing concept focuses on individual market transactions. Since
individuals heavily weigh their personal benefits while discounting the society
impact of their purchases, adoption of marketing concept will result in production
of goods, which do not adequately correspond to societal welfare. Providing
customer satisfaction may simply be a means to achieving a company’s profit
objectives and does not guarantee protection of customer welfare. Marketing
oriemation does not guarantee welfare of the customer but it does ensure profits for
the firm.
Marketing as a Constraint to Innovation
Marketing research discourages major innovations. Relying on customers to
guide development of new products has severe limitations. This is because
customers have difficulty articulating needs beyond the realm of their own
experiences. This suggests that the ideas gained from marketing research will be
modest compared to those coming from the scientific discoveries of R & D
laboratories. Particularly for discontinuous innovations, the role of product
development ought to be far more proactive. Technological innovation is the process
that realizes market demands which were previously unknown. Effective utilization
and exploitation of technology in developing new products is at least as important
as market need analysis.
But this criticism is not actually directed towards the marketing concept itself
but towards an over dependence on customers as a source of new product ideas.
Companies must not rely solely on the customer for new product ideas. New
product development should be based on sound interface between perceived
customer needs and technological research. Successful innovations are mostly
based on good understanding of user needs and technologies available to meet
those needs.
Marketing concepts, Benefits of marketing concepts
14

1. Explain clearly the modern concepts of marketing
2. Write short notes on
a. Consumer orientation
b. Integrated management action
c. Consumer satisfaction
d. Realising organisational goals including profit
2.6. SUMMARY
All the fine concepts of marketing the exchange, the production, the product,
the sales, the marketing gets importance study of marketing.
1. Write a note on consumer orientation.
2. What is exchange concept?
1. Journal of marketing management.
2. Indian journal of marketing.
2.9. ASSIGNMENTS
“All organisations need marketing” – Do you agree to this statement? If so give
reasons in support of your answer.
1. V.S.Ramaswamy and Nomakumari, Marketing Management, Mac Millan.
2. Sherleker, Marketing Management, Himalaya Publishing House, Mumbai.
Identify an Indian company which sailed through the different concepts of
marketing. Evaluate the reactions from the consumers.
2.12. KEYWORDS
Consumer orientation, Integrated management action

15
LESSON – 3
MARKETING MANAGEMENT TASKS

3.1. INTRODUCTION
Marketing management represents marketing concept in action. It may be
defined as the process of management of marketing programmes for accomplishing
organisational goals and objectives. The process of management is the set of
managerial functions known as planning, implementation and control of
programmes to achieve predetermined objects. Marketing management involves
planning, implementation and control of marketing programmes.
Marketing management represents an review functional area of business
management efforts for the flow of goods and services from the producers to the
consumers. It looks after the marketing system of the enterprise. Marketing
management performs all managerial functions in the field of marketing. It has to
plan and develop the production on the basis of known consumer demand. It has to
build up appropriate marketing plan or marketing mix to fulfill the set goals of the
business. It has to formulate sound marketing policies and programmes. It looks
after their implementation and control.
3.2. OBJECTIVES
 Responsibilities of marketing management
 Marketing management tasks
3.3. CONTENT
3.3.1. Responsibilities of Marketing Management.
3.3.2. Marketing Management Tasks.
3.3.1. Responsibilities of Marketing Management
Marketing management has to fulfill the following responsibilities in
particular:
1. Sales and market analysis.
2. Determination of marketing goals
3. Sales forecasting and marketing budget.
4. Formulation of marketing strategies, policies and procedures.
5. Evolving an appropriate marketing – mix or programme.
6. Organizing all marketing activities and instruments included in the
marketing-mix. Marketing activities may be organized product-wise, area-
wise or customers-wise according to specific requirements.
7. Assembling of necessary resources, such as marketing personnel, finance,
and physical facilities etc., to execute marketing campaign.
8. Active participation in the product planning and development to establish
best correlation between the product attributes and customer demands.
9. Management of distribution channels and physical distribution.
10. Effective communication, proper control and co-ordination of all marketing
functions.
16
11. Post-sales servicing during the warranty period.

3.3.2. Marketing - Management Tasks
The popular image of the marketing manager is that of someone whose task is
primarily to stimulate demand for the company’s products. However, this is too
limited a view of the range of marketing tasks carried out by marketing managers.
Marketing management is a task of regulating the level, timing, and characters of
demand in a way that will help the organisation achieve its objectives. Simply put,
marketing management is demand management.
The organisation forms an idea of a desired level of transactions with a market.
At any point in time, the actual demand level may be below, equal to, or above the
desired demand level. This leads to the eight distinguishable demand states listed
in Table 3.1. The marketing task and the formal name of each task is shown next to
each demand state.
Table 3.1
The basic marketing tasks
Demand State Marketing Task Formal Name
I Negative demand Disabuse demand Conversional marketing
II No demand Create demand Stimulational marketing
III Latent demand Develop demand Developmental marketing
IV Faltering demand Revitalize demand Remarketing
V Irregular demand Synchronize demand Synchromarketing
VI Full demand Maintain demand Maintenance marketing
VII Overfull demand Reduce demand Demarketing
VIII Unwholesome demand Destroy demand Countermarketing
Conversional Marketing
Conversional marketing grows out of the state of negative demand. Negative
demand is a state in which all or most of the review segments of the potential
market dislike the product or service and in fact might conceivably pay a price to
avoid it.
Negative demand, far from being a rare condition, applies to many products
and services. Vegetarians feel negative demand for meats of the kinds. People have
a negative demand for vaccinations, dental work, vasectomies, and gall bladder
operations. Many travelers has a negative demand for air travel; others have a
negative demand for rail travel. Places such as the North Pole and the desert
wastelands are in negative demand by tourists. Atheism, exconvicts, military
service, and even work are in negative demand by certain groups.
The challenge of negative demand to marketing management especially in the
face of a positive supply, is to develop a plan that will cause demand to rise from
17
negative to positive and eventually equal the positive supply level. We call this
marketing task conversional marketing.
Stimulational Marketing
There is a whole range of products and services for which there is no demand.
Instead of people having negative or positive feeling toward the offering, they are
indifferent or uninterested. No demand is a state in which all or review segments of
a potential market are uninterested in or indifferent to a particular offering.
Three different categories of offering are characterized by no demand. First,
there are those familiar objects that are perceived as having no value. Examples
would be urban junk such as disposable coke bottles, old barbed wire, and political
buttons right after an election. Second, there are those familiar objects that are
recognized to have value but not in the particular market. Examples would include
boats in areas not near any water, snowmobile in areas where it never snows, and
burglar alarms in areas where there is not crime. Third, there are those unfamiliar
objects that are innovated and face a situation of no demand because the relevant
market has no knowledge of the object. Examples would include trinkers of all
kinds that people might buy if exposed to but would not normally think about or
desire.
The task of converting no demand into positive demand is called stimulational
marketing. Stimulational marketing is a tough task because the marketer does not
even start with a semblance of latent demand for the offering. He can proceed in
three ways. The first is to try to connect the product or service with some existing
need in the marketplace. Thus antique dealers can attempt to stimulate interest in
old barbed wire on the part of those who have a general need to collect things. The
second is to alter the environment so that the offering becomes valued in that
environment. Thus sellers of motorboats can attempt to stimulate interest in boast
in a lakeless community by building an artificial lake. The third is not distribute
information or the object itself in more places in the hope that people’s lack of
demand is really only a lack of exposure.
Developmental Marketing
Developmental marketing is associated with a state known as latent demand.
A state of latent demand exists when a substantial number of people share a strong
need for something that does not exist in the form of an actual product or service.
The latent demand represents an opportunity for the marketing innovator to
develop the product or service that people has been wanting.
Examples of products and services in latent demand abound. Many cigarette
smokers would like a good-tasting cigarette that does not yield nicotine and tars
damaging to health. Such a product break-through would be an instant success,
just as the first filter-tip ciragette won a sizable share of the market. Many people
would like a car that promised substantially more safety and substantially less
pollution than existing cars. There is a strong latent demand for fast city roads,
18
efficient trains, uncrowded national parks, unpolluted major cities, safe streets, a
good television programmes.
The process of effectively converting latent demand is that of development
marketing. The marketer must be an expert in identifying those prospectus who
have the strongest latent demand and in coordinating all the marketing functions
to develop the market in an orderly way.
Remarketing
All kinds of products, services, places, organisations, and ideas eventually
experience declining or faltering demand. Faltering demand is a state in which the
demand for a product or service is less than its former level and where further
decline is expected in the absences of remedial efforts to revise the target market,
offering and /or marketing effort.
For example, railway travel has been a service in steady decline for a number
of years, and it is badly in need of imaginative remarketing. Many churches have
seen their membership thin out in the face of competition from secular recreations
and activities. The downtown areas of many, large cities are in need of remarketing.
Many popular entertainers and political candidates lose their following and badly
need remarketing.
The challenge of faltering demand is revitalization, and the marketing task
involved is remarketing. Remarketing is based on the premise that is possible in
many cases to start a new life cycle for a declining product or service. Remarketing
is the search for new marketing propositions for relating the offering to its potential
market.
Synchromarketing
Very often an organisation might be satisfied with the average level of demand
but quite dissatisfied with its temporal pattern. Some seasons are marked by
demand surging far beyond the supply capacity of the organisation and other
seasons are marked by a wasteful underutilization of the organisation’s supply
capacity. Irregular demand is defined as a state in which the current timing pattern
of demand is marked by seasonal or volatile fluctuations that depart from the
timing pattern of supply.
Many examples of irregular demand can be cited. In mass transit, much of the
equipment is idle during the off-hours and in insufficient supply during the peak
hours. Hotels in Miami Beach are insufficiently booked during the summer and
overbooked in the winter. Hospital operating facilities are overbooked at the
beginning of the week and underutilized toward the end of the week to meet
physician preferences.
The marketing task of trying to resolve irregular demand is called
synchromarketing because the effort is to bring the movements of demand and
supply into better synchronization. Many marketing steps can be taken to alter the
19
pattern of demand. For example, a museum that is under visited on weekdays and
over visited on weekends could (a) shift most of the optional events to weekdays
instead of weekends (b) advertise only its weekday programmes (c) change a higher
admission price during the week ends. In some cases a pattern of demand can be
readily reshaped through simple switches in incentives or promotion; in other case
the reshaping may be achieved only after years of patient effort to alter habits and
desires.
Maintenance Marketing
The most desirable situation that a seller daces is that of full demand. Full
demand is a state in which the current level an timing of demand is equal to the
desired level and timing of demand. Various products and services achieve this
state from time to time. However, it is not a time for resting on one’s laurels and
doing perfunctory marketing market demand is subject to two erosive forces. One
force is changing needs and taste in the market place. The demand for barber
services as well as the demand for mass magazines and college, education, had
undergone and unexpected decline because of changing market preferences. The
other force is active competition. When a product is doing well, competitors quickly
move in a attempt to attract away some of the demand.
The task of the marketer facing full demand is maintenance marketing.
Maintenance marketing calls for maintaining efficiency in the carrying out of day-
to-day marketing activities and eternal vigilance in spotting new process that
threaten to erode demand. The maintenance marketer is primarily concerned with
tactical issues such as keeping the price right, keeping the sales force and dealers
motivated, and keeping tight control over costs.
Demarketing
Sometimes the demand for a product or service may outpace the supply.
Known as overfull demand, it is defined as a state in which demand exceeds the
level at which the marketer feels above to motivated to supply it.
The problem may be due to temporary shortages, as when producers suddenly
find themselves facing an unexpected surge in demand or unexpected interruptions
of supply. Or the problem may be due to chronic over popularity. For example, the
state of Oregon felt that too many people were moving to Oregon and spoiling its
natural environment; and the city of San Francisco felt that too many motorists
were using the Golden Gate bridge and weakening its structure.
The task of reducing overfull demand is called demarketing. Demarketing
deals with attempts to discourages customers in general or a certain class of
customers in particular on either a temporary or a permanent basis. Demarketing
largely calls of marketing in reverse. Instead of encouraging customers, it calls for
the art of discouraging convenience may be reduced. The demarketer must have a
thick skin because he is not going to be popular with certain groups.
20
Countermarketing
There are many products or services for which the demand may be judged
unwholesome from the viewpoint of the consumer’s welfare, the public’s welfare, or
the supplier’s welfare. Unwholesome demand is a state in which any demand is felt
to be excessive because of undesirable qualities associated with the offering. Classic
examples of unselling efforts have revolved around the so-called products; alcohol,
cigarettes, and hard drugs.
Conversional marketing, Stimulational marketing, Remarketing, Synchro
marketing, De marketing, counter marketing.
1. Explain ‘Marketing management’ and its responsibilities.
2. Emaciate the various tasks of marketing with examples.
3.6. SUMMARY
The task of trying to destroy the demand for something is called
countermarketing, or unselling. Whereas demarketing tries to reduce the demand
without impugning the product itself, countermarketing is an attempt to designate
the product as intrinsically unwholesome. The offering may be the organisation’s
own product which it wishes to phase out, a competitor’s product, or a third party’s
product which is regarded as socially undesirable.
1. What is Remarketing?
2. Write a short note on Demarketing.
1. Journal of International Marketing.
2. Journal of marketing.
3.9. ASSIGNMENTS
“Marketing orientation goes beyond selling”. Examine this statement and
highlight the major differences between marketing orientation and selling
orientation.
3.11. LEARNING ACTIVITIES
In the face of fuel shortage, many petroleum companies have sought to reduce
their customers use of oil. Propose a demarketing plan that will bring down the
level of demand for oil.
3.12. KEYWORDS
Negative demand, Latent demand, faltering demand, irregular demand,
unwholesome demand.
❑
21
LESSON – 4
MARKETING ENVIRONMENT
4.1. INTRODUCTION
Most of successful companies have now realized that marketing presents a
never ending series of opportunities and threats. The marketing managers major
task is that of trend trackers and opportunity seekers modern marketers realize
that environmental scanning would provide a continuous link between them and
their customers. A marketers has to design his marketing strategies based on the
current marketing environment. Marketing environment comprises of external
factors over which the organization and management.
Marketing Environment comprises of external factors over which the
organisation and management has little control.
4.2. OBJECTIVES
 Key environmental forces that have an implementation on marketing
decisions.
 The techniques available for environmental scanning.
4.3. CONTENT
4.3.1. Uncontrollable External Forces
4.3.1.1. Demography
4.3.1.2. Economic Environment
4.3.1.3. Social & Cultural Environment
4.3.2. Importance & Benefits of Environmental Analysis
4.3.1. Uncontrollable External Forces
4.3.1.1. Demography
Market means people with money and with a will to spend their money to
satisfy their wants. Hence, marketing management is directly interested in
demography, i.e., scientific study of human population and its distribution
structure. Growing population indicates growing market particularly for baby
products. But when we have reduction in the birth rate and the lower rate of
growth of population, many companies specializing in baby products will have to
adjust their marketing programme accordingly. Population forecasts during the
next decade can be arrived at with considerable accuracy and on the basis of such
forecasts marketing management can adjust marketing plans and policies to
establish favourable relationship with demographic changes. Demographic analysis
deals with quantitative elements such as age, sex, education, occupation, income,
geographic concentration and dispersion, urban and rural population, etc. Thus,
demography (study of population) offers consumer profile which is very necessary in
market segmentation and determination of target markets. Quantitative aspects of
consumer demand are provided by demography, e.g. census of population, whereas
22
qualitative aspects of consumer demand such as personality, attitudes, motivation,

perception, etc., are several factors such as population rate of growth, motivation,
perception, etc., are provided by behavioural analysis. Good demographic analysis
combines several factors such as personality, attitudes, motivation, perception,
etc., are provided by behavioural analysis. Good demographic analysis combines
economic power, life cycle analysis of consumer, occupation, education and
geographic segmentation. Both demographic and behavioural analysis enable
marketing executives to understand the basis of market segmentation and to
determine marketing reaction to a new product or consumer reaction to an
advertising campaign.
India is the second largest market in the world. By the turn of the century,
India’s population likely to reach the 100 crore mark. The life expectancy of the
people in the country has gone upto 56 year by 1984. About 40 percent of the total
population is below 14 years of age.
The people of India are widely scattered over the length and breadth of the vast
country which covers an area of 3.3 million sq.km. The average density of
population in the country is 260 per sq.km (mid-1998 estimate). The density,
however, varies widely from state to state from 655 per sq.km in Kerala to 45 per
sq.km in Sikkim and 8 per sq.km in Arunachal Pradesh. Similarly, the density also
varies widely between the urban and rural areas of the country. There are 4000
towns and more than five lakh inhabited villages in the country. Nearly a quarter of
the total population of the country lives in urban areas and the remaining three
quarters in semi-rural and rural areas.
The people of India profess diverse religions and speck different languages. As
many as seven different religious groups – Hindus, Muslims, Sikhs, Christians,
Zoroastrians, Buddhists and Jains – form part of Indian society. The lanuages
specified in the Consitution as national languages and hundreds of dialects spoken
by substantial segments.
4.3.1.2. Economic Environment
People constitute only one element of a market. The second essential element
of a market is purchasing power and willingness to spend. Then only we have
effective demand. Hence, economic conditions play a significant role in the
marketing system. High economic growth assures higher level of employment and
income, and this leads to marketing boom in many industries.
Marketing plans and programmes are also influenced by many other economic
items such as interest rates, money supply, price level, consumer credit, etc. Higher
interest rates adversely influence real estate market and markets of consumer
durables sold on installment basis. Exchange fluctuations, currency devaluation,
change in political and legal set-up influence international marketing. The level of
take –home pay determines disposable personal income and it influences marketing
programmes directly. Economic conditions leading to recession can influence
23
product planning, price fixing, and promotion policies of a business enterprise.

Marketing mix must be formulated on the basis of review economic indices.
Since 1974, i.e., after the energy (oil) crisis all over the world, we have
inflationary trends and general level of prices in continuously rising. Inflation
coupled with scarcity conditions can radically change consumer buying habits.
Many purchases may be postponed or even eliminated. Higher petrol prices created
a tread in favour of small cars and public transport. Inflationary conditions affect
adversely the market for consumer durables. Economic forces can have positive or
negative effects upon the promotion efforts of business units. State of trade and
business booms and slumps constitute the economic aspects of marketing
environment.
Over the years, the Private Final Consumption has also shifted in a welcome
manner from ‘food and other basic items’ to ‘products and services with high
marketing significance’. Between 1960-61 and 1983-84, the food component came
down to 24 percent from 28 percent; household equipment went up from 2.6
percent to 4.3 percent; transport and communication went up from 4.7 percent to
9.9 percent. In addition to the marked downtrend in the share of food in final
consumption, ‘within the food group, there was a marked spurt in the share of
protective foods-fats, pulses, sugar, vegetable, meat, fruits, eggs and fish. Similarly,
with the non-food consumer goods, the share of durables increased substantially.
India’s per capita income, continuous to be appallingly low. Fortunately in
recent years, an environment for faster economic growth and higher per capita
income is sought to be created through a new set of economic and industrial
policies. There are indications that India is emerging as a growth economy. While
throughout the seventies, India was among the slow growth countries in the
developing world and her unspectacular average annual growth of 3 to 3.5 percent
was dubbed the ‘Hindu rate of growth’, in the eighties, India’s economic growth has
averaged five percent per annum. And this spurt from the historical rate of 3.5
percent has review implications for future standards of living. If fact, it is now
accepted that a growth rate of 7.5 percent or more in GDP is achievable on a stable
basis by the turn of the country, provided the technological aspects of the nation’s
economy is appropriately stepped up.
The growth of the corporate sector is an review indicator of the sophistication
and growth of an economy. During the last two decades 96.144 joint stock
companies in India, government and non-government put together. Of these,
94,264 companies which were limited by shares has a paid up capital of Rs. 21,
929crore. In 1951, the number of joint stock companies was only 28,532 with a
paid-up capital of just Rs.775crore. The growth of the corporate sector is
adequately reflected in the growth of the stock markets. The country’s stock-
markets have grown enormously in the last two decades. The growth in the eighties
has been particularly striking. The corporate sector which was till then depending
24
more on external borrowings and dependence during the decade and started
mobilizing larger funds for investment through the capital market.
Agriculture is a prominent sector of the economy of India. In fact it has been
the backbone of the national economy all these years. Nearly three-fourths of the
total population of the country depend directly or indirectly on agriculture for their
livelihood and more than forty percent of the national income is contributed by
agriculture. Industries in cotton, jute, sugar, rubber, etc., as well as the food
processing industry, depend totally on agricultural commodities. A substantial
portion of the country’s exports in also provided by the agricultural sector-mostly
by agricultural commodities like tea, coffee, tobacco, jute, spices and marine
products. In this backdrop, it is needless to say that the future growth of several
consumer goods industries in the country will increasingly depend on rural
prosperity, which, in effect, means agricultural prosperity. To the marketing man,
this has a special significance. It means that agricultural growth would be a main
indicator of the level of buoyancy of the nation’s markets.
A survey of the industrial scene of India would reveal that industrial
production increased at an average compound rate of six percent per annum. The
industrial output today is nearly six times of what it was in 1950.
The industrial sector now contributes nearly 30 percent of India’s GNP. The
growth has been particularly striking in sectors like petroleum products, chemicals
and chemical products, metal products, electronics, electrical machinery, transport
equipment and power generation. There has also been some fundamental
structural changes for the better. The output of basic and capital goods industries
now have a share of 55 percent in the index of industrial production whereas it had
only a share of 20 percent in1950. India’s engineering industry can today supply
the entire requirements of the country in respect of power generation equipments,
equipments for railways, road transport, communications etc.
Indian industry has in recent years also undergone a qualitative change in
addition to the quantitative expansion. It has embraced the concepts of optimum
scales of production, state-of-the-art technology, internationally comparable cost-
effectiveness and levels of productivity. Though it has still a long way to go in this
respect, a good beginning has already been made and it augurs well for the future.
4.3.1.3. Social and Cultural Environment
1. Changes in our life-style and social values, e.g., changing role of women,
emphasis of quality of goods instead of quantity of goods, greater
preference to recreational activities, etc.
2. Major social problems, e.g., concern for pollution of our environment,
socially responsible marketing policies, need for safety in occupations and
products etc.
3. Consumerism is becoming increasingly review to marketing decision
process. Societal marketing concept, demanding not only consumer welfare
25
but also citizen welfare is very much emphasized. Marketer’s are now
called upon not only to deliver life i.e. environment free from pollution.
From the marketing point of view, the emergency of a large middle class is
perhaps the most significant of all developments that have taken place in India
since independence. Many economists now place India’s middle class at over 100
million. Occupation statistics form the basis for such estimates. In India, around
25 million people are at present employed in the government and organized sector,
private and public. Around 18 million are estimated to be employed in the
unorganized sector. These two groups add up to 43 million people. It could safely be
reckoned that one half of this falls under the middle class. In addition, in the rural
areas too, there is a sizable middle class today. It has actually two segments-the
well-to-do among the farming class and the relatively better off among the non-
farmers, employed of self-employed, pursuing varied vocations. The middle class
households in all these categories together could, on a conservative basis, be
reckoned as 25 million. If on an average we have four members in each household,
the total size of the middle class in the country can be reckoned at 100 million at
the minimum.
The industrial development over the years gave birth to a well-to-do working
class and a sizable chunk of engineers, managers and supervisors. In the social
services sector, a sizable population of school and college teachers, doctors and
other supporting staff emerged. The continuous expansion of the government
machinery at the Centre and the states swelled up the strength of government
servants of different categories. The trader class also expanded considerably. While
these developments were taking place largely in the urban areas, rural India was
also undergoing some change. The landed gentry become a vanishing tribe, but a
sizable new agricultural group emerged. This group reaped the benefits of the green
revolution, the land reforms and the new farming technology.
All these groups constitute the ‘middle class’ of the country. This class has not
only swelled continuously in numbers, but has also grown in prosperity; its
disposable and discretionary income has gone up; and the upper strata within this
group has become the consumption community of the country. As this class is also
relatively better educated and better exposed to the life styles of the rich, its
aspirations have been constantly changing. The class has often spent more than
what it has earned at any given point in time to cope with its new social image. Its
expenditure on non-food items has increased. Soft drinks, cosmetics, synthetic
fabrics, readymade garments, furniture, fans, transistors, stereo systems, TVs,
electric mixers and grinders pressure cookers, gas stoves and other household
appliances have also become items of demand for this class.
In addition to the economic factors, socio-structural and life style factor have
also contributed to the rise of the middle class. The growth of urbanisation is the
first among these factors. The breaking down of the joint family system and the
26
parallel rise of the nuclear family is the next. More and more women taking to
employment is the third factor. These and other similar factors acting the concert,
have brought about a new lifestyle among the middle class. They now require
several time-saving conveniences. For example, the increased income coming from
both husband and employed wife has made it possible for the family to buy a
variety of such conveniences.
As cumulative effect of the quantitative expansion of the class, the increase in
its income levels and the change in its lifestyle, the consumption potential of the
class has gone up considerably in recent years. Today, the market potential of this
segment of India can be placed almost on par with the total potential of major
European countries like U.K. France or West Germany.
4. Political and Legal Forces: Political and legal forces are gaining considerable
importance in marketing activities of business enterprises. Marketing systems are
affected by government’s monetary and fiscal policies, import-export policies,
customs duties. Legislation controlling physical environment, e.g., anti-pollution
laws also influence marketing plans and policies. Consumer legislation tries to
protect consumer interests. Marketing management cannot ignore the legislation
regulating competition and protecting consumers. Business enterprises may not be
allowed to resort to price discrimination, false and misleading advertising exclusive
distributorships and trying agreements, deceptive sales promotion devices, division
of markets, exclusion of new competitors and such other unfair trade practices.
The economic and industrial environment of India has undergone a significant
change as a result of the new economic policies and liberalization measures
introduced by the government in recent years. The new policies touch practically
each and every aspect of economic affairs. Fiscal policies, industrial licensing
policies, trade policies and policies relating to technology have all been changed. On
the procedural side too there has been simplification of rationalisation. Basically,
all these steps have been aimed at a restructuring of the instruments of control-
removing some, revamping others-with the ultimate objective of accelerating the
pace of industrial development in the country.
From the marketing point of view, the new policy measure have resulted in two
significant developments: (i) a high degree of encouragement has become available
to consumer goods industries and (ii) a perceptible change has occurred in the
competitive character of India’s markets.
In the earlier years, the government laid greater emphasis on basic and heavy
industries; it was also unduly concerned with mopping up savings and curbing
consumption. These approaches dampened India’s marketing climate considerably.
Now, both these approaches have undergone a change. Consumer goods have been
accorded their due importance and consumption is encouraged along with savings.
The markets of India have become enormously more competitive as a sequel to
the new policies and measures. While the new policies and measures were primarily
27
aimed at accelerating the country’s economic development, as a fall-out effect, the

competitive profile of the nation’s markets has changed in a significant manner.
The provision of a free atmosphere to the industrial and business enterprise and
the consequent entry of a number of new enterprises into different businesses with
relative ease have been mainly responsible for the change in the competitive
structure of a wide variety of businesses in the country.
The legal framework prevailing in a country has a direct impact on the
marketing environment of the country. India is no exception to this reality. Over the
years, the government has been bringing in a number of legislative measures with a
view to regulating the marketing and distribution of several products in India.
Aspects like the final consumer price, product quality, the physical movement of
the product, channel arrangements and stipulations and resale prices are the ones
that have been frequently touched by one law or the other.
5. Science and Technology: Unprecedented development of science and
technology since 1940 has created a phenomenal impact on our lives. We have
witnessed in one generation radical change in our life-styles, in our consumption
pattern as well as in our economic welfare.
A new package of policies relating to technology has also been introduced. The
nation is now attaching a great degree of importance to technological upgradation
of practically all segments of industry. Better incentives have been built into the
basic policies and systems so that technologically advanced nations find it
attractive to collaborate with India in different sectors of industry and transfer the
latest technologies in the respective fields. In particular, India is making rapid and
significant advances in field like energy, electronics, micro electronics, and
communication and information technologies. There is an all-round accent on
securing high – technology on par with the developed nations and on becoming
technologically competitive on the international scene.
Technology is the way things are done; the methods, materials and techniques
used to achieve commercial and industrial objectives. New technologies offer a main
source of economic growth. Many businesses are earning handsome profits from
products which did not exist 35 years ago. Electronic industry is the best example
of exploiting new marketing opportunities. Computers and airplanes are entirely
new industries. Digital watches are killing the marketing prospects of traditional
watches. Artificial fibre cloth has almost killed the pure cotton textile industries in
many countries. Television has adversely affected radio and cinema industries.
Seventy percent of food products now available to a housewife in highly
industrialized countries were simply non-existent thirty years ago.
Marketing management with the help of technology can create and deliver
standards and style of life in many counties. It has the responsibility of relating
changing life-style patterns, values and changing technology to market
opportunities for profitable sales to particular market segments.
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6. Competition: Although price competition is still present particularly in the

retail market, non-price competition is of paramount importance for the
manufacturer. No marketing decision of major importance can be made without
assessing competition in a free market economy. The marketing manager has little
or no control over the actions of competitors. He can merely anticipate competitive
actions and be prepared to deal with them. Competitors considerably influence the
company’s choise of marketing strategies particularly in relation to selection of
target markets, suppliers, marketing channels as well as in relation to its product
mix, price mix and promotion mix.
7. The Distribution Environment: The distribution environment is an review part
of the marketing environment. The distribution environment in India has been
undergoing significant changes in the past few years. And to present, the pace of
change is getting further accelerated.
In the first place, as a rule, the distribution channels have been getting
shorter. The gap between the producer and the consumer is becoming narrower.
Secondly, the parasitic middlemen of yore are disappearing from the Indian
distribution scene. Thirdly, as the channel is getting shorter, the retail dealer in the
distributive trade is getting a better deal; his margins are more respectable now
than before; he is able to give better service to the consumers; and his profitability
had improved despite the hike in various cost elements. In fact, in quite a few
sectors, retailing has grown into a prestigious activity.
The distribution trade has also been growing in size recent years more and
more people are being employed in the distribution business. Another significant
development is that the manufacturers in many industries have departed from the
traditional method and channels of distribution. They are now developing their own
channels, depots and showrooms. Finally, the emergence of a large public
distribution system is another major development in India’s distribution scenario.
Many factors have been responsible for these changes in the distribution
environment. Increased competition and inflation and rising costs of marketing and
distribution are the most significant among these factors. Redundant market
intermediaries have been withdrawn by manufacturers for containing the escalating
costs of marketing and distribution. The government has taken several measures
by which the distribution environment has been affected in a significant way.
Increasing consumer awareness and the spread of consumerism has also had its
share of influence on the distribution environment.
8. The advertising Scenario: According to marketing experts, the nature,
substance and volume of advertising in a country is a pointer to the status of the
economy of the country, the nature of its country. Advertising in India has grown in
a spectacular manner throughout the last two decades and has scaled new peaks
during the last five years in terms in size, range and quality. Over the years there
has also been a substantial expansion in the media. All the major media-the press,
radio, TV and cinema have expanded sizably and are being used extensively by
29
advertisers for reaching their target customers. Over the years, the number of
advertising agencies in the country has also increased rapidly. Qualitatively too, the
ad business of India has grown considerably. There was a time when Indian ads
were mere imitations of British and American ads. But now, the situation has
vastly changed. The ad-men of India have succeed in giving a distinctiveness to
Indian advertising. New approaches and new styles to suit the Indian audience
have emerged. Creative ads have multiplied, making advertising in the country an
interesting and professionally rewarding field of activity.
9. The Rural Marketing scenario: The marketing environment governing the
rural markets too has been undergoing vast changes in the last two decades. For
example, tape recorders or ‘two-in-ones’ have become a common sight in the rural
areas. The spread of bicycles had been almost in the nature of a revolution. Today,
India is the world’s second largest producer of bicycles with an output of six million
unites per annum and a major part of this is absorbed by rural India. Two-wheelers
have also become a common sight in the villages. In clothing, their has been a sea
change. Preferences have shifted to blended fabrics, knitted apparels, and ready-
made garments. Earthenware pots have yielded place to a variety of new
kitchenever. Plastic products and stainless steel goods have become common
consumer items.
Evidently, there are two sides to India’s rural markets, both equally powerful
while the market provides immense opportunities it also displays intimidating
challenges. It does not lend itself to an automatic transfer of the tools and
techniques, and temp and style of marketing which proved a success in the urbon
marketing context. The rural market happens to be a totally new market, involving
a new customer and a new marketing situation.
10. The exports scene: India’s exports too have been growing over the years.
There has also been a welcome change in the pattern and range of India’s exports.
More than 4,000 different items are exported by the country today, as compared to
hardly 60 items at the time of independence. Manufactured products and products
of a highly technical nature now find a prominent place in the items exported by
India. The directional pattern of the foreign trade of India has also changed for the
better. Indian exports are now reaching a large number of countries all over the
globe.
The sectors in which significant gains have been made in the export effort in
recent years include farm products, marine products, textiles and ready-made
garments, leather and leather manufactures, gems and jewellery, chemicals,
engineering goods and iron ore. The country has also made notable progress in the
export of projects, technology and consultancy services.
11. Ecology: In the wider concept of marketing, ecological environment has
assumed a unique importance. Environmental experts are vigorously advocating
the preservation and survival of our entire ecological systems. It is said that
pollution is an inevitable by-product of high-consumption economic systems
prevalent in the advanced countries. The marketing system of an enterprise has
30
now to satisfy not only the buyers of its products (consumers/users) but also
societal wants which may be adversely affected by its activities and then only it is
entitled to achieve its profit objective. In future, marketing executives will have to
pay due attention to the quality of our life and our environment. They are expected
to take measures to conserve and allocate our scarce resources properly. Above all,
they must show active interest in the welfare of community life. Prevention of all
types of pollution and efficient use of our scarce resources can restore to balance in
our ecological environment. Economic use of energy and natural resource are the
essential ingredients of marketing strategies.
4.3.2. Importance of Environment Analysis
The marketing manager needs to be dynamic to effectively deal with the
challenges of environment. The environment of business is not static. It is changing
with fast speed. The following benefits of environment scanning have been
suggested by various authorities:
1. It creates an increased general awareness of environmental changes on the
part of management.
2. It guides with greater effectiveness in matters relating to Government.
3. It helps in marketing analysis.
4. It suggests improvements in diversification and resource allocations.
5. It helps firms to identify and capitalize upon opportunities rather than losing
out to competitors.
6. It provides a base of 'objective qualitative information about the business
environment that can subsequently be of value in designing the strategies.
7. It provides a. continuing broad-based education for executives in general,
and the strategists in particular.
Demographic environment, Economic environment, Social and cultural
environment.
1. Mention the uncontrollable variables influencing the marketing strategies
and policies of a firm in a competitive market.
2. Explain the impact of social and cultural environment on the marketing
management of a firm.
4.6. SUMMARY
The detailed analysis presented in the foregoing page in this lesson reveals
that the marketing environment of India has undergone a major change in the last
three decades. The change has been particularly significant in the past few years.
All these developments has made a profound impact on the size and structure of
India’s markets the traditional marketing scene has been significantly altered by
these developments. New markets for several consumer –products have been
created in the country-in-urban as well as rural areas. Competition has become an
integral part of the marketing environment of the country. It is reasonable to expect
31
that in the coming years, the change already witnessed in the social scenario too is
like to get accelerated further in the coming years. In short, the marketing
environment of the country provides a great opportunity for the marketing man to
work on.
1. Define Demography.
2. What is environment?
1. Journal of International marketing.
2. Journal of marketing research.
4.9. ASSIGNMENTS
1. ‘A firm is an open, adaptive system living in its own environment and strives
to accomplish within objective through integration and co-ordination’ –
Explain.
‘A marketer has to be more aware of changes in the external environment than
any other department in the organization’ – Do you agree.
4.12. KEYWORDS
Legal forces, distribution environment, advertising scenario, experts scene,
Ecology
❑
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LESSON – 5
MARKETING STRATEGIES
5.1. INTRODUCTION
Marketing strategy as a set of objectives, policies and rules that guide over
time a firms marketing efforts. It is a policy to maintain the firms competitive edge
in the market. Management give it a shape with strategies for each controllable of
product, distribution, promotion and pricing.
5.2. OBJECTIVES
After studying this lesson you can able to know
 Analysing opportunities
 Kinds of marketing strategies
5.3. CONTENT
5.3.1. Analysing Opportunities
5.3.2. Setting Company Objectives
5.3.3. Developing Marketing Strategy
5.3.4. Formulating Marketing Strategy
5.3.5. Kinds of Marketing Strategy
5.3.1. Analysing Opportunities
There is an unresolved debate in the management literature as to whether the
first step in the strategic marketing process is to identify opportunities or to set
objectives. Those who argue in favour of looking at opportunities offer the following
reasons:
1. Many organisations get their start because they recognize an review
opportunity. They echo Sir Edmund Hillary’s reason for climbing Mount
Everest: “Because it is there”.
2. Many organisations do not have well-stated objectives. It is difficult for
them to state what they really want. But they do recognize good
opportunities.
3. Many organisations change their objectives as their opportunities change.
Thus the March of Dimes was set up to raise money to conquer the
dreaded disease of polio. The development of the Salk vaccine in the early
1950s left the organisation without a cause. It looked for new
opportunities and recommitted its resources to the problem of birth
defects.
On the other hand, there are those who argue that objectives should precede
opportunity analysis:
1. Many organisations start with an overriding objective, such as to make
high profits, and look for the opportunities that will achieve the objective.
2. A company cannot simply look for opportunities without a set of
objectives. The world is too full of opportunities.
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3. Many organisations make conscious change in their objectives; and when

they do, the new objectives lead them to search for a different set of
opportunities.
We have to conclude that both sides have merit. It is possible to start the
strategic marketing process by looking either at opportunities or at objectives. The
arguments show that there is a dynamic tension between them, and both must be
considered simultaneously. We might even add that the company’s resources often
provide still a third starting point.
There are countless environmental opportunities available in any economy as
long as there are unsatisfied needs. Currently there are great opportunities to
develop new sources of energy, new food products, improved agricultural methods,
improved forms of transportation, new forms of leisure, and improved teaching
technology. There are opportunities in refuse disposal, lower – cost legal services,
containerization, prefab housing, water purification, day-care centers and bio-
chemical instruments. But none of these necessarily represent opportunities for
any specific company.
Alternative growth opportunities can be generated for a company by mapping
its core marketing system and then moving to three levels of analysis. The first level
of analysis discerns those opportunities present in the current product-market
activity of the company; we call these intensive growth opportunities. The second
level discerns those opportunities present in other parts of the core marketing
system; we call these diversification growth opportunities.
Intensive growth: Intensive growth makes sense for a company if it has not
fully exploited the opportunities latent in its present products and markets.
The three major types of intensive growth opportunities are described below:
1. Market Penetration: Market penetration consists of the company’s seeking
increased sales for its present products in its present markets through
more aggressive marketing effort.
2. Market development: Market development consists of the company’s
seeking increased sales by taking its present products into new markets.
3. Product development: Product development consists of the company’s
seeking increased sales by developing improved products for its present
markets.
Integrative Growth: Integrative growth makes sense for a company if (a) the
basic industry has a strong growth future and /or (b) the company can increase it
profitability, efficiency, or control by moving backward, forward, or horizontal
within the industry.
The three integrative growth possibilities are discussed below:
1. Backward integration: Backward integration consists of a company’s
seeking ownership or increased control of its supply systems.
2. Forward integration: Forward integration of a company’s seeking
ownership or increased control of its distribution systems.
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3. Horizontal integration: Horizontal integration consists of a company’s

seeking ownership or increased control of some of its competitors.
Diversification Growth: Diversification growth makes sense for a company (a) if
the core marketing system does not show much additional opportunity for growth
or profit, or (b) if the opportunities outside of the present core marketing system are
superior. Diversification does not mean that the company will take up any
opportunity however unrelated to its present distinctive competences or needs. On
the contrary, the company would attempt to identify fields that make use of its
distinctive competencies or help it overcome a particular problem. There are three
broad types of diversification moves:
1. Concentric diversification: Concentric diversification consists of the
company’s seeking to add new products that have technological and/or
marketing synergies with the existing product like; these products will
normally appeal to new classes of customers.
2. Horizontal diversification: Horizontal diversification consists of the
company’s seeking to add new products that could appeal to its present
customers though technologically unrelated to its present product line.
3. Conglomerate diversification: Conglomerate diversification consists of the
company’s seeking to add new perfects for new classes of customers
because this (a) promises of offset some deficiency or(b) represents a great
environment opportunity; in either case, these products have no
relationship to the company’s current technology, products, or markets.
5.3.2. Setting Company Objectives
A company cannot go after all of its opportunities first, because some of them
are inconsistent with each other; second, because it never has enough resources to
pursue all of its opportunities; and third, because all the opportunities are not
equally attractive. We can imagine the company eliminating those opportunities for
which it lacks sufficient resources or synergistic possibilities.
Once a company arrives at a strong sense of corporate mission, it finds it
easier to scan the environment for opportunities and easier to evaluate the
contribution of different opportunities to corporate purpose. At the same time,
corporate purpose itself is subject to revision as new opportunities arise and old
solutions no longer work.
The company’s basic purpose and mission must be translated into specific
objectives to guide the organisation to what it should try to accomplish with various
activities in the external environment. Company objectives must have certain
qualities if they are to serve the purposes. If particular, they should be hierarchical,
quantitative, realistic, and consistent.
A company may pursue a large number of objectives, not all equally important.
When possible, major objectives should be arranged in a hierarchical fashion
showing which are the most important, which are derived, and how they are
derived.
35
To the extent possible, objectives should be stated in quantitative or

operational terms. The objective “increase the return on investment” is not very
satisfactory. The objective “increase the return on investment to 7.5 percent” is an
improved statement. The objective “increase the return to investment to 7.5 percent
by the end of the second year” is a still better statement. The more specifically the
objective is stated in terms of magnitudes, time and place, the more useful it I for
developing plans and implementing controls.
The company is likely to pursue at any time a number of review objectives
rather than one. For example, a company states that it seeks to provide a quality
product that will maximize customer satisfaction, provide an adequate return, and
increase the company’s total market share. These are admirable objectives but raise
the question of whether they are all consistent. Sometimes the objectives are clearly
inconsistent as when management says that it wants “to maximize sales and
profits”, or wants “to achieve the greatest sales at the least cost”, or wants “to
design the best possible products in the shortest possible time”. It must be
recognised that these objectives are in a trade-off relationship. It is not possible to
maximize simultaneously sales and profits. One can increase sales by lowering
price, improving product quality, and increasing marketing effort, although these
steps, beyond and point, are likely to reduce profit. A statement involving two basic
objectives in a trade – or relationship is of no help as a management guide without
further specification.
5.3.3. Developing Marketing Strategy
Objectives are a statement of where a company wants to go; strategy is a grand
design for getting there. Strategy is a battle plan fused out of marketing, financial,
and manufacturing elements.
Marketing strategy of a firm is the complete and unbeatable plan or
instrument designed specifically for attaining the marketing objectives of the firm.
The marketing objectives will tell us where the firm wants to go; the marketing
strategy will provide the design for getting there.
According to Michael E. Porter, “Marketing strategy has mainly one air-to cope
with competition. There are five major and vital forces that decide the nature and
intensity of competition – the treat of new entrants, bargaining power of customers,
bargaining power of suppliers, threat of substitute products and the jockeying
among the existing contestants. The collect strength of these forces determines the
ultimate profit potential of an industry. And the strategist’s goal is to find a position
in the industry where his company can best defend itself against these forces or
can influence them in his company’s favour. Strategy can be viewed as building
defenses against the competitive forces”.
5.3.4. Formulating the Marketing Strategy
Formulation of marketing strategy consists of five main steps.
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1. Market segmentation: Market segmentation is the basic recognition the every

market is made up of distinguishable segments consisting of buyers with different
needs, buying styles, and responses of offer variations. No one approach to the
market will satisfy all buyers. Each segment of the market represents somewhat
different parts of the market before taking a position. There is no unique way to
segment a market. The fortunate firm is often the one that has found a creative new
way to segment the market.
2. Market positioning: The second principal of marketing strategy is to select a
specific pattern of market concentration that will afford the maximum opportunity to
the company to achieve its leadership objective. The company cannot to everywhere.
It must go after viable positions. It must follow the principle of target marketing.
Market segmentation throws up not one but several market segments with
varying degrees of potential, profitability and risks. The firm may not be interested
in all these segments. There may be segments assuring immediate profits; there
may be segments demanding heavy investment by way of market development;
some other segment may show very great potential but may display tough barriers
to entry. As such, the question which segment/segments the firm should select as
its target market, assumes crucial importance. The firm may analyse the risks,
Analyse the profitability and size and the competition in the different segments.
Still, it may not be possible for it to readily pick up the target segments.
Quantitative techniques may take the firm thus far, but not to be concluding point.
Judgment along can take the firm to the concluding point or final decision on the
decision on the target market. This decision is essentially a decision in the realm of
strategy. It is not just a number game.
What makes any part of the market an attractive one for a particular company
to go after? A maximally attractive market segment would have four characteristics:
1. The market segment is of sufficient size.
2. The market segment has the potential for further growth.
3. The market segment is not “owned” or over occupied by existing
competition.
4. The market segment has some relative unsatisfied needs that the
particular company can serve well.
3. Market entry strategy: The third element of marketing strategy is to
determine how to enter a target market segment. The company can proceed
through acquisition, internal development, or collaboration with other companies.
Acquisition of an existing product or company is the easiest and quickest way
to enter a new market. Acquisition obviates the costly and time-consuming process
of attempting to build up internally the knowledge, resources, and reputation
necessary to become an effective participant in that part of the market.
Some companies prefer to achieve most of their growth through internal
development. They may feel that true leadership is only achieved by running their
37
own research and development laboratories. They many feel that the companies
around to acquire are not very good or are asking for too much. Or there may be no
companies around to acquire.
Entry into a new market or market segment may also be accomplished by
collaboration with others to jointly exploit the new opportunity. A major advantage
is that the risk is shared, and therefore, reduced, for each of the participating
companies. Another advantage may be that each company brings specific skills or
resources, the lack of which makes it impossible for either company to venture by
it. In the best joint-venturing combinations, there is not only complementarily by
synergy.
4. Marketing –mix strategy: The next element in marketing strategy is for the
company to determine how it will profits its offering to the particular market
segment. The key concept here is marketing mix. Marketing mix is the set of
controllable variables that the firm can use to influence the buyers responses.
Many variables quality as marketing – mix variables. McCarthy popularized a
four-factor classification which he called the “four P’s” product, place, promotion
and price. This classification implied that buyers are influenced by variables related
to the product, the place, promotion, and price.
Assembling the marketing mix simply means assembling the “Four Ps” of
marketing in the right combination. Involved in this process are the choice of the
appropriate marketing activities and the allocation of the appropriate marketing
effort to each one of them. Product strategy is a part of this process. Matching the
products with market needs and consumer aspirations is the purpose of product
strategy. Distribution strategy is another part of this exercise. Taking the product
where the consumer wants it and delivering the product to him in a manner that is
most convenient to him is the essence of the distribution strategy. When other
elements like pricing, advertising and promotion are superimposed appropriately on
this framework, the marketing mix gets assembled.
5. Timing strategy: The final element of strategy is that of timing. Just because
a company has spotted a good opportunity, set an objective, and developed a
marketing strategy does not mean it should immediately move in. It may lost by
moving in too soon or too late. The proper sequencing and timing of its moves are a
key component of strategy.
5.3.5. Kinds of Marketing Strategy
In actual practice, it can be often seen that different firms take different
strategy stances. This is but natural. As long as their situational designs and
consequently their specific requirements of strategy differ from each other, they will
evidently follow different strategy stances. One firm may find it appropriate to have
a direct confrontation with the market leader; another may find it appropriate to
keep aloof for some time from the heat of competition; the third may find it relevant
to chalk out a strategy of sheer survival. It is essential to understand that three is
38
no universally valid strategy stance. It is so because the various firms do not share
the same situational design. Depending on the unique situational requirement
faced by each firm, the strategy stances adopted by them can fell into any of the
following broad categories.
Confrontation Strategy
It is a strategy of aggression /offence. The firm is ready for a direct frontal
attach on the existing competition. Reliance Textiles adopted a confrontation
strategy. Balsaras, makers of ‘Promise’ toothpaste, too adopted a confrontation
strategy. And to confront, a firm may adopt several kinds of tactics /approaches.
Taking the cue from military strategies, Philip Kotler classifies these approaches
into Frontal attach, Flanking attach, Encirclement attack, Bypass attach and
Guerrilla warefare.
Defensive Strategy
Here the firm wants to avoid any possible direct conformation with leading
competitions. For its own reasons, it assumes a defensive stance in the market. Its
concern is: how best can I defend my present position? ‘VIP’ in the moulded luggage
market adopted a defensive strategy when big competition landed it in rough
weather.
Niche Strategy
In this case, the firm neither confronts nor defends. It cultivates a small
market segment for itself with unique products/services, supported by a unique
marketing mix. These segments are too small to attract big competitors. Normally,
smaller firms with distinctive capabilities adopt niche strategy.
Demarketing Strategy
When for certain reasons, a firm wants to withdraw a product that is enjoying
good demand, it ‘demarkets’ the product through a conscious manipulation and
suppression of demand. The firm may canalize the demand towards some other
products which it would like to popularise.
Remarketing Strategy
Through this strategy, a product with losing demand is brought back of like
and remarketed in the same name and style or in a changed name and style. A
repositioning of the product and/or a modification in the marketing mix often
constitutes the broad components of a remarketing strategy.
CASES (UNIT 1)
1. In the face of fuel shortage, many petroleum companies have sought to
reduce their customers’ use of oil. Propose a demarketing plan that will
bring down the level of demand for oil.
(Refer Lesson 3)
2. Leading cigarette manufactures in India have launched cheaper varieties
to have an eye bidi segment concentrating in rural parts of the country. Do
you think that the Indian marketing environment is a boon to their
strategy?
(Refer Lesson 4 and 5)
39
REFERENCE BOOKS (UNIT 1)

Marketing Management – Philip kotler
Marketing Management – V.S.Ramaswamy and
S. Namakumari
Fundamentals of Marketing – William J. Stanton
Strategic Marketing – A. Robertson
Basic Marketing – Mc Carthy
Diversification growth opportunities, Types of diversification
1. How would you formulate a marketing strategy?
2. Explain the different kinds of marketing strategies.
5.6. SUMMARY
Organisational marketing strategies differs and choose the strategy according
to their requirement.
1. What is market penetration?
2. What is market positioning?
1. Indian Journal of marketing.
2. Journal of marketing channels.
5.9. ASSIGNMENTS
Give a brief write-up on the “Current marketing situation” and how to face the
challenge of dynamism.
2. Rajan Nair, Marketing Management, S.Chand, New Delhi.
Comment on the competitive marketing strategies to convert the competition
from multinationals in India.
5.12. KEYWORDS
Concentric diversification, Horizontal diversification, conglomerate
diversification

40
LESSON – 6
MARKET SEGMENTATION, MARKET TARGETING AND

PRODUCT POSITIONING
6.1. INTRODUCTION
Market consists of buyers, and buyers differ in one or more respects. They may
differ in their wants, purchasing power, geographical locations, buying attitudes
and buying practices. This varied and complex buyer behaviour is the root cause of
market segmentation. A market segment is a meaningful buyer group having
similar wants. Each segment can be a group of people with similar or homogeneous
demand and this will enable the enterprise to have tailor-made marketing mix to
each market segment. Segmentation is a consumer oriented marketing strategy.
Though wants and desires of consumers are diverse, segmentation helps in
grouping those consumers having similar wants or desires.
Market segmentation is a method for achieving maximum market response
from limited marketing resources. This is made possible by recognizing the
difference in the response characteristics of various parts of the market. In a sense,
market segmentation is the strategy of ‘divide and conquer’. Thus, segmentation
answers the following question:
“To whom should the products be sold and what should be sold to them?”
Market segmentation enables the marketers to select the target market and
offer appropriate marketing mix. The essence of segmentation is to identify
consumer demand. With the rising cost of production, Distribution and promotion,
precise market segmentation has assumed considerable importance in marketing
management.
Definition
“Market segmentation consists of taking the total, heterogeneous market for a
product and dividing it into several sub-markets or segments, each of which tends
to be homogeneous in all significant aspects”.
“Market segmentation is the sub-dividing of a market into homogeneous
subsets of customers where any subset may conceivably be selected as a market
target to be reached with a distinct marketing mix. The power of this concept is that
in an age of intense competition for the mass market, individual sellers may
prosper through creatively serving specific market segments whose needs are
imperfectly satisfied by the mass-market offerings”.
6.2. OBJECTIVES
After studying this lesson you can able to know
 Rationale for market segmentation
 Requirements for “effective segmentation”
 Target market strategies
 Product positioning techniques
41
6.3. CONTENT
6.3.1. Rationale for Market Segmentation
6.3.2. Benefits of Segmentation
6.3.3. Requirements for Effective Segmentation
6.3.4. Bases for Segmenting Industrial Markets
6.3.5. Steps involved in Segmentation Process
6.3.6. Market Targeting and Product Positioning
6.3.7. Target Market Strategies
6.3.8. Selecting a Market Targeting Strategy
6.3.9. Product Positioning
6.3.10. Product Positioning Techniques
6.3.1. Rationale for Market Segmentation
Every organisation must decide not only of what needs to serve but also whose
needs. Most markets are too large for an organisation to provide all the products
and services needed by all the buyers in that market. Some delimitation of the
market is necessary for the sake of efficiently and because of limited resources.
This is the problem of selecting target markets.
Markets vary in their degree of heterogeneity. At one extreme, there are
markets made up of buyers who are very similar in their wants, product
requirements, and responses to marketing influences. For example, suppose all
buyers of salt want to buy the same amount per month and want the simplest
packaging and the lowest price. Such a market would be homogeneous, and selling
to it would be fairly straight forward. The market offers of competitors would
probably be very similar.
At the other extreme are markets made up of buyers seeking substantially
different product qualities and/or quantities. For example, furniture buyers are
looking for different styles, sizes, colours, materials, and prices. Such a market is
heterogeneous. It is made up of customer groups with different buying needs and
interests. These groups are called market segments.
In a heterogeneous market, the marketer has three targeting options:
1. He can introduce only one product, hoping to get as many people to want
and buy it as possible. We call this undifferentiated marketing.
2. He can go after one particular market segment and develop the ideal product
for them. We call this concentrated marketing.
3. He can introduce several product versions, each appealing to a different
group. We call this differentiated marketing.
Thus market segments and the determination of market targets are separate
questions. Market segmentation is the process of identifying groups of buyer with
different buying desires or requirements. Market targeting is the firm’s decision
regarding which market segments to serve.
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6.3.2. Benefits of Segmentation

1. The manufacturer is in a better position to find out and compare the
marketing potentialities of his products. He is able to judge product
acceptance or to assess the resistance to his product.
2. The result obtained form market segmentation is an indicator to adjust
the production, using men, materials and other resources in a most
profitable manner. In other words, the organisation could allocate and
appropriate its efforts in a most useful manner.
3. Changes required may be studied and implemented without losing
markets. As such as soon as the product becomes obsolete, or even
earlier, the product line could be diversifies or even discontinued.
4. It helps in determining the kinds of promotional devices that are effective
and also their results
5. Appropriate timing for the introduction of new products, advertising, etc.,
could be easily determined.
6.3.3. Requirements for Effective Segmentation
The first condition is measurability, the degree to which information exists or
is obtainable on the particular buyer characteristic. Unfortunately, many suggestive
characteristics are not susceptible to easy measurement. Thus it is hard to
measure the respective number of automobile buyers who are motivated primarily
by considerations of economy versus status quality.
The second condition is accessibility, the degree to which the firm can
effectively focus its marketing efforts on chosen segments. This is not possible with
all segmentation variables. It would be nice if advertising could be directed mainly
to opinion leaders, but their media habits are not always distinct from those of
opinion followers
The third condition is substantiality, the degree to which the segments are
large and /or profitable enough to be worth considering for separate marketing
cultivation. A segment should be the smallest unit for which it is practical to tailor
a separate marketing programme. Segmental marketing is expensive, as we shall
shortly see. It would not pay, for example, for an automobile manufacturer to
develop special cars for midgets.
Geographic Segmentation: (Bases for Segmentating Consumer Markets) in
geographic segmentation, the market is divided into different locations, such as
nations, states, cities, or neighbourhoods. The organisation recognizes that market
potentials and costs vary with market location. It determines those geographical
markets that it could serve best.
Demographic Segmentation: In demographic segmentation, the market is
subdivided into different parts on the basis of demographic variables such as age,
sex, family size, income, occupation, education, family life cycle, religion,
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nationality, or social class. Demographic variables have long been the most popular
bases for distinguishing significant groupings in the market place. One reason is
that consumer wants or usage rates are often highly associated with demographic
variables: another is that demographic variables are easier to measure than most
other types of variables.
Psychographic Segmentation: The third category of segmentation variables is
the psychographic. Psychographic variables tend to refer to the individual and such
aspects as his life-style, personality, buying motives, and product knowledge and
use. People within the same demographic group can exhibit vastly different traits.
Life-style: Life-style refers to the distinctive mode of orientation an individual
or a group has toward consumption, work, and play. Such terms as hippies,
swingers, straights, and jet-setters are all descriptive of different life-styles.
Marketers are increasingly being drawn to life-style segmentation.
Personality: Marketers have used personality variable to segment the market.
They try to endow their products with brand personalities (brand image, brand
concept) designed to appeal to corresponding consumer personalities (self-images,
self-concepts).
Benefits sought: Buyers are drawn to products with different buying motives.
In the case of toothpaste, there are customers who seek decay prevention, bright
teeth, good taste, or low price. An attempt is made to determine the demographic or
psychographic characteristics associated with each benefit segment. Haley has
characterised those seeking decay prevention as worriers, bright teeth as sociable,
good taste as sensories, and low price as independents.
User status: Many markets can be segmented into nonusers, ex-users,
potential users, first-time users, and regular users of a product. High-market-share
companies such as Kodak (in the film market) are particularly interested in going
after potential users, whereas a small film competitor will concentrate on trying to
attract regular users to its brand: Potential users and regular users require
different kinds of communication and marketing efforts.
Usage rate: Many markets can be segmented into light, medium and heavy-
user groups of the product called volume segmentation. Heavy users may constitute
only a small percentage of the numerical size of the market but a major percentage
of the unit volume consumed. For example, 50 percent of the beer drinkers account
for 88 percent of beer consumption.
Loyalty status: Loyalty status describes the amount of loyalty that users have
to a particular object. The amount of loyalty can range from zero to absolute. We
find buyers who are absolutely loyal to a brand to an organisation, to a place and
so on. Companies try to identify the characteristics of their hard-core loyal so that
they can target their market effort to similar people in the population.
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Stage of Readiness: At any point of time, there is a distribution of people in

various stages of readiness toward buying the product. Some members of the
potential market are unaware of the product: some are aware; some are informed;
some are interested; some are desirous; and some intend to buy. The particular
distribution of people over stages of readiness makes a big difference in designing
the marketing programme.
Marketing factors: Markets can often be segmented into groups responsive to
different marketing factors such as price and price deals, product quality, and
service. This information can help the company in allocating its marketing
resources. The marketing variables are usually proxies for particular benefits
sought by buyers. A company that specializes in a certain marketing factor will
build up hard-core loyal seeking that factor or benefit.
6.3.4. Bases for Segmenting Industrial Markets
Industrial markets can be segmented using many of the variable employed in
consumer market segmentation. Demographic variables are the most important
basis for market segmentation. They are followed by operating variables and
personal characteristics. The following factors should be borne in mind to segment
industrial market.
Demographic Factors: The type of industries to which the goods sold, the size
of the companies and geographical areas shall be the demographic factors to which
attention should be paid. For example, a rubber tyre company’s buyers may be car
manufacturers, aircraft manufacturers, heavy vehicle manufacturers etc.
Purchasing Approach Factors: Companies sometimes have a centralised
purchase function or a totally decentralised purchase function. The purchasing
policies of the company, the power structure viz., financial soundness,
technological soundness have an impact the market segmentation. The criteria for
purchasing, say, quality, service, price etc., and the company’s relationship with
market do need attention while segmenting these markets.
Situational Factors: Some industries may require sudden be immediate
delivery of the product. The product sometimes may serve only a single purpose.
e.g. picture tubes. The size of orders may also vary according to requirements.
Personal characteristics: the industrial customer may have the similar or
different values than the marketer. Some industrial customers may be enterprising
and risk-taking where as some may be conservative and cautious. The industries
might be loyal to a particular supplier. All these personal characteristics are
noteworthy for segmentation of industrial markets.
Within a chosen target industry, a company can further by segmented by
customer size. Separate marketing programmes can be formulated for dealing with
large and small customers.
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Within the chosen customer size, the company can segment on the basis of
purchase criteria. Government industries may require products at a lower price
where as private industrial units may give importance to reliability.
Thus, industrial companies do not focus on one segmentation variable. They
apply multi attribute segmentation.
6.3.5. Steps involved in Segmentation Process
The process of market segmentation is not complete merely by identifying the
differences between one customer group and another. Identification is the starting
point. There are many other steps in completing the process. The main steps are as
follows
1. Assessing the difference between one customer group and the other. This
may be in terms of needs, likely response, market inputs, etc.,
2. Finding out the factors or characteristics on the basis of which consumers
can be appointed to a specific segment.
3. Based on the above steps, disaggregating the customers into suitable
segments.
4. Analysing and establishing whether it is possible to formulate separate
marketing programmes and marketing mixes for the different segments.
5. Finding out the segment which will be benefited by the products of the firm.
Such a segment can be considered as the target segment of the firm.
6. Estimating the likely levels of purchase by each segment, especially the
significant and relevant ones.
7. Finally, selecting those segments which offer higher potential and which
would be amenable to the offerings of the firm.
As mentioned earlier while carrying out the segmentation, the practical
requirements have to be kept in view. The segments arrived at must be relevant to
the marketing requirements of the firm. The segments must be ‘accessible’ or
‘available’ to the firm; they should not remain a dreamland, i.e., by normal
standards, it should be possible for the firm to capture the segments; they must
also be ‘sizable’. A very small segment may not serve the purpose of commercial
exploitation. Again, they must be ‘profitable’ to the firm there is no use in locating
sizable markets that are unprofitable. The chosen segments should also be clearly
‘measurable’. i.e. the sales potential and profit potential of the segments must be
measurable; the extent of influence of a specific marketing mix over the segment
should also be measurable.
6.3.6. Market Targeting and Product Positioning
Introduction: Market segmentation is actually the prelude to target market
selection. The marketing man normally carries out several steps in addition to
segmentation before selecting the target market. Essentially, he carries out a
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thorough evaluation of the various segments and selects those segments that are
most appropriate. The evaluation of the different segments has to be actually based
on these criteria and only on the basis of such an evaluation should the target
segments be selected. The marketing man must assess the sales potential and
profit potential of each segment; he must evaluate the worth of each segment from
his firm’s viewpoint- whether the segment is relevant to his firm, whether it is
sizable, whether it is accessible and whether it is attractive and profitable. He must
examine alternative possibilities whether the whole market has to be chosen for
tapping or only a few segments have to be chosen ad if so, how many and which
one. He can look for segments which are relatively less satisfied by the current
offers of competing brands. He must look at each segment as a distinct marketing
opportunity. He must evaluate his company’s resources and try to match the
resources and the market segments. He must also take at the product
characteristics and try to match the product characteristics and market segments.
The future position of the segment would be the next consideration in the
evaluation process. Usually, business firms seek out the high growth segments. In
the soap business, market analysis would readily indicate that the premium
segment happen to be the high-growth segment of the business.
Next in line will be the consideration of profitability. In the example under
consideration, the firm can easily size up that the premium segment is the more
profitable segment in the soap business. The price in this segment is usually high,
between Rs.6 per cake in respect of the popular segment. The profit potential in the
premium segment is quite high and a relatively lower volume would provide
adequate returns to the firm. On the contrary, in the popular or regular segment, a
much larger sales volume would be necessary for the business to be viable since
prices and profit margins in the segment are low.
The firm has to now consider whether the segment is accessible to it. This may
need further analysis. The market realities of the segment under consideration will
now enter the picture.
Having satisfied itself that the premium segment is sizable, growth oriented,
profitable and accessible, the firm has to analyse and find out if the segment would
match the firm’s resources, objectives, ambition and distinctive capabilities. Given
the position of the firm in these respects, for some firms, the popular segment may
be natural and for others, the premium segment may be the ideal choice. The
premium segment is a highly competitive segment; all new brands that enter the
segment do not make a success; though it is a high growth segment, several new
brands in the segment are seen falling by the wayside. Only a firm endowed with an
aggressive marketing culture, a strong marketing organisation and the required
resources can successfully fight for a share of the premium segment. The firm has
to assess whether its marketing capabilities are compatible with the segment under
consideration.
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In addition to the segmentation on the basis of premium vs. popular groups,

the firm can also attempt a geographical segmentation of the soap market before
finally selecting the segments to be served. The firm, for example, may look at each
zone in the country as a separate market segment and analyse whether distinctive
marketing strategies and distinctive marketing mixes could be applied over the
different zones. Here again, an analysis of whether the segment considered is
sizable, attractive, profitable and accessible, etc. will have to be seen.
6.3.7. Target Market Strategies
There are three target market strategies viz.
1. Undifferentiated marketing
2. Differentiated marketing
3. Concentrated marketing
1. Undifferentiated Marketing: In undifferentiated marketing, the firm chooses
not to recognize the different market segments making up the market. It treats the
market as an aggregate, focusing on what is common in the needs of people rather
than on what is different. It tries to design a product and a marketing programme
that appeal to the broadest number of buyers. It relies on mass channels, mass
advertising media, and universal themes. It aims to endow the product with a
superior image in people's minds, whether or not this is based on any real
difference.
Undifferentiated marketing is primarily defended on the grounds of cost
economies. The fact that the product line is kept narrow minimizes production,
inventory, and transportation costs. The undifferentiated advertising programme
enables the firm to enjoy media discounts through large usage. The absence of
segmental marketing research and planning lowers the costs of marketing research
and product management. On the whole, undifferentiated marketing results in
keeping down several costs of doing business.
2. Differentiated Marketing: Under differentiated marketing, a firm decides to
operate in two or more segments of the market but designs separate product and /
or marketing programmes for each.
In recent years an increasing number of firms have moved toward a strategy of
differentiated marketing. This is reflected in trends toward multiple product
offerings and multiple trade channels and media. The net effect of differentiated
marketing is to create more total sales than undifferentiated marketing. However, it
also tends to be true that differentiated marketing increases the costs of doing
business.
3. Concentrated Marketing: Both differentiated marketing and undifferentiated
marketing imply that the firm goes after the whole market. However, many firms
see a third possibility, one that is especially appealing when the company’s
resources are limited. Instead of going after a small share of a large market, the
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firm goes after a large share of one or a few sub markets. Put another way, instead
of spreading itself thin in many parts of the market, it concentrates its forces to
gain a good market position in a few areas.
At the same time, concentrated marketing involves higher than normal risks.
The particular market segment can suddenly turn sour or a competitor may decide
to enter the same segment. For these reasons, many companies prefer to diversify
in several market segments.
6.3.8. Selecting a Market Targeting Strategy
Particular characteristics of the seller, the product, or the market serve to
constrain and narrow the actual choice of a market targeting strategy.
The first factor is company resources. Where the firm's resources are too
limited to permit complete coverage of the market, its only realistic choice is
concentrated marketing.
The second factor is product homogeneity. Undifferentiated marketing is more
suited for homogeneous products such as grape fruit or steel. Products that are
capable of great variation, such as cameras and automobiles, are more naturally
suited to differentiation or concentration.
The third factor is product stage in the life cycle. When a firm introduces a
new product into the market place it usually finds it practical to introduce one or,
at the most, a few product versions. The firm's interest is to develop primary
demand, and undifferentiated marketing seems the suitable strategy; or it might
concentrate on a particular segment. In the mature stage of the product life cycle,
firms tend to pursue a strategy of differentiated marketing.
The fourth factor is market homogeneity. If buyers have the same tastes, buy
the same amounts per periods, and react in the same way to marketing stimuli, a
strategy of undifferentiated marketing is appropriate.
The fifth factor is competitive marketing strategies. When competitors are
practicing active segmentation, it is hard for a firm to compete through
undifferentiated marketing. Conversely, when competitors are practicing
undifferentiated marketing, a firm can gain by practicing active segmentation if
some of the other factors favour it.
6.3.9. Product Positioning
The significance of product positioning can be easily understood from David
Ogilvy's assertion. "The results of your campaign depend less on how we write your
advertising than on how your product is positioned".
Let us understand product positioning through certain examples.
Great Shake, the newly introduced soyamilk, is positioned as a health drink,
and positioned against milk.
Complan is positioned as a health-builder, and positioned against milk, listing
out the additional nutritive agents it possessed over milk.
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Limca is positioned as a thirst-quenching soft drink. Rasna is positioned on

the plank of economy and convenience.
The detergent powder, Nirma is positioned on the plank of economy, and it is
positioned for a price-conscious segment of the detergent users.
6.3.10. Product Positioning Technique
There are certain brands and companies which occupy a dominant position in
the consumer's mind, on account of the distinction that the brand or company has
already attained. For example, throughout the world, among the customers of
computers. IBM holds a dominant position. No other brand can enter the market
without somehow relating itself to IBM's position. So, wherever there is a dominant
brand or competitor, the other brands have to reckon the leader's position.
Positioning is the outcome of a conscious strategy of marketing. Some unique
features of the product, some unique features of the market or some unique
features of the competition is normally isolated and around that feature the product
is placed in the market. Positioning comes out to the marketing man's awareness
that a product cannot be 'everything to everyone'. It can only be something to
someone. Identifying these features imaginatively and using it as the ‘Plank’ on
which to pedestal the product is the essence of positioning. So, the product can be
positioned against a competing brand, it can be positioned for an exclusive well-to-
do segment of the market, it can be positioned for men, it can be positioned for
children, it can be positioned for the fun-loving youth, it can be positioned for a
health-conscious market, it can be positioned on a claim of luxury, a claim of
distinctiveness, a claim of convenience, uniqueness, novelty, or usage.
The marketing man has to formulate his positioning theme right from the
product idea stage. He cannot suddenly invent a positioning theme when he is
ready to enter the market with his product. He should have already decided what
his ‘cash on’ point should be, where he should introduce his product and for whom,
and on what distinctive claim he should go around and promote his product.
Positioning is essentially a battle or capturing a place in the mind of the prospect.
Quite often, products undergo ‘repositioning’ as they go along their life-cycle.
This is done to increase the sale of the products by appealing to a wider market.
The product may be provided with new features for the same old product may be
associated with new uses and may be offered to existing and new markets. In India,
in the past, manufacturers of transistor radios positioned them for the urban and
educated customers. Later, they repositioned them as an affordable convenience for
the common man of the semi-urban and even the rural markets.
Positioning is a technique which the marketing mean has to employ with a lot
of care and pre-planning. By positioning a product in a particular way, the
marketing man is committing the product to the particular decision and situation.
If the positioning decision is faulty, the product suffers heavy damages. It may take
a long time and enormous effort to retrieve a wrongly positioned product. While
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repositioning a successful product later in the life-cycle may be easy, it is not at all
easy to retrieve and reposition a wrongly positioned product.
1. Requirements for effective segmentation, product positioning.
1. What are the benefits of market segmentation? Identify the requirements of
effective segmentation.
2. Distinguish between the base for segmenting consumer market and
industrial markets?
3. Explain the steps involved in market segmentation process.
4. What is market targeting? As a two-wheeler marketer, how would you select
the target segment?
5. Explain the target market strategies with illustrations.
6. What is product positioning? Distinguish between product positioning and
product repositioning?
7. Explain the features of the product positioning technique.
6.6. SUMMARY
Market segmentation enables the marketers to select the target market and
offer appropriate marketing mix.
1. Define market segmentation.
2. What is Loyalty status?
1. International journal of marketing.
2. Journal of consumer research.
6.9. ASSIGNMENTS
1. What is market segmentation? What is the rationale behind the market
segmentation?
In modern market, low the marketer can position his product in the market-
Comment.
6.12. KEYWORDS
Segmentation, Positioning, Repositioning
❑
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LESSON – 7
BUYER (CONSUMER) BEHAVIOUR

7.1. INTRODUCTION
The buyer is a complex person, influenced by the social environment in which
he lives-his family, his society, his neighbour, his friends, his job, his colleagues.
Every component of his social environment leaves some imprint on him and
influences him in his day-to-day life. His purchases and consumption are carried
out within the larger context of his living. And his role as a buyer is not distinct
from his role as a human being. Buyer behaviour, after all, is a specific aspect of
general human behaviour. And, it is only natural that it is as complex as general
human behaviour.
The Buyer
1. Buyer is a riddle. He is not a simple entity. His needs vary from security
needs to self-actualisation needs. He satisfies his needs by his means. When
his needs are costlier, he postpones them.
2. With the revolution in the field of communication, the buyer is exposed to a
great deal of information. He does not take all the information, but selects
those which suit him.
3. When the buyer takes a buying decision, there is no rigid rule to bind him.
His decision may either be spontaneous on the spot, or the made after a
thorough analysis.
7.2. OBJECTIVES
 To know the meaning of consumer behaviour
 To study the theories of buyer behaviour
 Discuss about buyer behaviour process
7.3. CONTENT
7.3.1. Buyer Behaviour
7.3.2. Theories of Buyer Behaviour
7.3.3. Buying motives
7.3.4. Factors Influencing Buyer Behavour
7.3.5. Buying Process
7.3.1. Buyer Behaviour
Buyer behaviour is defined as "all psychological, social and physical behaviour
of potential customers as they become aware of, evaluate, purchase, consume, and
tell others about products and services". In other words, buyer behaviour includes
the acts of individuals directly involved in obtaining and using economic goods.
These acts are the result of a sequence of decisions made by the buyer. These
decisions are influenced by various factors. Hence buyer behaviour is the process
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by which individuals decide whether, what, when, where, how and from whom to
purchase goods and services.
The above definition gives the following information about buyer behaviour:
1. Buyer behaviour involves both individual (psychological) processes and
group (social) processes.
2. Buyer behaviour is reflected by post-purchase evaluation which indicates
satisfaction or non-satisfaction
3. Buyer behaviour includes communication, purchasing and consumption
behaviour.
4. Buyer behaviour is shaped by social environment.
5. Buyer behaviour includes both consumer and industrial buyer behaviour.
7.3.2. Theories of Buyer Behaviour
1. Economic Theory: According to economic theory, the buyers are assumed to
be rational in their decision-making. They follow the law of marginal utility.
Consumers evaluate the alternatives available and they chose that alternative
which would provide him with highest utility and lowest cost. The consumers have
a set of needs and tastes. They have got a certain amount of purchasing power. He
may not be able to fulfill all his needs because his purchasing power is the limiting
factor. Hence, he allocates his expenditure over different products at given prices so
as to maximize utility. Thus, the law of equi-marginal utility enables him to secure
maximum utility from limited purchasing power. The purchasing decision is based
on economic calculations and reason.
Economic model of consumer behaviour is un-dimensional. The following
presumptions are made about buyer behaviour;
1. Lower the price of the product, larger will be the quantity bought-price
effect.
2. Higher is the purchasing power, higher will be the quantity bought-income
effect.
3. Lower the price of a substitute product, lesser the quantity that will be
bought of the original product-substitution effect.
4. Higher the promotional expenditure, higher will be the sales-communication
effect.
Economic model assumes that markets are homogeneous. But now markets
are assumed to be heterogeneous. Hence the economic man is a myth. Buying
process is not always rational and price is not the only factor of motivation. Buying
is not always at the lowest price. It is obvious that the economic model is
insufficient to explain the intricacies of buyer behaviour.
2. Learning Theory: Classical psychologists interpret man's needs are coming
about through the interplay of drives, stimuli, cues, responses, and reinforcement.
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Every organism has innate physiological drives connected with survival.

Psychologists distinguish between primary drives (such as hunger, thirst, sex, and
acquisitiveness). The latter are learned through experience in trying to satisfy
primary drives.
A drive is a strong internal stimulus impelling action. A drive becomes a
motive 'when it is directed toward a particular drive- reducing object. A person may
reach for a soft drink to satisfy his thirst or a hotel to satisfy his hunger. These
objects are stimuli in that they are capable of arousing and satisfying his drives.
The particular response of a person to a stimulus is influenced by the
configuration of cues. Cues are minor stimuli that determine when, where and how
the person responds. In satisfying a thirst, a person is cued by the time of day, the
cost and availability of different beverages, and so on.
The response is the organism's reaction to the configuration of stimuli and
cues. If the response is rewarding, the probability of a similar response next time to
the same cue configuration is reinforced. If a response is not rewarding, the
probability of a similar response is diminished.
Cue configurations are constantly changing. For example, the shopper's
favorite brand may be out of stock or he may see another brand on sale. He will
shift to similar stimuli because learned responses are generalised.
A countertendency to generalisation is discrimination. When a person tries two
similar brands and finds one more rewarding, his ability to discriminate between
similar due configurations improves. Discrimination increases the specificity of the
cue- response connection, while generalisation decreases the specificity.
Thus, the learning theory has the following predictions.
1. Learning refers to change in behaviour brought about by practice or
experience. Almost everything one does or thinks is learned.
2. Product features such as price, quality, service, brand, package etc., acts as
cues or hints influencing consumer response.
3. Marketing communications such as advertising, sales promotion also act as
guides persuading buyer to purchase the product.
4. Response is decision to purchase.
3. Psycho-analytic Theory: This theory is developed from the thoughts of
Sigmund Freud. He postulated that the personality has three basic dimensions: id
refers to the free mechanism that leads to strong drives. Such drives (motives) are
not influenced by morality or ethics. Ego refers to the act of weighing consequences
and tries to reconcile with reality. It is an equilibrating device that leads to socially
acceptable behaviour and imposes rationality on the id. The ego weighs, the
consequence of an act rather than rushing blindly into the activity.
Super ego is a person's conscience: It is highly rational and tries to keep the
activities morally right. In essence, the id urges and enjoyable act: the super ego
54
presents the moral issues involved and the ego acts as the arbitrator n determining
whether to proceed or not. This has led to motivation research and has proved to be
useful in analysing buyers behaviour. This, in turn, has contributed some useful
insights in the advertising and packaging fields.
4. Socio-cultural Theory: Man is primarily a social animal and his wants and
behaviour are largely influenced by the group of which he is a member. The
tendency of all people is to "fit in" a society in spite of their personal likes and
dislikes. Most of the luxury goods are bought primarily because one's neighbour or
friend of the same status bought it. Culture, subculture, social classes, reference
groups, family are the different factor groups that influence buyer behaviour.
Culture: Culture is the most fundamental determinant of a person's wants.
The individual learns the values of his culture through a process called
socialization. Culture has a great deal to do with how an individual sees, thinks,
and feels. This becomes obvious when one steps into another culture. He suddenly
becomes aware of his cultural biases. International marketers in particular must
study cultural differences as a prelude to planning their products and marketing
programmes in different countries.
Sub-cultures: Each culture contains smaller groups or subcultures, and each
of these provides more specific identification and socialization for its members.
Nationality groups, Religious groups, Racial groups, and Geographical areas are the
four types of subcultures identified. Major marketers, although their markets are
broad, require sensitivity to variations in the needs and preferences of different
subcultures.
Social class: Virtually all human societies exhibit social stratification.
Stratification may take the form of a caste system where the members of different
castes are reared for certain roles and cannot change their caste membership. More
frequently, stratification takes the form of social classes. Social classes are
relatively homogeneous and enduring divisions in a society which are ordered with
respect to each other and whose members share similar values, life-styles, interests
and behaviour.
Marketers have found social class a useful variable for segmenting markets.
Products, advertising appeals, services, and atmospheres can be designed to appeal
to specific social classes. Social classes show distinct differences in their tastes in
clothing, home furnishings, leisure activity, automobiles, and so on. There is
evidence that social classes differ in their purchase decision processes as well
Reference groups: An individual is influenced by the many small groups with
which he interacts. Some are primary groups (family, close friends, neighbours and
fellow workers) and others secondary groups (fraternal organisations, professional
associations). He is also influenced by groups of which he is not a member, such as
sports clubs and movie clubs. Groups that interact and influence the attitudes and
behaviour of an individual are called reference groups.
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Reference group influences consumption behaviour most strongly in those

product and brand categories that are visible and even conspicuous. The more
cohesive the reference group, the more effective its communication process; and the
higher the individual esteems it, the more influential it will be in shaping his
product and brand choices.
The Person: From what has been said, a person's basic motivations are heavily
influenced by social learning. The norms and value systems in his culture,
subculture, social class, and reference groups leave in indelible imprint on his
needs and wants. These social forces deserve the most careful study by marketers
trying to interpret the objectives that might motivate consumer interest in their
products and brands.
5. The Nicosia Model: In recent years, some efforts have been made by
marketing scholars to build behaviour models totally from the marketing man's
standpoint. The Nicosia model and the Howard and Sheth model are two important
models in this category. Both of them belong to the group called the systems model,
where the human being is analysed as a system with stimuli as the input to the
system and behaviour as the output of the system.
The model tries to establish the links between a firm and its consumer-how
the activities of the firm influence the consumer and result in his decision to buy.
The messages from the firm first influence the predisposition of the consumer
towards the product. Depending on the situation, he develops a certain attitude
towards the product. It may lead to a search for the product or an evaluation of the
product. If these steps have a positive impact on him, it may result in a decision to
buy. This is the sum and substance of the 'activity explanations' in the Nicosia
model. The Nicosia model groups these activities into four basic fields.
Field One has two sub-fields-the firm's attributes. An advertising message
from the firm reaches the consumer's attributes. Depending on the way the
message is received by the consumer, a certain attribute may develop, and this
becomes the input for Field two. Field Two is the area of search and evaluation of
the advertised product and other alternatives. If this results in a motivation to buy,
it becomes the input for Field Three. Field Three consists of the act of purchase.
And Field four consists of the use of the purchased item. There is an output from
Field Four – feedback of sales results to the firm.
6. The Howard-Sheth Model: John Howard and Jagdish Sheth put forward the
Howard and Sheth model in 1969, in their publication entitled 'The Theory of Buyer
Behaviour'. The logic of the model runs like this: There are inputs in the form of
stimuli. There are outputs beginning with attention to a given stimulus and ending
with purchase. In between the inputs and the outputs there are variables affecting
perception and learning. These variable are termed 'hypothetical' since they cannot
be directly measured at the time of occurrence.
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Over the years, several other models have also been put forward, with the
intention of explaining buyer behaviour. All these models have certain merits and
certain limitations. They do not fully explain the complex subject of buyer
behaviour. Nor do they establish a straight input-output equation on buyer
behaviour. And, none of them provides a precise answer to the why's or how's of
buyer behaviour. They merely explain the undercurrents of human behaviour from
different angles and premises. But these models will certainly be helpful in gaining
at least a partial insight into buyer behaviour.
7.3.3. Buying Motives
A consumer buys a particular product because he is influenced by certain
motives. Motive is a strong feeling, urge, instinct, desire or emotion that makes the
buyer to react in the form of a decision to buy. For that matter, every human
activity is motivated and is not spontaneous. Consumers, for example, are goal-
seekers who gratify their needs by purchases and consumption. In other words,
needs are the motivational element behind purchase. These needs were classified
by Abraham H. Marlow, in a pyramid form known as 'Hierarchy of Needs'.
Satisfaction proceeds through each of the five stages viz., psychological, safety,
social, self esteem and self realisation. When one need is satisfied, the customer
will seek higher goals and thus proceeds up the hierarchy. It seems that distinction
between needs and wants is necessary here. Needs are general in nature and
common to all people. For example, need for safety is common. But all needs may
not become demand. Only when need becomes specific and is consciously felt, it
conditioned by certain motives. These are termed as buying motives buying motives
are defined as "those influences or consideration which provide the impulse to buy,
induce action or determine choice in the purchase of goods or services. These
buying motives may be classified into two:
1. Product Motives
2. Patronage Motives
Product Motives: Product Motives may be defined as those impulses, desires
and considerations which make the buyer to purchase a product. Product motives
may still be classified on the basis of nature of satisfaction as,
1. Emotional Product Motives and
2. Rational Product Motives
Emotional product motives are those impulses which persuade the consumer
on the basis of his emotion. The buyer does not try to reason our or logically
analyse the need for purchase. He makes a buying to satisfy:
(i) pride; (ii) sense of ego, (iii) urge to imitate others; (iv) his desire to be
distinctive
Rational product motives are defined as those impulses which arise on the
basis of logical analysis and proper evaluation. The buyer makes a rational decision
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after cheap evaluation of the purpose, alternatives available, cost benefit, and such
other valid reasons.
Product motives may also be classified in the following ways:
1. Operational product motive
2. Socio-psychological product motives
Operational product motive may be defined as an impulse arising out of the
ability or function that a product is likely to provide. Socio-psychological product
motive may be defined as the desire to buy the product which shall arise as a result
of psychological or social significance that a buyer attaches to the product.
Patronage Motives: Patronage Motives may be defined as consideration or
impulses which persuade the buyer to patronise specific shops. Just like product
motives, patronage can be grouped as emotional and rational. Emotional Patronage
Motives are those that persuade a customer to buy from specific shops, without any
logical reason behind this action. He may be subjective for shopping in his favourite
place. Rational Patronage Motives are those which arise when selecting a place
depending on the buyers satisfaction that
1. it offers a wide selection
2. it has latest models
3. it offers good after-sales services etc.
7.3.4. Factors Influencing Buyer Behaviour
1. Impact of Information on Buyer Behaviour: The buyer today is exposed to a
veritable flood of information. There is a deluge of information unleashed on him
from different sources. These sources inform him about new products and services,
improved versions of existing products, new uses for existing products and so on.
The common information sources that persuade people to try a product are:
 advertising
 samples and trials
 display in shops
 salesmen's suggestions
2. The Socio-Cultural Environment: Affecting Buyer Behaviour: The buyer
whom we are studying is living in a society, influenced by it and in turn influencing
its course of development. He is a member of several organisations – formal and
informal. He is a unit of several groups. He belongs to a family, he is a member of
some religion or caste, he belongs to a certain language group. He may be a
member of a professional forum, he may belong to a particular political group, or a
cultural body. There is constant interaction between the individual and the
organisations to which he belongs. And all these interactions leave some imprint on
him. Which influences him in his day-to-day life and consequently, his buying
behaviour.
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3. Group Influence on Buyer Behaviour: Actually group influence on buyer

behaviour is of two types since there are two types of groups exercising an influence
on buyers:
i) the intimate group and
ii) the broad social classes
Influence of intimate group on buyer behaviour: Examples or intimate groups
are family, friends, close colleagues, and small, closely-knit organisations. These
groups exercise a strong influence on the life styles and the buying patterns of the
members. Among these groups, the most influential and primary groups are the
family and peer groups. The peer groups are close-knit groups composed of
individuals, who have a common social background and who normally belong to the
same age group.
4. Influence of Social Classes on Buyer Behaviour: Buying behaviour of
individuals is also influenced by the social class to which they belong. Structurally,
the social class is a larger group than the intimate groups. The constitution of a
social class is decided by the occupation, place of residence etc., of the individual
members. The members of a social group will enjoy more or less the same
community status and prestige. Each class develops its own standard of life style
and behaviour patterns. And the members of the class normally select a product or
a brand which caters to their group norms. Marketers stand to gain considerably
form a proper study of group influence on individual buying behaviour. It will help
them to develop proper marketing strategies for different customer segments.
5. Influence of Religion, Culture, Language, etc, on Buyer Behaviour: Every
culture, every religion and every language group dictate its own unique patterns of
social conduct. Within each religion, there may be several set and sub-sects; there
may be orthodox groups and cosmopolitan groups. In dress and food habits,
education or marriage in almost all matters of individual life, religion and culture
exercise an influence on the individual directly or indirectly. The do’s and don’ts
listed out by religion and culture, control significantly the individual's life style and
buying behaviour.
6. Status Influencing Buyer Behaviour: People are becoming more and more
concerned about their image or their status in society. This concern is a direct
outcome of the material property of the society. The desire to the somebody, 'to feel
that you are somebody, are to show that you are one, is a compelling one in modern
society. Status is announced through various symbols like dress, ornaments,
possessions, and general lifestyle. The values attached to these status-symbols may
change over time. It is for the marketing man to know and capture the marketing
opportunity behind these changing symbols-symbols of status.
Buying Habits: Marketers should also know the buying habits of customers-
how, when and where they buy. Buying habits can be best studied in relation to the
types of products purchased. In fact, classifications of consumer goods have been
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made on the basis of buying habits. One such classification divides them into
convenience goods, shopping goods and specialty goods.
Convenience Goods: There are certain product which the consumers would
like to purchase with the least possible effort. Such items are purchased frequently
and their unit price is low. There is not much of planning behind the purchase.
Products like toothpaste, soap, cigarettes, etc., come under this category. There is a
recurring need of these items and the consumer would desire to get it at an easily
accessible place. These are convenience goods. Manufacturers marketing such
products know that the products have to be made available within the customer's
easy reach. So they make these products available in as many outlets as possible
ensuring maximum exposure. If the products are not available easily, the consumer
is not prepared to make a special shopping trip for buying the products, and he
may readily switch over to any substitute product or brand available at the
immediate vicinity.
Shopping Goods: Items like furniture, dress materials, electrical appliances,
etc., are not purchased so frequently. There is an element of planning behind the
purchase. It is not necessarily purchased at the easily accessible store. The buyer is
willing to make one or more shopping trips to buy these items. Unlike the purchase
of convenience goods, these purchases involve considerable expenditure. The
customer would certainly like to compare the prices, quality, patterns etc., in a
number of stores before finalizing the purchase. Such products are normally not
standardized items. There is an element of fashion in them. They are termed
shopping goods.
In accordance with these buying habits, marketing methods of these goods
have been modified. Since the buyers of shopping goods are in the habit of
comparing the items in one shop with those of another, stores dealing in such
goods are seen clustered in market centres. Whereas manufacturers of convenience
goods make their products available through innumerable sales points, in the case
of shopping goods, normally there will be a smaller number of selling points. And
the manufacturers normally sell directly to the retailers without routing the
supplies through a wholesale tier.
Specialty Goods: Specialty goods are high-priced goods-care, watches, high-
priced dresses and ornaments, etc. Purchases of specialty goods involve substantial
investment and the periodicity of purchase is less frequent than that of shopping
goods. Specially, goods are not purchased out of instant decisions. The various
aspect of the purchase-the cost angle, the utility angle, the prestige angle, the
alternatives available, the experience of others who have purchased the product are
analysed before deciding on the purchase. Normally the entire family takes part in
the decision- making process in the purchase of specialty goods.
Since the buyers of such products are prepared to make special purchase
efforts, the manufacturers need not have a wide distribution. They normally deal
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through a small number of outlets in potential markets. They have a selective

distribution, normally entrusting the job to selected retailers. In certain cases, the
manufacturers of specialty goods operate their own retail outlets.
7.3.5. Buying Process
The buying process includes the following five steps:
1. Need Recognition: Buying process begins when a person begins to feel that a
certain need or desire has arisen. The need may be activated by internal or external
factors. The intensity of the want will indicate the speed with which a person will
move to fulfill the want. The buyer will postpone the less important motives.
Marketing management should offer appropriate cues to promote the sale of the
product.
2. Information Search: Aroused needs can be satisfied promptly when the
desired product is not only known but also easily available. But when it is not clear
what type or brand of the product can offer best satisfaction, the person will have to
search for information. This may relate to the brand, location and the manner of
obtaining the product. Consumers can use many sources, like family, friends,
neighbours, opinion leaders and acquaintances. Marketers also provide relevant
information through salesman, advertisements, dealers, packaging, sales promotion
and window-displaying. Mass-media like newspapers, radio and television provide
information. Marketers are expected to provide reliable, up-to-date and adequate
information regarding their products and services. This is the pressing demand of
consumerism.
3. Evaluation of Alternative: This is the critical stage in the process of buying.
There are several important elements in the process of evaluation:
1. A product is viewed as a bundle of attributes. These attributes or features
are used for evaluating alternative brands. For example, a product like it has
certain common attributes such as taste, flavour, strength, aroma, colour,
number of cups per packet and price.
2. Information cues or hints about a set of characteristics of the product in
brand such as quality, price, distinctiveness, availability etc.
3. brand images and brand concepts can help in the evaluation of alternatives.
4. In order to reduce the number of alternatives, some consumers may
consider more critical attributes and mention the level of for those
attributes.
5. Occasionally, consumers may use an evaluation process permitting trade off
among different alternatives.
Marketers should grasp thoroughly the process and utility functions for
designing and promoting the product.
4. Purchase Decision: While the consumer is evaluating the alternatives, he
will develop some likes and dislikes about the alternative brands. This attitude
towards the brand influence the intention to buy. Thus the prospective buyer heads
towards final selection. In addition to all other factors, situational factors like
61
dealers terms, falling prices etc., also are considered. Perceived risk may also
influence the decision to purchase. High priced products involve higher risk.
Sophisticated products involve performance risk. Consumers may not have
confidence in foreign products involving higher cost and they would prefer national
brands to reduce risks and problems of service after sale.
5. Post-purchase Experience and Behaviour: The brand purchase and the
product use provides feedback of information regarding attitudes. If the derived
satisfaction is as per the expected satisfaction, it will create brand preference
influencing future purchase. But if the purchased brand does not yield desired
satisfaction, negative feelings will occur and this will create anxiety and doubts.
This phenomenon is called cognitive dissonance. There will be lack of harmony
between the buyer's beliefs and his purchase decision. Marketer may try to create
dissonance by attracting users of other brands to his brand. Advertising and sales
promotion can help marketer in this job of brand switching.
1. Theories of buying behaviour.
2. Different factors influence buying behavior.
1. Explain the factors influencing Buyer Behaviour.
2. Narrate the Buying process.
7.6. SUMMARY
Buyer mind is a black box many persons tried to study the buyers mind and
are successful to some extent only. Hence Buyer Behaviour is still a riddle.
1. Who is a buyer?
2. Define buyer bahaviour?
1. Indian Journal of marketing.
7.9. ASSIGNMENTS
1. What do you mean by Buyer Behaviour? Discuss the different themes of
Buyer Behaviour.
Discuss the buying behaviour that is need of the hour.
7.12. KEYWORDS
Reference group, buying motives, buying process, Patronage motives

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LESSON – 8
SALES FORECASTING
8.1. INTRODUCTION
A sales forecast is an estimate of the amount or unit sales for a specified
future period under a proposed marketing plan or programme. The American
Marketing Association has defined sales forecast as "an estimate of sales, in dollars
or physical units for a specified future period under a proposed marketing plan or
programme and under an assumed set of economic and other forces outside the
unit for which the forecast is made"
The making of a proper sales forecast requires assessment of two sets of
factors:
1. The outside uncontrollable forces likely to influence the company's sale,
such as the weather, government activity and competitive behaviour.
2. The internal marketing methods or practices of the firm that are likely to
affect its sales, such as product, quality, price, advertising, distributing and
service.
The sales forecast may be for a specified product or for the entire product line
or it can be for market as a whole or any portion of it. Once the sales forecast is
prepared, it becomes the key controlling factor in all operational planning
throughout the company. The forecast is the basis of sound budgeting. Financial
planning or working capital requirements, plant expansion, and other need is based
on anticipated sales. Scheduling of all production as setting man power needs
purchasing raw material requirement, and determining the rate of production
output depends upon sales forecast.
8.2. OBJECTIVES
 To know the meaning of sales forecasting and its uses
 To study various techniques of sales forecasting
 To study the sales forecasting procedure and its limitations
8.3. CONTENT
8.3.1. Uses of Sales Forecast
8.3.2. Period of Sales Forecast
8.3.3. Sales Forecasting is a Difficult Task
8.3.4. Criteria in Sales Forecasting
8.3.5. Techniques of Sales Forecasting
8.3.6. Section of Appropriate Forecasting Method
8.3.7. Sales forecasting procedure
8.3.8. Marketing Information System (MIS) and Sales Forecasts
8.3.9. Limitations of Sales Forecast
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8.3.1. Uses of Sales Forecast

Sales forecasting serves the following purposes:
1. It enables the company concerned to meet the growing needs by balancing
supply and demand. As far as sudden and temporary pressures are
concerned, forecasting helps the organisation to avoid them.
2. It is useful for measuring the efficiency of sales department. Sales
forecasting may be said to occupy a forefront seat in management.
3. Reliable sales forecasting is a first rate aid to proper pricing whether in
terms of costs or in terms of what the market will bear.
4. It aids in reallocation of sales territories.
5. It mitigates the twin evils of under-stocking and over-stocking
6. It acts as a tonic for financial departments which may make use of sales
forecast.
7. It acts as a friend, philosopher and guide in so far as plant layout,
warehousing and transportations facilities are concerned.
8. Seasonal or timely fluctuations may be easily met with by averaging out
production and employment over the year.
9. Maximum regularisation of production which forecasting makes possible
serves to eliminate completely or reduce substantially the need for over-
time work at premium rates. It also eliminates slack periods in which
workers have nothing to do. Perhaps the most dramatic advantage of
forecasting in the personal field is the opportunity it gives management to
avoid frantic discharging and hiring policies.
According to Henry Fayol, "The act of forecasting is of great benefit to all who
take part in the process, and is the best means of ensuring adaptability to changing
circumstances. The collaboration of all concerned leads to a unified front, an
understanding of the reasons for decisions and a broadened outlook".
The specific contributions of forecasting to the field of marketing management
may be summed as follows:
 To decide whether to enter a new market or not.
 To determine how much production capacity to be built up.
 To help in the product mix decisions (to eliminate or to add a new
product).
 To prepare standards against which to measure performance.
 To prepare annual budgets based on estimated sales revenue.
 To assess the effects of a proposed marketing programme.
Sales forecast is the cost or keystone of marketing management. On the basis
of the reliable sale forecast, we can have (1) the required number of the salesmen to
achieve our sales objective, (2) allocation of sales quota for each salesman,
(3) determination of sales compensation plan, (4) determination of sales territories,
(5) advertising and sales promotion programme, (6) scheme of distribution, (7) fixing
64
of sales price, (8) production plan, (9) regulating inventories and purchasing,
(10) estimating standard cost, (11) budgeting and controlling expenses, and (12)
planning cash requirements.
In fact entire marketing mix, viz., product, price, promotion and physical
distribution revolves round the sales forecasts. Sales forecasting acts as the basis
not only of production planning and marketing planning but also of financial
planning and personal planning. The master plan or budget of the company as the
functional or departmental plan and budgets are ultimately based on sales
forecasts. Thus a comprehensive and integrated business planning (strategic as
well as short term) is based on the foundation of sales planning.
Sales forecasting is a device by means of which management may integrate its
objectives, its operating programmes, and its targets with potential market
opportunity. This is done by translating the sales forecast into specific profit and
sales volume goals to be realised in the given period. The sale forecast thus
becomes a basis for marketing programmes, purchasing plans, financial, budgets,
personnel needs, production schedules, plant and equipment needs, expansion
programme and many other aspects of management programming.
8.3.2. Period of Sales Forecasts
As far as time frame is concerned, basically, there are three types of sales
forecasts:
 The short range forecasts
 The long range forecasts
 Perspective planning forecasts
The short range forecasts help in short range business planning. Such forecast
are usually made for a period of one year and reviewed monthly, quarterly or half
yearly. Revisions are made in the light of experience and changing conditions. The
short-range forecasts are used for planning the various sales/marketing
programmes like personal selling, advertising, warehousing arrangements and so
on. They also used for short-term planning of the activities in the functional areas
that are outside marketing like production, finance and materials.
The long range forecast at the time of starting facilitate investment decisions at
the time of starting a new industry or while attempting and expansion or
diversification. Since industrial investment is often irrevocable and the pay-off
period extends over a long term, demand forecasting for a longer-term, say ten
years will be essential for investment decisions. The margin of error may be high in
such long-term forecasts. Yet, they would be sufficiently reliable for planning
purposes.
Sometimes, one comes across a still longer-term forecast, say for 15 or 25
years. Such forecasts are normally used for the purpose of perspective planning.
Economies subscribing to planned economic development often generate
65
perspective planning targets in the different sectors of the national economy.

Perspective planning of this kind serves as a guide to the planning and
implementation process over a really long ranging period.
8.3.3. Sales Forecasting is a Difficult Task
In any business, sales forecasting invariably turns out to be a difficult
exercise. There are two vital reasons for this. In the first place, forecasting means
predicting the future. And as Peter F. Drucker said, we can be certain of only three
things about the future.
1. it cannot be known with certainty.
2. It will be different from what it is now.
3. It will be different from what we expect.
Secondly, each business has certain peculiarities. As such forecasting of
demand and sales in any business bristles with certain peculiar complexities. One
has to master these complexities in any attempt at sales forecasting.
8.3.4. Criteria in Sales Forecasting
The following are the criteria frequently used:
 Market potential (or industry potential)
 Company potential (or sales potential)
 Market demand (or industry demand)
 Company demand (or sales possibilities)
 Market forecast (or industry forecast)
 Company forecast (or sales forecast)
'Market potential' is nothing but a quantitative estimate of the total possible
sales by all the firms selling the product in a given market. It gives an indication of
the maximum demand or the ultimate potential for that product assuming that the
ideal marketing effort is made. 'Company potential' refers to a part of the market
potential, what an individual firm can sell at the maximum in a given market, again
under ideal conditions and on the assumption that the ideal marketing effort is
made.
The terms 'Market demand' and 'Company demand', refer to those portions of
'Market potential' and 'Company potential' that are achievable under existing
conditions. 'Market forecast' and 'Company forecast' are still narrower they refer to
what the industry and the firm respectively are likely to sell in actual practice
during the period of the forecast.
It can be easily seen that 'Company potential' is just a part of 'Market
potential', 'Company demand' is just a part of 'Market demand', and 'Company
forecast', i.e., sales forecast is just a part of 'Market forecast'.
8.3.5. Techniques of Sales Forecasting
No one method of sales forecasting can be applied to all enterprises, nor can
all factors that establish a sales forecast be obtained from one source. These
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techniques range from uninformed guesses of the executives to highly sophisticated

statistical methods. Usually separate estimates are prepared for each article or
product line. Then each total product forecast is sub-divided in as much detail as
possible i.e., a forecast should be made in rupees and/or units for each territory,
customer, group or other meaningful sales unit. Such forecast may then be used in
planning for sales quota or allocating the advertising expenditure.
Some of the most common techniques used for sales forecasting are discussed
below:
1. Jury Method/Executive Opinion Method: Under this method, opinions of
the top executives (form marketing, production, finance and other departments)
regarding future sales volume is obtained. Such method provides forecasts easily
and quickly; does not require any elaborate statistics; permits combining and
averaging the specialised opinion of different executives. But such method lacks
scientific validity and may turn out to be absolutely wrong and deceptive; and it
also disperses responsibility for accurate forecasting.
2. Sales Force Composite Method: As per the sales force composite method,
the sales forecasting is done by the sales force. All salesmen develop the forecast for
their respective territories; the territory-wise forecasts are consolidated at
branch/region area level; and the aggregate of all these forecasts is taken as the
corporate forecast.
3. Survey of Export Opinion Method: This is yet another judgment-based
method of sales forecasting. This is somewhat different form the jury method and
the sales force composite method. In those two methods, opinions of the executives
and sales force are used to develop the forecast. In survey of expert opinion method,
experts in the concerned field inside or outside the organisation are approached for
their estimates. This method may be relatively more useful when total industry
forecast is developed than in company level sales forecast.
4. Users' Expectation Method: This method is adopted for industrial
marketing. The advantage here is that the customers comprise only a small group.
Clearly, if a company can obtain an adequate and reliable information sample of
what customers will buy, even though the actual orders are not in hand, it will have
a good basis upon which to develop a sales forecast.
As pointed out, this method cannot be adopted in consumer goods marketing
as the customers are large in number. Secondly, customer expectations cannot be
predicted accurately.
5. Market Share Method: Some firms use a simple method of sales forecast in
which the desired/planned market share of the firm is the key factor. They work
out the industry forecast apply their market share factor and deduce the company's
sales forecast. The market share factor is developed based on past trend, company’s
competitive position, brand preference etc. Such conversion of industry forecast
67
into company sales forecast enquires considerable expertise. By a detailed

marketing audit, the firm must correctly appraise its market standing, brand
image, market share and strengths and weaknesses as compared with the
competitors in the industry. It must also correctly assess through reliable
marketing intelligence, its competitor’s plans, policies and activities. Only then, the
forecast arrived at by this method will have a good degree of reliability. Retail audit
would also be of considerable help in employing, the market share method; it would
help assess the industry position as well as the individual firm’s market shares.
6. Simple Projection Method: Among the projection methods, the simplest is
the one that uses the ‘rule of the thumb’ by which current year’s forecast is arrived
a by simply adding a certain percentage to last year’s sales. Some firms use the
formula shown below:
Next year's sales 

This year's Sales2
Last year's sales
This formula will provide a reasonably reliable estimate only if the sales are
stable and show an increasing trend. Some other firms go by the growth rates
adopted by industry leaders. In certain cases the rate of growth of the industry as a
whole is adopted or the projection.
7. Extrapolation Method: Some firms rely on the extrapolation method.
Extrapolation is also a projection/trend method. It involves the plotting of the sales
figures for the past several years and stretching of the line or the curve as the case
may be. The mechanical extrapolation will give the sales forecast for the coming
years. Extrapolation basically assumes that the variables will follow the previously
established pattern. Accordingly, this method will be effective where the pattern of
past movement has been relatively steady and abrupt disruptions are unlikely in
the future. In other words, the assumption is that the future will mirror the past.
8. Moving Averages Method: This method enables us to eliminate the effects of
seasonality and other irregular trends in sales. Each point of a moving average of
time series is the arithmetical or weighted average of a number of preceding
consecutive points of the series. If seasonal effects are present in the demand
pattern of the product, a minimum of two years sales history is needed for applying
this method.
9. Exponential smoothing: Exponential smoothing is yet another projection
method of sales forecasting. It is similar to moving averages and is used fairly
extensively. It represents the weighted sum of all past numbers in a time series
with the heaviest weight placed on the most recent data. This method is
particularly useful when forecasts of a large number of items are made. It is not
necessary to keep a long history of past data. The method can have a stable
response to changes and responses can be adjusted as required.
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10. Time-series Analysis: It is a common device of mathematical projections of

future sales. It involves the projection of past sales trends into the future. To
predict future sales we analyse four kinds of historical sales variations (1) seasonal
variations, (2) movements related to changes in the business cycles (Depression,
Revival, Prosperity, Boom followed by Slump and so on), (3) the long-term trends of
sales, and (4) irregular or unexplained variations. By isolating and analysing these
four types of variations in sales, an analyst can estimate with accuracy the
probable level of sales for a coming period. Of course, it is assumed that the past
trend will continue in the future under such extrapolation. This is an objective
method of sales forecast.
11. Regression Analysis: Regression analysis is another analytical technique of
sales forecasting. This technique tries to functionally relate sales to those variables
that influence sales. They may be economic factors, competitive factors or price.
The variable which is to be forecasted is the dependent variable and the factors
which cause changes in the dependent variable are explanatory or casual variables.
The association between the dependent the dependent variable (i.e. the sales
forecast of the company) and the explanatory or causal variables is determined and
measured. An equation is fitted to explain the fluctuations in sales in terms of
explanatory or causal variables.
After establishing the relationship based on past data and with the estimated
values for the factors for future years, we can get the sales estimates for the future
years. Where sales are influenced by two or more causal variables acting together,
multiple regression analysis is applied. Computers are used for regression analysis
involving complex calculations.
The regression method, in general, will give more accurate forecasts than the
trend method since regression takes into account causal factors. At the same time,
in regression analysis involving a number of causal variables, the error of
forecasting will multiply along with the error in determining and measuring the
relationship or influence of each of these variables.
12. Econometric Models: Econometric models constitute yet another analytical
method of sales forecasting. Econometrics basically attempts to express economic
theories in mathematical terms so that they can be verified by statistical methods
and used to measure the impact of one economic variable upon another for
predicting future event. The econometric forecasting models vividly portray the real
world situations and the multiple variables involved in the sales situation.
The econometric models are quite complex and expensive to develop. But they
predict the turning points more accurately. The econometric models are used more
in forecasting the demand of durable industrial as well as consumer durables,
where ‘replacement demand’ is a significant factor to be projected.
13. Market Survey Method: When a company wants to introduce a new
product or an improved product, it resorts to a market survey to assess the likely
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demand for the product. Likewise, any new company entering the market for the
first time, resorts to the market survey method for forecasting its demand/sales.
This is quite natural. The firm does not have any data of past sales or past demand
patterns to fall back upon. It has to gather the information from the market and
take decisions. Usually, the firm conducts a survey among a sample of consumers
and gauges their attitudes, likely purchases and purchase habits. Sometimes, a
survey is conducted among the channel members-wholesalers, and/or retailers to
elicit information on their attitudes, likely purchases, etc.
8.3.6. Selection of Appropriate Forecasting Method
The forecaster must carefully choose his method of forecasting from among the
wide variety of methods. Basically, the method chosen must match the
requirements of his product and his organisation. Since all the methods have their
associated merits and demerits and there is nothing like an ideal forecasting
method that could be applied to advantage in all situations, the forecaster must
assess the suitability of the specific method to his specific situation before
commissioning the forecasting exercise. Quite often, the forecaster can improve his
forecast by choosing a combination of more than one method.
8.3.7. Sales Forecasting Procedure
The usual steps involved in sales forecasting are:
1. Determining the objectives for which the sales forecasts are to be used.
2. Dividing Company’s products into homogeneous groups.
3. Determining the relative importance of the factors which affect sales of each
such group.
4. Selecting the appropriate sales forecasting method.
5. Collecting and analysing the sales and drawing conclusions there from.
6. Converting the conclusions into specific forecasts relating to the products
and territories involved.
7. Applying these forecasts to company’s operations; and
8. Periodically reviewing and revising the forecasts.
8.3.8. Marketing Information System (MIS) and Sales Forecasts
Marketing information is central to sales forecasting. Since a large number of
factors, such as changes in economic and business conditions, changes in market
potential, changes in competition and changes in the programmes of the firm
influence the sales of a firm, sales forecasting requires a data base relating to all
these factors.
The following are the essential data requirements for effective sales forecasting.
1. Industry sales for the past few years; product-wise territory-wise, customers
class-wise, month-wise and dealer-wise.
2. Past sale of the company.
3. Production data-industry and company.
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4. Market share of each firm in the industry with break-up of sales by

markets/territories/channel types.
5. Sales of substitute products.
6. Use pattern of the product.
7. Economic, technological and environmental date relevant for the product’s
consumption.
8. Strengths and weaknesses of the firm in the market.
8.3.9. Limitations of Sales Forecast
It is subject to certain limitations, which hamper the accuracy of sales
forecasting. The limitations are offered by factors such as fashion, absence of sales
history, growth elements and psychological behavioural variables of the market.
Fashion or style affects the sales. It is difficult to say how for the market will
adopt the new fashion and for how long. If the fashion becomes popular, large sales
may result otherwise the sales may be very small.
Absence of sales history also creates difficulty in accurate forecasting in case
of those firms which base their forecasts on the past sales trends. In the absence of
past a sales history the sales forecasts may be based on mere guess work.
Anticipated growth rate for the product can be calculated precisely, because
the rate of growth never remains uniform, the same rate may rather continue,
decline or remain stationary.
Psychological behavioural variables prevailing in the market are difficult to
measure for any change in the consumer attitude may upset the entire sales
forecast.
Therefore, while preparing sales forecasting, due consideration should be given
to these limitations by the marketing executives.
1. Sales forecast helps into enter a new market.
2. MIS is central to sales forecasting.
1. What are the types of sales forecast?
2. What are the criteria in sales forecasting?
8.6. SUMMARY
Sales forecasting is an estimate or projection of sales likely in the future. It is
helpful for a marketing man in several ways in planning. There are various
techniques used for sales forecasting. An organisation should choose an
appropriate method of Sales Forecasting.
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1. What is Jury method?
2. Define Time-series analysis.
8.9. ASSIGNMENTS
1. Define Sales Forecasting. State the importance of Sales Forecasting.
2. Explain the techniques of Sales Forecasting.
Fundamentals of marketing – William J Stanton
Marketing Management – Philip Kotler
Marketing Management – V.S. Ramaswamy
S. Namakumari
Principles and Practice of – Dr. C.B. Mamoria
Marketing in India R.L. Joshi
Principles of Marketing - S.A. Sherlekar
S.J. Salvadore Victor
Dr. K. Nirmala Prasad
1. Suma Limited has a product range of steel furniture, cosmetics, drugs, cattle
feed, refrigerators and typewriters. The company has market potential
throughout India. How would you segment the market for Suma Ltd?
(Refer Lesson 6)
2. Bata shoes are gradually losing their position in the market. Suggest a
strategy to reposition them.
(Refer Lesson 7)
3. State the factors influencing the TV buyers. The extent of their influence and
the appropriate approach of marketers have also to be highlighted.
(Refer Lesson 8(
4. You are making and marketing mosquito nets. Now the market is flooded
with mosquito repellents. How would you manipulate your marketing mix to
face the market situations?
(Refer Lesson 9)
8.12. KEYWORDS
Sales Forecasting, Market Potential
❑
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LESSON – 9
MARKETING MIX
9.1. INTRODUCTION
It was James Culliton, the American marketing expert, who coined the
expression Marketing Mix and described the marketing manager as a ‘mixer of
ingredients’. To quote him, “The marketing man is a decider and an artist-an mixer
of ingredients, who sometime follows a recipe prepared by others: sometimes
prepares his own recipe as he goes along; sometimes adapts a recipe to the
ingredients immediately available; sometimes invents some new ingredients; and
sometimes experiments with ingredients as no one else has tried before”.
It was Jerome McCarthy, the well-known American Professor of marketing,
who described the variables of marketing mix in terms of the four Ps, classifying the
variables under four heads, each beginning with the alphabet ‘P’;
 Product.
 Place (distribution).
 Pricing.
 Promotion.
These for components of the marketing mix are also alternatively described as:
 The product mix.
 The distribution mix.
 The pricing strategy.
 The communication mix.
In each of the marketing mix elements there are several sub-elements. The
complete set of marketing mix elements and sub- elements are presented below:
9.2. OBJECTIVES
After reading this lesson you will understand
 The concept of Marketing mix
 Variables of Marketing mix
9.3. CONTENT
9.3.1. Product Variable
9.3.2. Place Variables
9.3.3. Price Variable
9.3.4. Promotion Variables
9.3.5. Customer Variables
9.3.6. Competition Variables
9.3.7. Trade Variables
9.3.8. Environmental Variables
9.3.9. Management of Marketing Mix
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9.3.1. Product Variables

 Product line and range.
 Design, quality, features, models, style, appearance, size and warranty of
product.
 Packaging, type, materials, size, appearance and label.
 Branding and trade mark.
 Service, pre-sale and after-sale.
 New products.
9.3.2. Place Variables
 Channels of distribution, types of intermediaries, channel policy and
design, location of outlets, channel remuneration, and dealer-principal
relations.
 Physical distribution, transportation, warehousing, inventory, levels, order
processing etc.
9.3.3. Price Variables
 Pricing policies, levels of prices, levels of margins, discounts and rebates.
 Terms of delivery, payment terms, credit terms and instalment facilities.
 Resale price maintenance.
9.3.4. Promotion Variables
 Personal selling, objectives, level of effort, quality of sales force, cost level,
level of motivation.
 Advertising, media mix, budgets, allocations and programmes.
 Sales promotional efforts, display, contests, trade promotions.
 Publicity and public relations.
In addition to the marketing mix variables described above, the marketing
manager of any firm handles another set of variables, viz., Behavioural/
Environmental variables. As the same indicates, these variables are constituted by
the behavioural or environmental forces that are external to the enterprise. This set
of variables too can be classified under four heads;
 Customer variables.
 Competition variables.
 Trade variables.
 Environmental variables.
There are several sub-variables under each of the Behavioural/Environmental
variables. They are presented below:
9.3.5. Customer Variables
 Number of customers.
 Location of the customer.
 Purchasing power of the customers.
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 Buying behaviour.
 Habit of purchase.
 Personality traits and attitudes.
 Lifestyles and needs
9.3.6. Competition Variables
 Structure of the industry.
 Nature and intensity of competition.
 Products and services offered by the competitors.
 Number of competitors, their size, capacity and territory of operation.
 Competitors’ sales levels in each market segment/product.
 Competitors’ strengths and weaknesses.
 Competition from substitute products.
9.3.7. Trade Variables
 Structure of the trade.
 Types of intermediaries, their number and strength.
 Trade practices.
 Service provided by the trade.
 Motives and attitudes of the intermediaries.
 Extent of sophistication of the trade.
9.3.8. Environmental Variables
 Level of technology.
 Government regulations on products, prices, distribution, etc.
 Controls on trade practices.
 Economic conditions in the country.
 Geography and climate.
 Culture and traditions.
 Law and politics.
 Attitudes of the public and the press.
The ‘marketing mix variables’ are often termed as ‘controllable variables’ of
marketing, as they emanate from within the enterprise and the marketing manager
is free to choose, alter and control these variable as he likes. The ‘environmental
variables’ are termed as ‘non-controllable variables’ as they are external to the firm
and the marketing manager cannot choose them or control them at his will.
The marketing process is nothing but the interaction of the marketing mix
variables with the environmental variables. As the environmental variables are non-
controllable any marketing programme in effect turns out to be a conscious
adjustment of the marketing mix variables to suit the environment variables.
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9.3.9. Management of Marketing Mix

Assembling the marketing mix elements into a winning marketing programme
is by no means an easy task. It involves many crucial decisions relating to each of
the elements-product, price, channel and promotion. Decisions are also required on
the interrelationships of the elements. What is the ideal combination of the four Ps
in a given situation? Which line of products or which individual product should be
the price structure? What are the channel options available and which one has to
be selected? What is the right promotion strategy for the product in the chosen
market? How should the total marketing effort and resource of the firm be
apportioned among each of the four Ps? These and many other similar questions
have to be raised and answered. The impact of the mix would be best when the
different elements of the mix are chosen correctly and are integrated very well with
one another.
Blending the marketing mix elements into a winning combination is a
continuous task and not a one shot assignment. No marketing man can assume
that the marketing job is over once the elements of the marketing mix are
assembled in the right way. The mix may require constant changes. The marketing
man has to carefully monitor the mix and adjust the elements as required by the
changing conditions.
The marketing man has to keep the marketing mix open. Without keeping the
marketing mix open and dynamic, the marketing man will not be in a position to
respond properly to the changes that are taking place constantly in the
environmental variable. Let us, for instance, take competition, which is a major
environmental variable. The competitor in a given industry may be making many
tactical manoeuvres in the market all the time. They may introduce a new product
or initiate an aggressive promotion campaign or announce a price reduction. The
marketing man of the firm has to meet all these manoeuvres and take care of the
competitive position of his firm and his brands in the market. The only route open
to him for achieving this is the manipulation of his marketing mix.
Just as the changes taking place in the external environment necessitate
modifications in the marketing mix, changes taking place within the firm too
necessitate modifications in the marketing mix. For example, changes in the
corporate strategy of the firm, changes in the resource level of the firm, or changes
in the product lines of the firm lead to changes in the marketing mix as well.
In short, the elements of the marketing mix have to be ingeniously altered to
accommodate the changes taking place within the firm and in the relevant external
environment. And this is precisely why assembling and operating the marketing
mix remains a continuous task in marketing management.
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1. Type of variables.
2. 4Ps
1. Explain the environmental variables.
2. What are the customes variables?
9.6. SUMMARY
The four elements of marketing mix are co-equal, inter-dependent and
essential. The marketing mix acts as the integrated marketing strategy and the four
elements together constitute the marketing strategy. Individually the four elements
are important but their significance lies in the proper mix or blend indicating the
unique way they are combined as a careful plan, or strategy, to meet competition in
a dynamic marketing environment. For one market segment we have a typical
marketing mix. The decisions on the elements of marketing mix must be properly
co-ordinate and balanced in order to achieve an optimum marketing mix.
1. What is product mix?
2. Define pricing strategy.
1. Journal of International Marketing.
9.9. ASSIGNMENTS
1. Explain the different variables of Marketing Mix.
2. Brief the Behavioural/ Environmental variables.
3. Narrate Management of Marketing Mix.
Discuss the 4Ps of marketing mix in the present context.
9.12. KEYWORDS
Four Ps, Variables, Marketing mix, blending the Marketing mix
❑
77
LESSON – 10
PRODUCT
10.1. INTRODUCTION
In a most simple way a product could be defined as “everything the purchaser
gets in exchange for his money.” From a strictly technical or manufacturing point of
view, a product consists of a number of raw materials put together that the end
result (i.e., the product) serves a useful purpose of consumption. From the
economic point of view, a product consists of a bundle of utilities involving various
product features and accompanying services. These utilities are created by a set of
tangible, physical and chemical attributes assembled in an easily identifiable form.
The products, for easy identity, will have a descriptive name also (brand name).
Thus, a consumer is buying what is expressed economically as “want satisfaction”.
A product is, therefore, not just a physical object but what consumers perceive it to
be.
Almost everything that we come across in our daily life is a product this course
material on Marketing Management is a product; Financial Express news paper is a
product; Reynolds ball point pen is a product; a bottle of Kissan’s Orange squash, a
tin of Complan, a Close-up tooth paste, a Margo soap, a packet of Surf, a Onida TV
set – they are all products. All of them have some utility behind them; all of them
cater to and satisfy some needs of some people. So, in simple terms, we can define
a product as a ‘need satisfying entity’.
A product is something more than a mere physical commodity. It has a
personality. Products carry certain meaning with them and project certain
distinctive image. These meanings and images arise out of the many components
that make up the total product personality. The major components are:
1. The core or the basic constituent
2. The associated features
3. The brand name
4. The package and
5. The label
10.2. OBJECTIVES
 To know the meaning of the term product and its importance.
 To know the classification of products.
 To study the product policy and factors influencing product mix.
10.3. CONTENT
10.3.1. Importance of the Product
10.3.2. Product Classification
10.3.3. Product Concept
10.3.4. Product Policy
10.3.5. Factors Influencing Product Mix
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10.3.1. Importance of the Product

A firm is not selling a product. It sells only the “Product benefit”. Product is the
most important variable in the marketing mix of a firm. Any firm is floated to
manufacture and sell a product. If the product is sound and easily acceptable to
the market, if it satisfies reseller’s needs and consumer preferences and is carefully
fitted to the needs and desires of the customers, sales success is assured. In
essence, the right product is a great stimulus to sales. A right product is bound to
reduce considerably the problems pricing, promotion and distribution. It need not
have aggressive advertising and high pressure salesmanship. It may not demand
extra-ordinary sales promotion gimmicks. Hence ‘product’ is the centre of all
marketing policies and decisions. The marketing planning begins with the product
and also ends with the product. So product decisions are the most important
decisions.
10.3.2. Product Classification
It is evident that ‘product’ has been undergoing a constant change and the
marketing man has been constantly engaged in enriching his product offer. In his
attempt to score over competition, he has been bringing out refinements upon
refinements on his basic product offer but managing the product was becoming
more and more difficult. He had to take the ‘product’ to higher and higher levels of
evolution such as:
 The generic product
 The branded product
 The differentiated product
 The customized product
 The augmented product
 The potential product
The Generic Product and the Branded Product
The generic product is an unbranded and undifferentiated commodity like rice,
bread, flour or cloth. The branded product gets an identity through a ‘name’.
Spencers bread and Modern bread are branded products. The marketing
implications of ‘the Brand’ have already been dealt with earlier in detail.
The Differentiated Product
The differentiated product enjoys a further distinction from other similar
products/brands in the market. The differentiation claimed may be ‘real’, with a
real distinction on quality or utility or service; or it may be ‘psychological’, brought
about through subtle sales appeals. All season’s Hi-tech Tomato soup is an
example of a differentiated product. It claims a distinction and difference over other
brands of packaged soups-it is ready in two minutes, it involves absolutely no
cooking, the product is to be just poured into boiled water and consumed. The
differentiation is essentially on the plank of convenience to the user.
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The Customised Product

In the customized product, the customer’s specific requirements are taken into
account while developing the product. This is a frequent practice in industrial
products marketing, where the manufacturer and the user are in direct contact and
the product gets customized to the requirements of the customer. When an
engineering and fabrication firm like Larsen and Toubro undertakes to supply oil
rigs to the Oil and Natural Gas Commission, it is offering a customized product to
the specifications of ONGC. It is not supplying an off-the-shelf or standard product.
When the same firm supplies its cement to ONGC, it is offering just a branded
product, not a customized product.
The Augmented Product
The augmented product is the result of voluntary improvements brought about
by the manufacturers in order to enhance the value of the product. These
improvements are neither suggested by the customers nor even expected by them.
The marketer, on his own arguments the product, by adding an extra facility or an
extra feature to the product. When manufacturers of Aristocrat mouled luggage
introduced luggage cases with wheels, it was a case of product augmentation. The
wheel was an extra facility the manufacturer thought of and added to the luggage.
Instead of lifting and carrying the suitcase, the users could now pull it along the
ground on its wheels.
The Potential Product
The potential product is tomorrow’s product carrying with it all the
improvement and fineness possible under the given economic and competitive
conditions. There are no limits to the ‘potential product’. The limit is set only by the
technological and economic resources of the firm. A computer which can
understand human language, and respond directly to human voice and oral
instructions is an example of a potential product.
10.3.3. Product Concept
The product concept has three dimensions viz.
1. Managerial Dimension
2. Consumer Dimensions and
3. Societal Dimension
1. Managerial Dimension: It covers physical attributes, related services, brand,
package, product life-cycle and product planning and development.
2. Consumer Dimensions: To the consumer, a product actually represents a
bundle of expectations. Once a product is bought by a consumer and his
evaluation, i.e., post-purchase experience, is favourable, marketers can have repeat
orders. Buyers are not interested in the composition of a product. They are
concerned only with what the product does, and to what extent it satisfies their
social and psychological needs.
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3. Societal Dimensions: To the society salutary products (having good effect in

the body & mind) e.g. Tonic and desirable product (TV., Cycle etc.) are always
welcome, as they fulfill the expectations of social welfare and social interests.
Salutary products yield long run advantages, but may not have immediate appeal.
Desirable products offer both immediate satisfaction and long run consumer
welfare.
Marketers have to fulfill the following social responsibilities while offering the
products to consumer.
1. Safety to users
2. Long-run satisfaction to consumers
3. Quality of life, concern for better environment
4. Fulfillment of government regulations relating to composition, packaging
and pricing of many products.
10.3.4. Product Policy
The modern marketing concept is that it is not sufficient merely to produce a
better product; it is also necessary to bring it to the attention of the prospective
customers. In other words:
(1) Even if there is a better product, it will not be bought unless its existence is
brought to the notice of the consumers
(2) A bad or useless product may be bought when its uses are highlighted to
the consumers. This makes it necessary on the part of the producers to adopt
certain “policies” to bring the product to the notice of the prospective buyers. The
term ‘policy’ can notes a principle of operation adopted by the management to guide
those who carry out action. A policy sets the objectives to be achieved and also the
limits within which the management has to operate. For the proper carrying out of
business functions, each function must have a policy. As far as a product is
concerned, such a policy is essential to make the product live up to the
expectations of the consumers. Such policies taken in regard to the development of
a new product or for retaining an existing product in the market is known as
product policy.
The main function of product policy is to guide the activities of the firm
towards common goals. Today the success of the company is measured not only by
its current profits but also by its long-term growth. In other words, a company
must strike a delicate balance between optimizing current operations and making
necessary provisions for the future. These aims could be achieved only by adopting
a proper product policy.
The important aspects analysed under product policy are:
 Consideration of the product mix;
 the rate, nature and direction of changes in demand for existing products;
 Product elimination and new product development decisions, and
 Product policy of the competitors.
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It is to be understood that product policies do not provide readymade answers

to the above problems. Product policy could provide only guidelines for efficient
planning and action.
Product policies are company rules to guide those engaged in product planning
development, production or marketing. Stated more specifically, such policies are
concerned with defining the type, volume and timing of the products that are
offered by a company for sale, it is sometimes suggested that the product policy is
applicable only in cases where new products are introduced. Product policies are
applicable for both existing and new products.
Deciding the Product Policy
Deciding the product policy is the main task in product management. What
products should a company make? Where exactly are these products to be offered?
To which market, or market segment? What should be the relationship among the
various members of a product line? What should be the breadth and depth of the
product mix? How many different product lines can a company accommodate? How
should the products be positioned in the market? What should be the brand policy?
Should there be individual brands, family brands and / or multiple brands? Can a
product be left to the middleman’s branding? Answers to these questions will
constitute the product policy of a firm.
Broadly, the product policy involves:
 Appraisal of the product line and the individual products.
 Decisions on product differentiation
 Product positioning
 Brand decisions
 Decisions of packaging
 New product development
Product policy has three elements viz. (1) Product item (2) Product line and (3)
Product Mix.
1. Product Item: Product item refers to the specific product manufactured by
a company. Simply speaking it refers to a particular product. For example,
Godrej Company produces various products (items), like locks,
refrigerators, typewriters, etc. Here each product is a product item.
2. Product Line: Product line refers to a group of products that are closely
related because: (a) they satisfy a class of need (b) they are used together
(c) they are sold to the same customer groups, (d) they are marketed
through the same type of outlets (e) they fall within given price ranges.
If any one of the conditions is fulfilled to a group of products
manufactured by a concern, then it is a product line.
3. Product Mix: Product Mix is defined as the composite of products offered
for sale by a firm or a business. Rather product mix is a collection of all
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products offered for sale by a company. Product mix is one of the elements
of product policy. The product mix is three dimensional: it has breadth/
width, depth and consistency.
(a) Breadth/Width: Breadth or width of the product mix refers to the
number of product groups or product lines found within the
company. For example, Bajaj Electricals produce varieties of electrical
appliances such as fans, mixies, lamps, etc.
(b) Depth: Depth refers to the number of product items within each
product line. For example Kodak Company manufactures different
varieties of cameras.
(c) Consistency: Consistency of product mix refers to the close
relationship of the various product lines. In other words the products
manufactured by a company are united by one factor. For example,
Bajaj Electricals produces various lines of products. But these goods
are not united by a common factor.
10.3.5. Factors Influencing Product Mix
As long as profit motive is there in any business, changes, in product mix are
inevitable. The exact number of products to be manufactured and marketed by a
firm cannot be exactly determined. They are influenced by many factors –
controllable, non-controllable, external or internal.
(1) Non-controllable Factors: The non-controllable factors may be (a) population
increase/decrease, (b) changes in the level of income of buyers, (c) changes in
consumer behaviour.
In India, there is an ever increasing rate in the growth of population. This
naturally adds to the number of buyers leading to a quantitative change in the
volume of production. The development programme of the Government ensures
increase in income enabling the consumers to spend more. This also adds to the
stream of demand qualitatively and quantitatively. The consumer behaviour is the
source of reasons that invite changes in product planning.
(2) Controllable Factors:
(a) Cost Considerations: A firm may think of adding the new product to
its product line which can be produced easily with the same
machinery and production facilities. It will certainly bring down the
cost of production of existing products. Thus the cost considerations
may be tempting motive behind such diversifications.
(b) Complementary/Demand Factor: A firm can add the product to its
product line which has a complementary demand to its products.
For example, a pen manufacturing company can start the production
of nibs and link also.
(c) Advertising and Distribution Factors: A firm using a wide network of
advertising and distribution channels can think of adding new
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products, to its product line as they can be distributed with the help
of the same network. It will lower down their advertising and
distribution costs also.
(d) Use of Waste: Sometimes due to use of waste and residual material
also there can be an increase in product line. The product can be
manufactured as by-product and it may bring down the cost of main
product.
(e) Company Objective: The company objective may be to stabilize or
increase the profits, to maximum sales or to enter into new markets.
This may motivate the company to add new product to its product
line. The elimination of obsolete products and unsuccessful product
also bring changes in product line and product mix of the
companies.
1. Three dimensions of product concept.
2. Non-Controllable and controllable factors of production.
1. What are the importance of the product?
2. What are the social responsibilities while offering the products to consumer?
10.6. SUMMARY
Product is the import variable in the market. If the product is satisfied to the
buyer, then all other tasks to the organ is simple.
1. Define product.
2. Define brand.
10.9. ASSIGNMENTS
1. What is a Product? How would you classify it?
2. Explain product policy.
Discuss the basis of product classification.
10.12. KEYWORDS
Generic product, Augmented product, Product differentiation, Product lone,
Customised product.

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LESSON – 11
PRODUCT PLANNING AND DEVELOPMENT

11.1. INTRODUCTION
The Marketing programme starts with product planning and the technical
activities involved in it, is called as Product development like human being the
product is having a definite life cycle. Various strategies are formulated depend
upon the stages of the cycle.
11.2. OBJECTIVES
 To understand the concepts Product Planning & Product development
 To study the stages in Product Life Cycle
 To know the strategies used in different product life cycle.
11.3. CONTENT
11.3.1. Product Planning
11.3.2. Product Development
11.3.3. Product Life Cycle
11.3.1. Product Planning
It is the starting point for entire marketing programme in a firm. It embraces
all activities, which enable producers and middlemen to determine what should
constitute a company’s line of products. Product planning has been defined as “the
act of marketing out the supervising the research, screening, development, and
commercialization of new products; the modification of existing lines and the
discontinuance of marginal or unprofitable items”.
In other words, product planning involves three important considerations:
1. The development and introduction of new products
2. The modification of existing lines to suit the changing consumer needs and
preferences; and
3. The discontinuance or elimination of unprofitable or marginal products.
11.3.2. Product Development
Product development embraces the technical activities of product research,
engineering and design. It requires the collective participation of production,
marketing, engineering, and research departments. The scope of product- planning
and product development activities covers the decision making and programming in
the following areas.
1. Which product should the firm make and which should it buy?
2. Should the company expand or simplify its line?
3. How each new item could be more useful?
4. Is the quality right for the intended use and market?
5. What brand, package and label should be used for each product?
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6. How should the product be styled and designed, and in what sizes and
colours, and what materials should it produce?
7. In what quantities should each item be produced, and what inventory
control should be established?
8. How should the product be priced?
Of the above areas one of the most important is the taking of decision to make
or buy a product. Some firms may assemble a series of pre-manufactured parts;
others may decide to make some parts and buy others and then assemble to give
an end product. Yet others may assemble pre-manufactured parts; and the paint,
polish, or otherwise finish the end product.
The decision to “make or buy” a product depends upon the management’s
analysis of several issues, such as the following.
1. Relative cost of making or buying
2. Extent to which specialized machinery techniques, and production resources
are needed.
3. Availability of production capacity.
4. Managerial time and talents required – the amount of production
supervision needed.
5. Secrecy of design, style and materials – the extent to which the company
wants its processing methods kept secret.
6. Attractiveness of the investment necessary to make a product.
7. Willingness to accept seasonal, cyclical, and other market risks.
8. Risk of depending upon outside resource-will they raise the price cut off
relationship?
9. Extent of reciprocity present –Is the supplier of item also a customer of the
firm’s other products?
11.3.3. Product Life Cycle
Products, like people, have a certain length of life, during which they pass
through different stages. For some, the life cycle may be as short as a month, while
for others it may last for quite a sufficiently long period. The examples may be of a
fashionable dress or an electrical appliance. From the time the product idea is born,
during its development, and upto the time it is launched in the market, a product
goes through the various phases of its development. It life begins with its market
introduction; next it goes through a period during which its market grows rapidly.
Ultimately, it reaches marketing maturity after which is a market decline and
finally the product dies. It is worth noting that the duration of each stage is
different among products go through all stages some fail in the initial stages; others
may reach the maturity stages after a long time. “In virtually all cases decline and
possible abandonment are inevitable because (1) the need for the product
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disappears; (2) a better or less expensive product is developed to fill the same need,
or (3) a competitor does a superior marketing job”.
1. Introduction
In the early stage when the product is introduced in a market sales revenue
begins to grow but the rate of growth is very slow. Profit may not be there as there
is low sales volume, large production and distribution costs. It may require heavy
advertising and sales promotion. Products are brought cautiously on a trial basis.
Weaknesses may be revealed and they must be promotion. Products are brought
cautiously on a trial basis. Weaknesses may be revealed and they must be promptly
removed. Cost of market development may be considerable. In this stage, ‘product
development and design are considered critical.
Marketing Strategies in the Introduction Stage
In launching a new product, marketing management can set a high or a low
level for each marketing variable such as price, promotion, distribution, and
product quality.
A high-price a high promotion level. The firm charges a high price in order to
recover as much gross profit per unit as possible. At the same time, it spends a lot
on promotion to convince the market of the product’s merits even at the high-price
level. The high promotion serves to accelerate the rate of market penetration. This
strategy makes sense under the following assumptions: (1) a large part of the
potential market is not aware of the product; (2) those that become aware of the
product are eager to have it and play the asking price; (3) the firm faces potential
competition and wants to build up brand preference.
A selective penetration strategy consists of launching the new product with a
high price and low promotion. The purpose of the high price is to recover as much
gross profit per unit as possible and the purpose of the low promotion is to keep
marketing expenses down. This combination is expected to skim a lot of profit from
the market. This strategy makes sense under the following assumptions (1) the
market is relatively limited in size; (2) most of the market is aware of the product;
(3) those who want the product are prepared to pay a high price; and (4) there is
little threat of potential competition.
A pre-emptive penetration strategy consists of launching the product with a
low price and heavy promotion. This strategy promises to bring about the fastest
rate of market penetration and the larger market share for the company. This
strategy makes sense under the following. Assumptions: (1) the market is large in
size; (2) the market is relatively aware of the product (3) most buyers are price-
sensitive; (4) there is strong potential competition; and (5) the company’s unit
manufacturing costs fall with the scale of production and accumulated
manufacturing experience.
A low-profile strategy consists of launching the new product with a low price
and low level of promotion. The low price will encourage the market’s rapid
acceptance of the product; at the same time, the company keeps its promotion
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costs down in order to realize more net profit. The company firmly believes that
market demand is highly price-elastic but minimally promotion – elastic. This
strategy makes sense if (1) the market is large; (2) the market is highly ware of the
product (3) the market is price-sensitive; and (4) there is some potential
competition.
2. Growth or market Acceptance stage
In this stage, the product is produced in sufficient quantity and put in the
market without delay. The demand generally continuous to outpace the supply.
They sales and profit curves rise often at a rapid rate. Competitors enter in the
market in large number if the profit outlook appears to be very attractive. The
number of distribution outlets increase, economies of scales are introduced and
prices may come down slightly,. Sellers shift to “But-my-brand’ rather tan “Try –
my-product” promotional strategy.
Marketing Strategies in the Growth Stage
During this stage, the firm tries to sustain rapid market growth as long as
possible. This is accomplished though such actions as:
1. The firm undertakes to improve products quality and add new-product
features and models.
2. It vigorously searches out new market segments to enter.
3. It keeps its eyes open to new distribution channels to gain additional
product exposure.
4. It shifts some advertising from building product awareness to trying to bring
about product conviction and purchase.
5. It decides when the time is right to lower prices to attract the next layer of
price – sensitive buyers into the market.
3. Market strategies in the mature stage
The product manager whose product has settled into a stage of sales maturity
is not content to simply defend its current position. He recognizes that good offense
will provide the best defense of his product. These basic strategies are available in
this stage; market modifications product modification, and marketing –mix-
modification.
Market modification: The product manager first looks for opportunities to find
new buyers for the product. There are several possibilities.
First the manager looks for new markets and market segments that have not
yet tried the product.
Second, the manager looks always to stimulate increased usage among present
customers. A common practice of food manufacturers, for example, is to list several
recipes on their packages to broaden the consumers’ uses of the product.
Third, the manager may want to consider repositioning his brand to achieve
larger brand sales, although this will be not affect total industry sales. For example,
a manufacturer of a chocolate drink mix may find that its heavy users are mostly
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order people. This firm should give serious consideration to reposition the drink in
the youth market, which is experiencing faster growth.
Product modification: Managers also try to break out of a stagnant sales picture
by initiating calculated changes in the product’s characteristics that will attract
new users and /or more usage from current users. The trade term for this is
product relaunch, and it can take several forms.
A strategy of quality improvement aims at adding new features that expand the
product’s versatility, safety, or convenience. For example, the introduction of power
to hand lawn movers increased the speed and ease of cutting grass.
A strategy of style improvement aims at increasing the aesthetic appeal of the
product in contrast to its functional appeal. The periodic introduction of new car
models amounts to style competition rather than quality of feature competition.
Marketing-mix: Modification: As a final source of mature product strategy, the
product manger considers the possibility of stimulating sales through altering one
or more elements or the marketing mix. One strong possibility is to cut prices as a
way of drawing new segments into the market as well as attracting other brand
users. Another is to search for a new a brilliant advertising appeal that wins the
consumers’ attention and favour. A more direct way to attract other brand users is
through aggressive and attractive promotions – trade deals, cents-off, gifts, and
contests. The company can also offer more services to the buyer as a patronage
building step.
4. Market decline Stage
At the decline stage, the sales begin to fall. The demand for the product
shrinks probably due to new and functionally advanced products become available
in the market or the market becoming apathetic to the product. In any case, Prices
and margins get depressed, the total sales and the profits diminish. Some firms at
this stage may try to link up the sale of these products with some other premium
products they have developed and this try to strength out the life of the product.
But most firms perceive properly the impending total decline and prepare for the
gradual phasing out of the product. Successful firms quite often keep new products
ready in a queue to fill the vacuum created by the decline of existing products.
Marketing Strategies in the Decline Stage
A company faces a number of tasks and decisions to ensure the effective
handling of its aging products.
Identifying the weak product: the first task is to set up on information system
that will spot those products in the line that are truly in a declining stage.
An overall view of such a system is
1. A product review committee is appointed with the responsibility for
developing a system for periodically reviewing weak products in the
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company’s mix. The committee includes representatives from marketing,

manufacturing and the controller’s office.
2. The committee meets and develops a set of objectives and procedures for
reviewing weak products.
3. The controller’s office fills, out data for each product showing industry sales,
company sales, unit costs, prices, and other information over the last several
years.
4. This information is run against a computer programme that identifies the
most dubious products. The criteria include the number of years of sales
decline, market-share trends, gross profit margin, and return on investment.
5. Products put on the dubious list are then reported to those managers
responsible for them. Each manger fills out a diagnostic and prognostic
rating forms showing where he thinks sales and profits on dubious products
will go with no change in the current marketing programme and with his
recommended changes in the current programme.
6. The product review committee examines the product rating form for each
dubious product and makes a recommendation (a) to leave it along (b) to
modify its marketing strategy, or (c) to drop it.
Determining marketing strategies: In the face of declining sales, some firms will
abandon the market earlier than others. The firms that remain enjoy a temporary
increase in sales as they pick up the customers of the withdrawing firms. Thus any
particular firm faces the issues of the whether it should be the one to stay in the
market until the end. For example, Procter & Gamble decided to remain in the
declining liquid – soap business until the end and made good profits as the others
withdrew.
If it decides to stay in the market, the firm faces further strategic choices. The
firm could adopt a continuation strategy, in which case it continuous its past
marketing strategy; same market segments, channels, pricing, promotion, and so
on. The product simply continuous to decline until at last it is dropped from the
line. Or the firm could follow a concentration strategy, in which case it concentrates
its resources only in the strongest markets and channels while phasing out its
efforts elsewhere. Finally, it could follow a milking strategy, in which case it sharply
reduces its marketing expenses to increase its current profits, knowing this will
accelerate the rate of sales decline and ultimate demise of the product. In some
situations the hard-core loyalty may remain strong enough to allow marketing the
product at a greatly reduced level of promotion, and that the old or even a higher
price, both of which mean good profits.
The drop decision: When a product have been singled out for elimination, the
firm faces some further decisions. First, it has the option of selling or transferring
the product to someone else or dropping it completely. It will usually prefer the
farmer because this will bring in some cash and will minimize the hardship to
customer and employees. Second, the organization has to decide when the product
should be terminated. It could be dropped quickly and decisively so there would be
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no chance for resistance to build up a reverse the decision. Or it could be

discontinued gradually with a time table to allow resources to transfer out in an
orderly way and to allow customers to make other arrangements. Management will
also want to provide a stock of replacement parts and service to stretch over the
expected life of the most recently sold units.
1. Product development embraces the technical activities of product research.
2. Product through different stages.
1. What do you understand by marketing strategies in the introduction stage?
2. What is market decline stage?
11.6. SUMMARY
This is a description of the typical product life cycle. This does not man that
every single product necessarily passes through all these stages. Several new
products, all of a sudden, find their way into decline before entering the growth
stage. However, most successful products can be seen to pass through the typical
life cycle. The knowledge that the product will pass through such a cycle of life is
helpful in evolving proper product policies and promotion and pricing strategies. A
marketer can also try to foresee at the very outset the pattern of life of the proposed
product and plan the product strategy, pricing strategy and promotion strategy, so
as to shape the life cycle of the product to suit his objectives and requirements.
1. Define market modification.
2. What is product modification?
1. Journal of marketing
2. Journal of marketing management.
11.9. ASSIGNMENTS
1. What is Product Planning? How will you differentiates it from product
development?
2. Explain the different stages in Product Life Cycle.
1. Discuss the issue with respect to decision to “make or buy” a product.
11.12. KEYWORDS
Product Planning, Product Development, Product Life Cycle, Pre-Emptive
Penetration.
❑
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LESSON – 12
NEW PRODUCT DEVELOPMENT

12.1. INTRODUCTION
New product development is one of the most important components of product
policy and product management. It is not enough if the existing product lines and
products are appraised properly, products are positioned effectively and brand
decisions are taken wisely. A progressive firm must always consider new product
development as a cardinal element of its product policy.
12.2. OBJECTIVES
 To study the concept New Product Development.
 To know the stages in NPD.
12.3. CONTENT
12.3.1. Significance of New Product Development
12.3.2. Stages in New Product Development
12.3.3. New Product Adoption Process
12.3.4. How to Solve the Problems of New Product Failure
12.3.5. Product Elimination
12.3.1. Significance of New Product Development
New Products Become Necessary for Meeting the Changes in Demands
Innovation is the essence of all growth. This is especially true in marketing. In
the age of scientific and technological advancements, change is a natural outcome
of change in food habits, change in comforts and conveniences of life, change in
social customs and habits, change in expectation and requirements. Any business
has to be vigilant to these changes taking place in its environment. People always
seek better and better product more convenience to products, more fashion, and
more value for the money they part with. A business firm has to respond to these
dynamic requirements of its clientele, and these responses take the shape of new
products and new services. Through such as response, the firm reaps a good deal of
benefits.
New Products become necessary for making New Profits
New products become necessary from growth and profit angles too. Products
that are already established often have their limitations in enhancing the profit level
of the firm. It thus becomes essential for business firms to bring in new products to
replace old and declining ones and products incurring losses. New products become
part and parcel of the growth requirements of the firm and in many cases, new
profits come to the firm on through new products.
The need for responding to changes and the need for new profits are not the
only factors that persuade business firms to go in for new products. There is amore
compelling reason-the threats arising from the environment. These threats make
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some of their current products highly vulnerable. And to reduce the vulnerability of
their business as a whole, they seek our new products. New products offer new
avenues of growth and thus secure to overall viability of the firm. The risk also gets
spread over several products, existing ones and new products, so that the firm does
not face the threat of sudden extinction.
Successful new-product development is becoming increasingly hard to achieve,
there are several reasons for this.
Some technologist think there is shortage of fundamentally new technologies
on the order of the automobile, television, computers, xerography, and wonder
drugs. Although there are many minor products emerging the nation needs major
innovations to avoid economic stagnation.
Keen competition is leading to increasing fragmented markets. A new product
is aimed at capturing a large share of a small market segment rather than the mass
market. This means smaller sales and profits, although the company may maintain
its position longer.
New products have to increasingly satisfy public criteria in addition to
promising reasonable profits. They must be designed with consideration given to
consumer safety and ecological compatibility. Government requirements have
slowed down the rate of innovation in the drug industry and have considerably
complicated product design and advertising decisions in such industries as
cosmetics, automobiles, small appliances, and toys.
A company typically has to develop a great number of new- product ideas in
order to finish with a few good ones. Thus management finds itself in a dilemma; it
must develop new products, yet the odds weigh heavily against their success. The
answer still must lie in new product development, but conducted in a way that
reduces the risk of failure. Two needs stand out; the need for effective
organizational arrangements and the need for improved techniques at each stage of
the new product development process.
12.3.2. Stages in New Product Development
New product development goes through several important stages as given
below:
Exploration: The first stage of the new product’s evolution begins with an idea
for the product. Hence this stage is also termed as ‘Idea Generation’.
The new product ideas may come from customers, dealers, in-company
sources or from research organisation. Consumers’ problems are the most fertile
ground for the generation of new product ideas. This is equally true of both
industrial products and consumer products. From shampoos to computers,
customers are generating product ideas. And innovation –bound companies are
cashing in on them. Several companies follow user-stimulus strategies by
announcing attractive rewards for good new product ideas. Experienced workforce,
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research staff and salesman are also source of product ideas. There are companies
well known for silently encouraging ‘skunkworks’ where small ‘unauthorized’ teams
of executives/workers spend company’s time and money to work to crazy product
ideas of their own.
New product ideas can also come from market research studies. Research
studies on the consumers, products, competition, etc. will reveal market gaps by
comparing the existing supply of products with the ideal product conceptions of
consumers. But all market gaps are not commercially viable. The promising ideas
will be chosen for framing new product concepts.
Creatively techniques like brainstorming and synectics are also used for
generation of product ideas. In brainstorming, a small group of people are
encouraged to come up with their ideas on a specified problem. In synectics, the
real problem is kept away initially from the group and only a broader framework of
the problem is given to them. The group is encouraged to think in all possible
dimensions, and slowly the problem would be made clearer to them, and their ideas
would get refined.
Screening
The main purpose of the first stage in the new-product development process is
to increases the number of good ideas. The main purpose of all the succeeding
stages is to reduce the number of ideas. The company is not likely to have the
resources or the inclination to develop all of the new-product ideas, even if they
were all good. And they will not all be equally good. Evaluation and decision now
enter the picture. The first idea-pruning stage is screening.
In the idea screening stage, the various product ideas are put to rigorous
screening by expert product evaluation committees. They seek answers to basic
questions, like:
 Is there a felt need for the new product?
 Is it an improvement over an existing product?
 Is it close out current line of business?
 Does it take us to a totally new line of business?
 Can the existing marketing organisation handle the product?
 Or does it need extra expertise on the production and marketing front?
The more attractive looking ideas pass on to the next stage.
Concept Development
During this stage the ‘idea-on-the paper’ is turned into a ‘product-on-hand’. In
other words, the idea is converted into a product that is producible and
demonstrable. This stage is also termed as ‘Technical Development’. It is during
this period that all development of the product, from idea to final physical form,
take place.
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The final decision whether a product should be developed on a commercial

scale or not is decided at this stage because the time-lag required to attain this
stage is a long one and it is possible that some adverse developments might have
taken place during this period. Once the management decides to go forward with
the product idea, the following activities are undertaken:
1. Establishing development projects for each product.
2. Building the product with the changed specifications, if necessary, and
3. Completing laboratory evaluation and releasing the product for testing.
Concept Testing
This is different from test marketing of the product which takes place at a later
stage. What is tested at this stage is the ‘product concept’ itself-whether the
prospective consumers understand and product idea, whether they are receptive
towards the idea, whether they actually need such a product and whether they
would try out such a product if its is made available of getting the market response
to the product idea, this exercise helps bring the company’s own version of the
product concept into clearer focus. Because, in the absence of any real product to
be shown to the respondents at this stage, the company has to make very elaborate
and definite statements about the product, its attributes and benefits. Much of the
vagueness associated with a new product idea may get thrashed out at the concept
testing stage.
Business Analysis
This stage is crucial in the total process of new product development because
several vital decisions regarding the project are taken based on the analysis done at
this stage. This stage will decide whether from the financial and marketing point of
view, the project is worth proceeding with. Investment analysis and profitability
analysis of the project under different assumptions are made at this stage. The
project’s overall impact on the corporation’s financial position with and without the
new product are estimated and compared. The financial estimates would be reliable
only if they are based on a fairly accurate demand forecast and related market
factors. The marketing experts by now should have undertaken detailed exercises
on the marketability of the product.
The purpose of this stage is to project the future sales, profits, and rate of
return for the proposed new product, and to determine whether these meet the
company’s objectives. If they do, the company will develop the new product.
Business analysis is done not only at this stage but throughout the development
process as new information is accumulated about the product and the market.
Product Development
Product ideas appearing sound from a business point of view can now be
turned over to the research and development department. This is an important step
in at least three ways. It marks the first attempt to develop the product in a
“concrete” form. Upto now, it has existed only as idea, or perhaps as a drawing, or a
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very crude mock-up. Second, it represents a very large investment, which is likely
to dwarf the idea-evaluation costs incurred in the earlier stages. Much time and
money go into trying to develop a technically feasible product. And finally, it
provides an answer as to whether the product idea can be translated into a
technically and commercially feasible product. If not, the company’s investment up
to now is lost except for any by-product information gained in the process.
Three steps are involved in the product-development stage: prototype
development and consumer testing, branding and packaging.
The first task is for the research and development department to build a
physical prototype that realizes the attributes specified in the product concept and
its trouble – free and economical to manufacture. Consumer testing goes hand in
hand with prototype development. Various methods have been proposed for the
testing of consumer preferences among a set of prototype alternatives, such as
paired comparisons, multiple choices, and ranking procedures. Consumers are
normally asked to sample the alternative products in a laboratory or home setting,
and the testing organization exercises the normal controls to avoid biased results.
The company examines the results and decides on the prototype model that seems
not promising on the overall criteria.
The brand name should not be casual after thought but an integral part or
reinforce of the product concept. Among the desirable qualities for a brand name
are:
1. It should suggest something about the product’s benefits.
2. It should suggest product qualities such as action colour, or whatever.
3. It should be easy to pronounce, recognize and remember.
4. It should be distinctive.
The two traditional packaging concerns of manufactures are product
protection and economy. A third packaging objective, which comes closer to
considering the consumer, is convenience. This means such things as size options
and packages that are easy to open. Over the years a fourth packaging objective
has received increasing recognition from manufacturers, particularly those in the
consumer’s goods field. This is the promotional function.
Test Marketing
Test marketing is a form of risk control and ensures avoidance of costly
business errors. It is a controlled marketing experiment with minimum possible
cost and risk; to decide the soundness and feasibility of full-fledged marketing of
the product. If totally new products are introduced into the market on a commercial
scale without resorting to test marketing, it may so happen that the product was
not the right one for the chosen market. It may be too costly a mistake for the firm.
Test marketing of a product may indicate that the sales prospectus for the product
are bound to be poor. The firm can save the investment by dropping the new
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product idea. On the contrary, if the results received from the test marketing are
positive and encouraging, the firm may go ahead with the commercial production
and marketing of the new product.
Test marketing is an experiment that has to be carefully conducted. Care is
required in selecting the test markets and control markets, in monitoring the test
and in analysing and interpreting the test results. In many cases, test marketing is
also a time-consuming process; it has to be carried out for long duration in order to
obtain reliable and meaningful indications. And if competitors get information
regarding the test, it is possible for them to manipulate the test process and
thereby make the test results unreliable.
In the Indian context, text marketing as a marketing technique is becoming
popular in recent times. In the past, only giant corporations like Hindustan Lever
and Tatas used to go in for test marketing. Now more and more firms with the help
of their advertising agencies are going in for test marketing before a new product is
commercially launched.
Commercialisation
In this stage the product is submitted to the market, and thus commences its
life-cycle. Commercialisation is also the phase where marketing is most active in
connection with the new product. This stage is considered to be a critical one for
any product and should therefore be handled carefully. For instance, it should be
checked whether advertising and personal selling have been done effectively and
whether proper outlets have been arranged for the distribution. Despite the care
with which the previous development stages have been planned, unforeseen events
can impair commercialisation seriously. The following activities are usually
undertaken during this stage:
1. Completing final plans for production and marketing
2. Initiating coordinated production and selling programmes.
3. Checking results at regular intervals.
It should be remembered that new products should be launched in the market
only stage by stage. In other words, introduction may be restricted to a few regions
in the first instance. This is to avoid short supply of the product due to initial gaps
in production and distribution. It is not prudent to extent a product nationally and
then not be able to meet demand or to come across some unexpected deficiency.
12.3.3. New Product Adoption Process
When a new product is launched, it can be highly successful if the
management identifies the nature and extent of adoption process of that product.
Stanton visualises six mental stages which a prospective user goes through while
deciding whether or not to adopt new product. According to him, these stages are:
(a) Awareness stage, where the individual is exposed to innovation-product,
service, idea-but knows very little about it.
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(b) Interest information stage, where the prospect becomes interested to ask
for and know specific information about it.
(c) Evaluation stage, in which the prospect mentally measures the relative
merits and demerits of the innovation.
(d) Trial stage, in which the prospects actually adopted the innovation on a
limited basis.
(e) Adoption stage, in which the individual decides whether or not to use the
innovation on a full scale basis.
(f) Post-adoption stage, in which the prospect continues to seek assurance
that he made the right decision.
(g) Why new products fail? Despite careful attention to product planning and
development, as many as 50% of the new products actually entering the
markets have a very short life span and market failures occur. The
following are the usual reasons for the failure of new products.
1. Inadequate market analysis: if the market analysis is inadequate,
improper, biased or not extensive enough, the analysis will yield only
wrong idea. Acting on such data leads to product failure.
2. Product problems and defects: It arises out of technical mistakes in the
process of production. This is a basic reason for product failure.
Inadequacies in products, to a large extent, are got rid of by proper
product testing.
3. Higher costs than estimated costs: This is another reason for product
failure. The cost estimate often also go wrong when the products are
finally introduced into the market.
4. Poor/Bad timing of introduction: The basic principle to be followed in
product planning is to find out the exact time within which the
product is to be introduced into the market. Usually when and how
are the two questions, a manufacturer often finds it difficult to
answer. A close analysis of market conditions and the consumer
behaviour and attitudes is essential to find out an answer to the two
problems.
5. Failure to estimate the strength of competition: this is also an important
factor that leads products to struggle hard in the market. There are
various methods to overcome severe market. Price cuts on the marked
price and various kinds of discounts, etc., may be adopted. Whatever
it is, improvement in the quality alone will withstand competition.
Customers cannot be cheated by price cuts, discounts, etc.
6. Insufficient and ineffective marketing effort: It is wrong to assume that
a manufacturer’s job ends at the moment a product is ready for sale.
He should try very much to market his product by proper promotional
activities.
7. Inadequate sales force: Selling is done by personal or impersonal
methods. Impersonal methods constitute the advertisement and
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similar promotional activities. Personal methods on the other hand,

are more intimate and more efficient. Promotional activity should be
backed by adequate sales force to introduce the product in the
market.
8. Failure to recognise rapidly changing market environment.
9. Failure of product to fill consumer needs due to ignorance about
consumers attitudes and about new products.
10. Too many new products entering the market and
11. Many products are not new as perceived by consumers.
12.3.4. How to solve the problems of New Product Failure?
All these problems could be solved by timely action of the marketing
management. The following methods are suggested to prevent a new product
failure:
1. By analysing and ensuring that there is adequate demand existing for the
product. In other words one should identify and ensure a potential market
for his products.
2. By making a product that would exactly fit into the existing market
structure of a company.
3. By using continuous and efficient demand creation methods and
4. By selecting a product that should reflect the company’s image already
created in all respects, especially with regard to quality and price.
12.3.5. Product Elimination
There are some products which cannot be improved or modified to suit the
market. Here, the profitable alternative would be withdrawn the product. The
process of withdrawal is technically known as “product elimination”.
1. New Product development goes through several important stages.
2. New Product become necessary for meeting the changes in demand.
1. Explain the significance of New Product Development.
2. Explain the different stages in New Product Development.
12.6. SUMMARY
All the problems related to new product introduction could be solved by timely
action of the marketing management.
1. What is product problems and defects?
2. What is known as production elimination?
1. Journal of International marketing.
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12.9. ASSIGNMENTS
1. Why New Product Fail? Suggest measures to overcome this problem.
1. Discuss the steps to solve the problems of new product failure.
12.12. KEYWORDS
Product Elimination, Commercialisation, Test Marketing, Concept testing,
Screening.
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LESSON – 13
PRODUCT RELATED STRATEGIES: BRANDING

13.1. INTRODUCTION
The physical product is only a part of the product image. It cannot stand alone
before the potential buyer. There are four elements that surround the product to
give us a complete product concept. These are (1) Branding, (2) Packaging and
Labelling, (3) Product Warranty and (4) Services. These four elements are the vital
marketing tools in any marketing programme to secure the desired market share in
a competitive market.
13.2. OBJECTIVES
 To know the concept of Branding and its importance
13.3. CONTENT
13.3.1. Branding
13.3.2. Importance of Branding
13.3.3. Functions of Branding
13.3.4. Methods of Branding
13.3.5. Types of Brands
13.3.6. Conditions Favourable to Branding
13.3.7. Essentials of a Good Brand
13.3.8. Advantages of Branding or Trade Mark
13.3.9. Disadvantages of Branding
13.3.1. Branding
Brand is a wider term and it includes brand name and brand mark.
Brand Name: According to American Marketing Association, brand name is
part of a brand consisting of a word or group of words comprising a name which is
intended to identify the foods or services of a seller to differentiate them from those
of competitors. In other words, a brand name consists of words which may be
pronounced e.g. Usha fans. Allwyn Refrigerators, Godrej etc. It is a single word or
words used to identify a product and to differentiate it from other products.
Brand Mark: A brand mark is that part of the brand whichappears in the form
of a symbol, design, or distinctive colouring or lettering. It is recognised by sight,
but not pronounceable. It is designed for easy identification of the product. For
example, the picture of “Gopuram” of the Tamil Nadu Tourism and Development
Corporation.
Trade Mark: When a brand name or brand mark is registered and legalised it
becomes a trade mark. Thus registered brands are Trade Marks. In that sense all
trade marks are brands but not all brands are trade marks. Trade Mark is defined
as “a brand or part of a brand that is given legal protection because it is capable to
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exclusive appropriation”. Thus the trade mark is essentially a legal term protecting
the manufacturer’s right to use the brand name and /or brand mark.
Trade Name: This term is frequently and erroneously used as synonym for
either ‘brand name’ or ‘trade mark’. A trade name is the name of business,
preferably the name of the organisation itself. A trade name may also be a brand
name, but in such a case in serves two separate purposes. It brings name, but in
such a case it serves two the product. TATAS is solely a trade name of the marker
of various brands of cosmetics. GODREJ is both a trade name and a brand name
for most of their products.
Patents: Patents are public documents conferring certain rights privileges,
titles of offices. A patent confers the right to the use of a technical invention. It is
applicable in the case of new inventions such as a new process, a new machine.
When a new invention is made it is registered so that an exclusive right is obtained
by the inventor to use it. Defined more precisely, a patent confers the right to
secure the enforcement power of the State in excluding unauthorized persons, for a
specific number of years, from making commercial use of a clearly identified, new
and useful technological invention.
Copyright: This is applicable in the case of books and is used in the same
meaning as that of patents. It is a sole right to reproduce literary, dramatic,
musical or artistic work. Copyright is available for the whole of the author’s life-
time and fifty years after his death.
13.3.2. Importance of Branding
Branding is an essential part of marketing sub-function of selling.
Manufactured goods are standardized in the process of production. Thus they are
of uniform quality, size, etc. and do not require grading. But every manufacturer or
seller feels the need of identifying his goods with some definite symbol, mark or
slogan so that his goods catch the attention of the consumers. Also, a manufacturer
or a seller wants to establish certain definite image in the mind of the public about
the quality, durability, shape, fashion and colour of his product. He does this by
using a brand or trade mark to symbolize his product. For example, it is not a car
which is sold, but a ‘Maruti’ or an ‘Ambassador’. We may take the example of tea
which satisfies a number of our needs like hospitality, sociability, intimacy, leisure
and relaxation. What is purchased by us is not tea as such but a particular brand
of tea. The seller is selling “Brook Bond” or “Lipton” tea. This is so because there is
an image in the mind or the buyer that a particular brand satisfies his need.
Consequently sales of this brand exceed those of the competing brands which have
not created such distinct image. Thus, brands provide the base for selling efforts.
Manufacturers and sellers know that branded products can be sold more easily and
at highest prices than competitive unbranded products. Therefore, branding is
invariably used as a method of modern mass selling. The primary object of
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branding is to introduce “product differentiation” in the market, that is, to single

out a product from its rivals.
Factors which have made branding necessary. Following factors have made the
need of branding felt effectively:
1. The growth of competition.
2. The increasing importance of advertising
3. Significance of packing as an important function of marketing.
4. The growing habit among consumers to buy goods of particular brands.
13.3.3. Functions of Branding
1. It helps in product identification gives ‘distinctiveness’ to a product.
2. A branded product indirectly denotes the quality or standard of a product.
3. It eliminates imitation products
4. It ensures legal right on the product.
5. Brands differentiate the product and facilities advertisement to be more
effective and successful.
6. Brands help or facilitate consumer’s shopping.
7. It helps to create brand loyalty to particular products.
8. Branding reduces the price comparison, because two similar items with two
different brands may not be compared.
9. Repeated sales are facilitated with minimum effort through brands.
10. A good brand signifies prestige.
Brand Image and Product Image
Every brand image is partially derived from a product image. The product
image relates to the fundamental aims and satisfactions which the consumers find
in a particular product. Therefore, it is not wrong to say that the brand image
relates to the specific versions of the product image.
13.3.4. Methods of Branding
Products are branded in one of the following ways:
1. Based on the name of the manufacturer: The name of the manufacture may
be used in the abbreviated form to name the product Example-Bata,
Remington.
2. Special names: The products may be given special name without may be
coined especially to be used as the brand name Example-Sunlight; Lifebuoy.
3. Special symbol or mark: Special symbol or mark may be designed for use as
trade-mark or brand to describe a particular product and to identify and
distinguish it from other products some class Examples-Scissors cigarettes,
Camel ink.
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13.3.5. Types of Brand

1. Individual Brand: A firm very decides upon a policy of adopting distinctive
brands for each of its products. For example ITC Ltd., gives different brand
names for its products.
2. Family brand: When a firm is making many lines of products and each line
of product is given a particular brand name it is called family brand. A
company may produce different lines Milk food, soft drinks, cosmetics and
so on. If each line is given a separate brand name, it is known as family
brand.
3. Umbrella Brand / Company Brand: When all the products of a company have
the name of the company as a brand name, such brand name is known as
umbrella brand or company brand. All the products of Godrej Company –
Soap, Furniture, Typewriter, Refrigerator etc. has only one brand name
“Godrej”.
4. Combination Device: Tata house is using a combination device. Under this
device each product of the company has an individual brand name but it
also has the name of the company brand to indicate the business house
producing the product e.g. Tata’s Tea. Under this method, side by side with
the product image, we have the image of the organisation also. Many
companies use this device profitably.
5. Private of Middleman’s Brand: Under this arrangement manufacturer
introduces his products under the distributors’ brand name. In India this
practice is popular in the woolen, hosiery, sports goods etc. The
manufacturer merely produces goods as per the specifications and
requirements of distributors and he need not worry about marketing.
Middlemen enjoy more freedom in pricing products sold under their own
brands. They have more control distribution.
13.3.6. Conditions Favourable to Branding
The following conditions, if satisfied, will lead to successful branding:
1. The demand for the general product class should be large and strong
enough to support a profitable marketing plan, involving additional
promotion cost.
2. The product should be easily identifiable by a brand and lend itself easily to
conspicuous marketing.
3. The brand must vary through to the ultimate consumer.
4. There must be economies of large scale production whenever additional
production is undertaken as a result of expanding sales volume.
5. The quality of the product should be the best and it should be easily
maintained.
6. There must be a consistent and widespread supply of the product.
13.3.7. Essentials of a Good Brand
A brand to be an effective weapon in the hand of manufacturer or seller for the
creation of consumers preference or “product differentiation” must posses the
following essential qualities:
Firstly it should simple short and easy to memorise :
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Secondly, it should be easy to recognize and recall.

Thirdly, it should be distinctive and attractive to the eyes and pleasing to ears.
Fourthly, it should not be based on prevailing styles and fashions.,
Fifthly, it should be easy economical to reproduce.
Sixthly, it should be effectively illustrative.
Finally, its owner should be able to protect the brand or trade mark in the low
court.
13.3.8. Advantages of Branding or Trade Mark
The practice of selling goods under a brand name or trade mark brings
advantages to manufacturers, whole – salers, retailers and consumers alike. More
important of these advantages are discussed here:
(a) Advantages to manufacturers
1. Distribution of the product in a wider market with the help of effective
advertising is made possible.
2. The individuality of a product is established. This helps the manufacturer to
distinguish his product from those of his competitors. Thus a fixed demand
and preference for the branded product are created.
3. Advertising costs are reduced. Once the brand has been made popular
retailers are forced to keep the product in their stock because of its
popularity.
4. Wholesalers and retailers have preference for branded products because
they can be hold easily.
5. After some time, it is possible for the manufacturer to dispense with the
services of the wholesaler. In such a case manufacturer reduces the
expenses in distribution of goods.
6. Manufacturer can directly control the price of his product because in case of
the branded product retail selling price is fixed by manufacturer.
7. Branded products are often handled on smaller margins. Therefore,
manufacturer is required to pay lower rate of commission to wholesalers (or
retailers).
8. Manufacturer has not to depend upon the wholesalers and retailers for the
creation of demand for his product. Branding aids the manufacture to
maintain contact with the consumers.
9. Branding insures steadier demand which leads to economics of planned and
continuous production.
(b) Advantages to wholesalers and retailers
1. No efforts of promoting a sale are necessary. Consumers often know and
accept many branded products. Therefore, consumers themselves come to
the retailer for the purchase of such products.
2. Less risk involves in the case of a branded product of a manufacturer for the
retailer.
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3. In case of products with manufacturer’s brands less time is required to sell

them. This many help in the turnover of sales in retail shops.
4. Retailer is assured of a more or less stabilized demand for the branded
products which have been brought to the notice of the consumers.
5. Breading aids in the standardization of quality and saves the retailer much
trouble in choosing and buying his stock.
6. It helps in advertising and display programmes. Brand name or brand mark
gives a seller a short, quick method of attracting the consumer’s attention
and creating an impression which will “motives his into buying action”. A
product sold on self-service basis has to rely heavily on brand appeal so that
in can be immediately recognized and selected by the customer out of the
mass of products displayed on shelves and counters.
7. It help in increasing control and share of market. By putting his own brand
on the product a manufacturer or a middleman can be sure of some control
over the market. Branding also helps the owner of the brand to encourage
“repeat sales” and to protect himself against “product substitution”. Unless
the product can be identified by a brand, a wholesaler cannot be sure that a
retailer will not substitute a product of another make.
8. It reduces price comparisons and helps stabilize prices. A brand
differentiates a product and enables the brand owner to establish a price for
his product which cannot be easily compared with prices of competing
goods. Also, branding reduces price- fluctuations. Prices of well-known
brands tend to fluctuate less than those of non-branded products or of
unknown brands.
9. It facilities introduction of a new item. A firm selling one or more lines of
branded much more easily than a firm selling unbranded goods.
c) Advantages to consumers
1. Consumers cannot be charged higher prices by the retailers. Prices of
branded products are fixed by the manufacturers and they are well
advertised. Thus the consumers know what the price is. Therefore, it is not
possible for the retailers to charge higher prices of branded products.
2. Consumers are assured of good quality: Manufacturers have to maintain the
quality of products, their reputation is to be retained, products of inferior
quality cannot be sold. Therefore, supply of quality product is ensured to
consumers.
3. Quality goods are easily available: Retailers have to keep ready in stock
goods of all popular brands. Therefore consumers can get such goods easily
whenever they want.
4. Quality of branded goods is protected: Branded goods are usually sold in
sealed packages. Thus, they are protected from the effect of heat, moisture
and dust. Adulteration by middlemen is also made impossible in case of
branded goods.
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5. Stability in price: Generally the retail price of branded products is

maintained steady because manufacturers do not find it advisable to change
the prices as frequently as those of unbranded products.
13.3.9. Disadvantages of Branding
1. The serve criticism leveled against branding is that it leads to some kind of
monopoly known as “Brand monopoly”. The brand monopoly created by
gradually creating a brand loyally to the products in the minds of the
customers.
2. It is difficult to establish a brand and the expense of advertising in the initial
stage is very high which raises the cost.
3. Brand names do not always assure good quality. Manufacturers sometimes
place inferior goods in the market under a glamorous brand name.
1. Brand is a wider term and it includes brand name and brand mark.
2. The practice of selling goods under a brand name or trade mark brings
advantage to the market participates.
1. What is branding? Differentiate brand name from brand mark.
2. Write notes on:
(a) Trade Mark
(b) Trade Name
(c) Patents
(d) Copyright
3. State the importance of branding
4. Explain the functions of branding
5. What are the essentials of a good brand?
6. Explain the different methods of branding.
7. Narrate the features of different types of brands
8. State the conditions favouring branding
9. Discuss the advantages of branding to manufacturers, wholesalers/
retailers, and consumers.
10. What are the limitations to branding?
13.6. SUMMARY
Branding has become a management technique as it involves considerations of
alternatives and choosing the best alternative. Some of the practical hints have
been discussed above. Brand managers have in develop a logical order of action in
developing brand awareness and ultimately leading to brand loyalty. These steps
may be as follows:
1. Non – recognition – Consumers are unware of the availability of a
particular brand
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2. Brand recognition – Making the consumers to realise the availability

of a particular brand
3. Brand preference – Making the consumers buying out of habit a
particular brand
4. Brand insistence – In this stage consumers will not accept any
substitute product
5. Brand loyalty – Last stage in the Branding process – when
consumers make repeat purchases of the same
brand.
1. Define brand.
2. What is Brand mark?
1. Journal of advertising.
13.9. ASSIGNMENTS
1. How would you make a branding decision?
Brand name gives image to the product as well as to the producer-Comment.
13.12. KEYWORDS
Brand Name, Brand Mark, Brand Loyalty, Trade Mark, Patents, Copy Right.
❑
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LESSON – 14
PRODUCT RELATED STRATEGIES: PACKAGING AND LABELING

14.1. INTRODUCTION
Packing means the wrapping and creating of goods before they are transported
or stored. Many goods must be packed in order to be preserved or delivered to the
buyers. Liquids must be placed in barrels, bottles or cans. Bulky foods such as
cotton and jute are compressed into bales. Goods must be placed in boxes or bags
for delivery to dealers. Retailers often wrap goods or place them in bags or boxes for
delivery to the ultimate consumer. Fragile goods are often packed in special
containers.
Packages are the sub-division of the packing function of marketing. It means
placing of goods in small packages – boxes, bottles or cans, bags, barrels etc., for
sale to the ultimate consumers. It is concerned with putting goods in the market in
the size convenient to the buyers. Packaging has been defined as the general group
of activities which involve designing and producing the container or wrapper for a
product.
14.2. OBJECTIVES
To know the importance of Packaging and labelling.
14.3. CONTENT
14.3.1. Need of Packing and Packaging
14.3.2. Packaging Decision
14.3.3. Requisites of Good Packaging
14.3.4. Kinds of Packaging
14.3.5. Packaging Materials
14.3.6. Advantages of Packing and Packaging
14.3.7. Consumer Problems with Packaging
14.3.8. Social view of Packaging
14.3.9. Gauging the Reaction of Consumers
14.3.10. Labelling
14.3.11. Functions
14.3.12. Kinds of Labels
14.3.13. Advantages of labeling
14.3.14. Disadvantages of Labeling
14.3.15. Product Warranty
14.3.1. Need of Packing and Packaging
1. Protection from damage: Goods are likely to get damaged in transit or while
in store. Therefore they must be kept in suitable containers.
2. Prevention of Evaporation: Products like gas, spirit etc., are volatile in nature.
If they are not properly packed they will evaporate.
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3. Protection Against spoilage: Products like gur, sugar, tea, etc., are likely to
get spoiled in transit or in store if they are not protected against dust and
other articles. Also gur, sugar, honey and such other products attract flies,
ants, etc. Hence they must be kept properly and tightly packed in suitable
containers.
4. Protection against pilferage: To product goods from getting stolen also
packing becomes essential.
5. Protection against leakage: To prevent liquid articles like oil flow away while
in storage or in transit, these must be kept in barrels or containers.
6. Protection of the quality of goods: Packing is also necessary to prevent
deterioration in the quality of goods because of the effect of light, air or other
atmospheric effects.
7. Convenience of consumers: Goods are packaged in convenient sizes and
units which are easy of handle by the consumers.
8. Economy: Package should provide various economies both to the producers
and to the consumers. Well packed products are fresh, clean and it tack.
Therefore monetary loss is prevented. Moreover, whenever possible,
containers should be so designed that they may be useful for further use-
domestic or re-use.
9. Promotion Role: Packaging also has a promotional role which has become
more important. It has received increasing recognition from the
manufacturers in recent years. The various promotional functions are :
(a) Self- Service: The package must be capable of performing many of the
sales tasks. It must attract attention, describe the producers’
features, give the consumer confidence and make a favourable over
all impression.
(b) Consumer difference: Prestige of a product is maintained with the
help of proper packaging. Good packaging is capable of projecting
various qualities of the product as well as of the manufacturers.
(c) Product identification: Packages differentiate similar products and
thereby they have an advertisement value. When people think that a
good package, taller in size, not shorter, contains bigger products.
Above all many people buy the products for the sake of containers.
14.3.2. Packaging Decision
Packaging as a marketing activity confronts the seller with following questions:
1. Which of the numerous materials available for packaging will serve the
purpose of enhancing the appearance of the product best?
2. What colours, designs, shapes and sizes of packages should be preferred?
3. How to design a package which will be convenient for the consumers to
handle?
4. Can a package be so designed that it can be used by the consumer even
after the product it contains has been consumed?
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5. Should special gifts and such other packages be designed for Diwali,
Christmas marriage and such other selling seasons.
14.3.3. Requisites of Good Packaging
To perform its function effectively in the process of marketing, packaging must
possess the following essential qualities: (i) Attractiveness, (ii) Protective strength,
(iii) Consumer’s convenience, and (iv) Economy.
i) Attractiveness: The package must be attractive enough to tempt the on looker
to try it. Generally, colours are used to make to packages look attractive. But while
using colour certain caution is necessary.
Firstly, colour to be used should be pleasing to eye.
Secondly, while using colours it must be borne in mind that different colours
are associated with different human feeling and emotions. For example, white
colour is the symbol of purity and cleanliness, blue stands for coolness, green
symbolizes freshness and red indicates warmth.
Thirdly, different colours should be used for packages containing goods for
customers from different age-groups. Bright colours should be used for packaging
articles meant for children but use of such colours should be avoided if the article
is meant for grown – up persons.
Usually, a picture is used on the package to make it attractive. In such a case,
care should be taken to see that the picture suggests the nature of the product.
Pictures having no relation with the product should be avoided.
Printed matter on the package also adds to its attractiveness. But to be
effective, such matter should be informative and should occupy minimum of the
space. Also it must have been printed clearly, attractively and in prominent letters.
ii) Protective strength: Basically packaging is concerned with the protection of
goods. Therefore it should be strong enough to protect the goods from breakage or
leakage, spoilage, pilferage etc. In case of goods packaged in glass bottles or
containers, they should be further packed in good cardboard packing. Goods
subject to determination in quality due to atmospheric effects should be packed in
glass containers or in tight-capped metal tins.
iii) Consumer’s convenience: Goods are packaged in the size which suits the
requirements of the consumers. Usually consumers prefer to purchase their
requirements in small quantities rather than in bulk. Therefore, there is tendency
towards smaller packages.
iv) Economy: Another essential requisite of good packaging is it must be as
inexpensive as possible. For this purpose special efforts should be made to reduce
the cost of packaging. Whenever possible containers should be so designed that
they may be useful for domestic and other purposes even after the contents have
been used. For example, glass cans, baskets, wooden etc., have many uses.
Sometimes packages are so designed that they may be returned for refilling, for
example edible oil bottles.
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14.3.4. Kinds of Packaging

The following are the various kinds of packaging:
1. Consumer Packaging: A consumer package is a kind of package which holds
the required volume of products for the household consumption. For example tooth
paste, shoe polish, face powder, oil, shaving cream, blade, ink, nail polish, kum-
kum, gas cylinder etc., have packed is small volume. Sometimes the same article
may be packed in larger volume for office or factory purposes. For example oil, ink,
gas etc. are packed in larger volumes also.
2. Family packaging: The products of a particular manufacturer when packed
in an identical manner is known as family packaging. The shape, colour, size, etc.,
of packaging will be similar for all his products. In such a case packaging methods,
materials used for packaging, the appearance etc., will be one end the same for all
the products of a manufacturer. For example, Asian Paints Company packs all its
products in a similar type of packing. Similar in the sense, the shape of tins and
appearance will be same. Bata shoe company’s products are packed in similar type
of boxes.
3. Re-use Packaging: Re-use packaging is also known as dual package.
Packages that could be used for some other purposes after the packed goods have
been consumed is known as re-use packing. For example, the glass jar of Nescafe
Instant Coffee and many other products are packed in such a way that the package
can be put into many uses. The other examples are V.V.D. Oil packing, liquor
bottles, Sweet tins, biscuit tins and so on.
4. Multi Packaging: The practice of placing several units in one container is
known as multiple packaging. Johnson’s Baby care set, Parker pen set, etc., are
example of multiple packaging.
14.3.5. Packaging Materials
Packaging differs from goods to goods. It depends upon the nature of the goods
to be packed. For liquid products container made of materials which can prevent its
disperson is used. For solid product, packing is necessary and helpful in retaining
the moisture, freshness and such other characteristics of the product. For fragile
articles like bangles, wooden containers are used to protect then from breakage.
Different materials at used for the purpose of packaging. Earthenware is
porous and helps in retaining the freshness of the products kept in it. Chin jars are
becoming popular and replacing the old earthenware containers. They can protect a
product against right and corrosive action of acid. Their defect is that they are
fragile.
Wooden boxes are used as the outermost packing because they are strong
enough to protect goods even if roughly handled in the process of transportation.
Cardboard containers have become popular and in many cases have replaced
wooden boxes, particularly in the case of packing small articles. This is because
cardborad containers have certain advantages over wooden boxes. Firstly,
cardboard is cheap, though sufficiently, strong and right to product fragile goods.
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Secondly, it can be manufactured in varying thickness and different colours.

Thirdly, its surface can be used for marking and design or written material.
Gunny bags are popular for packing goods like grains, cement, sugar, etc.
They are strong and can stand rough handling through long distance involved in
the transportation of such goods. Paper bags are popular as package for products
solid in form. Paper bags are commendable because they can be given very
attractive appearance and they have an advertisement value as it can be printed
upon. But they suffer from certain limitations. Firstly, the freshness of the product
cannot be preserved. Secondly, production against damage is not possible.
Tin and plastic containers have gained extreme degree of popularity because
they are light in weight and they can be made attractive by giving any shape or
colour to them. They are rigid and non-porous too. But, in case of plastic, caution
to keep them away from fire is always necessary.
The new family of synthetic packaging materials have several merits such as:
(I) waterproof and moister proof property; (ii) capacity to provide effective barrier to
vapour; (iii) greater resistance to sun exposure (iv) thermal stability; (v) light weight;
(vi) alkali and acid proof property; (vii) attractiveness and transparency. They also
lend themselves to attractive printing/ branding on them. Plastics as a group are
now dominating the packaging field in India. They are now used in a variety of
packaging applications from simple grocery bags to sophisticated stretch blown
bottle. Consumer products like Paloma Tea, Nescafe, Sponta Wafers, Dalda, Amul
Milk Chocolates and agricultural inputs like chemical fertilizers have all gone in for
plastic packaging materials.
Tetrapacks: One of the latest among these innovations is the tetrapack bricks
or aseptic packaging. It is the new development in food packaging. The special
feature in this case is that the package as well as the contents are sterilized and
human handling is dispensed with. The package consists of several thin layers of
polyethylene foil and paper. Several manufactures of fruit juices and fruit drinks
are now using tetrapacks. In the past, fruit juices were made available in cans and
fruit drinks in bottles. These packing processes necessitated the addition of
preservatives to the products. Tetrapacks have an edge over cans since their
contents have as shelf life of three months without the addition of preservatives.
Parle’s Frooti and Appy, Lipton’s Tree Top, Voltas’ Volfruit and Noble Soya’s Great
Shake are some of the drinks now being marketed in aseptic tetrapack bricks.
Flexible Containers: The trend generally is towards flexible packaging whenever
the products lend themselves to such package. Not only in consumer goods
packaging, but in the bulk transportation of commodities also, flexible containers
have made their entry. For example, the Transport Corporation of India (TCI), one of
the leading transportation agencies in the country, have recently introduced flexible
containers for bulk movement of liquids, granules and powders. They are durable
rubber containers-tanks and drums – made from high tenacity polymide fabric
matrix and coated with compatible polymers. The flexible containers are useful in
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large volume transportation of several products like oil, chemicals, liquid

detergents, alcohol, food grains, fertilizers cement, etc.
14.3.6. Advantages of Packing and Packaging
Packing is very useful in the marketing of goods. Most of the products are
packed for their protection. Apart from this protective packaging”, package is also
used as a “Powerful selling tool”. This is particularly so in the marketing of
consumer’s goods. Chief advantages of packing and packaging are listed below:
1. It protects goods on its route from the manufacturer to the consumer or
industrial user against breaking, spoilage, leakage or pilferage.
2. It facilitates branding and advertising of products.
3. It is useful in getting display in retail stores which usually suffer from the
shortage of space.
4. It helps the seller to increase his sales and obtain higher prices than he
could get for similar goods handled in the bulk.
5. It products the quality of the products.
6. It ensures the supply of goods of right quality in desired quantity of
consumers.
7. A company with several products gets the advantage of the goodwill or one
product to push the sale of other products by using similar package with the
“same colour scheme and name”.
8. Printed literature containing information about the method of using the
product can be easily passed on to the consumers by putting it in the
package.
9. Packaging gives the product a prestige, an individuality which are not
possessed by goods sold in the loose form by retailers. It helps to identify a
product and thus may prevent substitution of competitive goods.
10. Compared with products sold in bulk, packaged goods, usually, are more
convenient, cleaner and less susceptible to losses from evaporation, spilling
and spoilage.
11. At the selling point, the package serves as a ‘silent salesmen’ encouraging
impulse buying. While in the possession of the customer, it induces the
customer to reorder the same brand and thus stimulates ‘repeat sale’.
12. An increase ease of handling or a reduction in losses due to damage may cut
marketing costs.
Thus, packaging is important not only for the purpose of protection and
convenience but also for product-differentiation and stimulation of demand.
14.3.7. Consumer Problems with Packaging
In spite of its various advantages, packaging has been subjected to many
criticisms. One among them it that it adds to cost. To some extent this complaint
holds good. But the benefits received are sufficient to compensate the increase in
cost. Apart from this criticism the other disadvantages are listed below:
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1. Unless the package is transparent, the buyer cannot judge the contents by
appearance. If information about the quality on the package label is absent,
the buyer has to buy almost blindly.
2. If the consumer wants a specific quantity, he may not have that amount
when goods are sold in packages.
3. There is no way to check the weight and volume of the contents unless the
buyer opens the packages to ascertain the weight. Package sizes inflate the
contents.
4. During the period of rising prices less contents are packed in the same
package and apparently same prices are charged.
5. Packaging may create health hazards for consumers. Certain plastic food
packaging has been shown to cause cancer. Packages stored in godown are
susceptible to infection.
14.3.8. Social View of Packaging
1. Pollution control: Pollution control is a burning issue in packaging
particularly in western countries. Broken bottles, crushed cartons and bent
cans litter the streets and choke municipal dumps. This has created the
solid waste problems in those countries. Hence all packaging programmes
must consider the environmental and ecological issues.
2. Resources scarcity: Resources scarcity is another problem. Some precious
natural resources are being wasted on non-returnable (disposable)
containers e.g. soft drink bottles. Later on these disposal packages create
litter and pollution problems. Such type of packages cannot be tolerated
now.
14.3.9. Gauging the Reaction of Consumers to Packaging
It is essential to gauge periodically the reaction of the consumers to packaging
and adapt the packaging to their requirements. Consumers may have their own
preferences covering (a) package size, (b) package shape and (c) package material.
Marketing men must grasp through systematic research, consumer preferences on
the one hand and the cost and availability aspects on the other and provide the
consumers with the best possible packaging. They should also remember that any
change in packaging, even when it means an improvement in every respect, must
be handled deftly and carefully. The consumer’s perception of the change is the
most important factor.
14.3.10. Labelling
Label is a small slip placed on or near anything (product) to denote its nature,
contents, ownership, destination, etc. The function of standardization is made
perfect and known to the users through labels. Packages afford a place where the
labels could be affixed. It is a medium through which the manufacturer gives
necessary information to the user or consumer. It is defined as a part of a product
which carries verbal information about the product of the seller. A label plays an
important role in making the packaging and branding functions meaningful. Hence
these three functions are closely related. The recently passed Packaged Commodities
(Regulation) Order 1975, makes it obligatory on the part of manufacturers to show
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details about the identity of the commodity, its weight, date of manufacturer etc.
The provision of this enactment is carried out with the help of labelling.
14.3.11. Functions
1. It gives definiteness to the product and therefore the identification of a
product is easy.
2. It stresses the standard and other special features of the product which are
advertised.
3. It enables the manufacturer to give clear instructions to the consumer about
the proper use of his product.
4. By mentioning prices, undue price variations caused by the intermediaries
are avoided. In other words, price is recorded registered and maintained.
5. It encourages to produce only standardized and quality products.
6. It provides a method for the manufacturer by which a contact with the
customer is established.
14.3.12. Kinds of Labels
William J. Stanton classifies the labels into four: Brand, Grade, Descriptive
and Informative labels.
i) Brand labels: These labels are exclusively meant for popularising the brand
name of the product. Cosmetics manufacturers prefer to use this kind. They are
interested, above all, in popularising the brand manes for their products.
ii) Grade labels: These give emphasis to standards or grades. This is used as
an indirect method of product identification,. E.g. cloth, leaf, tea, dust tea.
iii) Descriptive labels: the labels which are descriptive in nature are typified as
descriptive labels. They are most illustrative in nature. In addition to the product
feature they explain the various uses of the product. Most of the milk – food
products and other similar household products invariably have descriptive a labels.
iv) Informative labels: The main object of these labels is to provide maximum
possible information. These may contain the product characteristics and in addition
the method of using it properly. In the case of medicine detailed labels are attached
which even specify the side effect in using them.
14.3.13. Advantages of Labelling
1. Labelling is a social service to customers, who very often do not know
anything about the product’s characteristic features. False claims are
prevented by using labels.
2. It avoids price variations by publishing the price on the label.
3. It helps advertising activity of the organisation. Label is the medium to
popularise the product.
4. It helps the customers to assess the superiority of the product.
5. It is guarantee for the standard of the product. Hence it raise the prestige of
the product and of the manufacturer.
6. It gives all needed information to the buyers and avoids confusion.
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14.3.14. Disadvantages of Labelling

1. For an illiterate this is of no use.
2. It increases the cost of the product, since labelling involves expenditure on
the part of the manufacturer.
3. Labelling is effective only where standardization is compulsory.
4. It aims at mainly popularizing the product rather than giving information to
the consumers.
5. It enables to customers to weigh and compare the advantages of products
before they are used. This ultimately ends in discarding of one product in
favour of the other.
14.3.15. Product Warranty
In modern life we have numerous products with complicated, intricate and
elaborate mechanism, such as radio, television, motor car, electrical appliances,
etc. An average consumer is incompetent to know the ins and outs of such
sophisticated products. The law has now started to alter the famous maxim “Let the
Buyer Beware” and give due recognition to its substitute “Let the Seller Beware”. In
many countries the law takes into consideration the handicaps and disabilities
encountered by average buyers while purchasing such highly mechanized or
automated products. Informative labelling and informative advertisement will also
educate consumers in making wise selection while purchasing the products. The
Sale of Goods Act has given legal protection in the form of implied conditions and
warranties.
Condition is a stipulation essential to the main purpose of the contract. If it is
broken, victimized party, i.e., the buyer can claim for damages but has no right to
reject the contract.
The product warranty must be clear, unambiguous and meaningful. A
warranty is an assurance of the quality, service and performance. It is a written
guarantee of the intrinsic value of a product. It points out the responsibility of the
maker for repairs, service and maintenance in the case of consumer durables. The
producer should use the word warranty instead of the word guarantee.
The warranty is the outcome of the rule of law viz., “let the buyer beware”.
Producers developed warranties to create buyers confidence and to provide redress
to aggrieved customers. Buyers could rely on the statement made by the seller. For
example, a manufacturer may warrant that his produce is 100% wool or that the
colour of the cloth will not fade. Such a warranty may be supported by money-back
guarantee.
The value of warrantee to consumers depends upon the reliability of the
warrantor and the person who has specific responsibility of making good on the
warranty. This is true because in practice and it law, the consumer has little
resource. However, courts have started awarding damages for an injury simply if
the product is shown to be defective or unfit for its intended use. There are four
guidelines as instruments for meeting social responsibilities of marketing as well as
for assuring a continuous customer interest 1) Warranty integrity, (2) Education of
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consumer in the use of the product, (3) Product quality control, and (4) Service on
demand.
If the four guidelines are followed by the manufacturers, repeat sales can be
stimulated and Government may not be compelled to enact additional consumer
legislation. There are millions of appliances being used by consumers all over the
world. They are complicated and need honest warranties from the manufacturers.
Consumer satisfaction is the key to successful warranty programme. Customer
satisfaction with product in use provides the clue as to the effectiveness of the
warranty programme.
Implied warranties are promise of the maker that the product is of average
saleable quality, will do what the product is normally expected to do; and will last a
reasonable period of time. Express warranties are specific promises in writing made
by the manufacturer or trader relating to quality, performance, condition or other
feature. When one accepts an express warranty, one may have to give up the
implied warranty as a condition of acceptance.
Manufacturer is expected no go give deceptive advertisement of warranties or
guarantees as they will defect the very purpose viz., warranty acting as seller aid.
Manufacturer should not give fraudulent warranties and victimize innocent
consumers, particularly in the case of costly durable goods such as television,
refrigerators, motor cars, fans, electrical appliances etc. False warranty is an unfair
trade practice.
Service Facilities
After – sales service is an important aspect of a marketing transaction. Every
increase in the use of machinery, appliances and equipment in all branches of our
economy has created a continuous demand for after-sales service, i.e., for the
smooth maintenance and repairs at low charges as well as quick access to spare
parts and accessories at reasonable prices.
Market research emphasizes the importance of after sales service in the
marketing campaign of costly and durable goods such as typewriters, duplicators,
all kinds of office appliances and machines refrigerators, TV sets, tape recorders,
radios, washing machines, domestic appliances and such other status-symbol
goods. It is also necessary in the sale of machine and equipment.
Benefits of After - Sales Service
1. It can build up and maintain seller’s goodwill.
2. Mass distribution of costly consumer durables is possible only through
after-sales service and consumer credit.
3. Complaints and grievances regarding servicing and maintenance will be
promptly and efficiently dealt with by the seller. Customer satisfaction is the
master-key to further sales and growth.
4. Sales campaign will achieve remarkable success if after-sales service is
included in sales promotion.
5. Free service during the guarantee period is the best selling point in the sale
of machinery and appliances.
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1. Packaging must possess the following essential qualities: Attractiveness,
protective strength, consumer’s convenience and economy.
2. Packaging is very useful in the marketing of goods.
1. What is packaging? What is the need for packaging?
2. How would you make a good packaging decision?
3. Explain the requisites of good packaging.
4. What are the different kinds of packaging?
5. What are packaging materials?
6. Discuss the advantages of packaging?
7. State the problems of consumers associated with packaging.
8. What is labelling? What are its functions?
9. State William J. Stanton’s classification of labelling.
10. What are the advantages and disadvantage of labelling.
11. ‘Product warranty is a seller aid’ – Elucidate.
14.6. SUMMARY
Packages are the sub-division of the packing function of marketing. It is
concerned with putting goods in the market in the size convenient to the buyers.
1. Define product identification.
2. What is brand labels?
1. Journals of consumer research.
14.9. ASSIGNMENTS
1. Highlight the importance of after sales service in marketing the durable
goods.
“Let the buyers beware” and “Let the seller beware” discuss the theme with
respect to product warranty.
14.12. KEYWORDS
Packaging, Packing, Labelling, After Sales Service, Product Warranty.
❑
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LESSON – 15
PRICING
15.1. INTRODUCTION
Pricing decisions have strategic importance to all organizations profit as well
as non-profit organizations. Price is the only element in the marketing mix that
produces revenue, the other elements produce costs. Price exists all around us. You
pay interest for use of money, a student pays tuition fees for education, rent for use
of living quarters or a piece of equipment for a period of time: fare for a taxi ride or
airline flight, toll for travel as some highways, dues for membership in an union for
a club, and so on.
15.2. OBJECTIVES
After reading the lesson, you will understand
 The concept of price and pricing.
 The objectives and role of pricing.
 The pricing policy and various pricing strategies.
 The different methods of pricing
15.3. CONTENT
15.3.1. Pricing –Meaning and Objectives.
15.3.2. Pricing Polices and Strategies.
15.3.3. Pricing Methods.
15.3.1. Pricing – Meaning and Objectives
Price is the device for translating (into quantitative terms i.e rupees and paise)
the perceived value of the product to the customer at a point of time. The buyer is
interested in the price of whole package consisting of the physical plus a bundle of
expectations or satisfactions. These may inter alia include after sale service,
replacement parts: technical guidance, credit, etc. To the ultimate consumer, the
price he pays for a product or service represents a sacrifice of purchasing power. It
is the only objective criteria (might be an imperfect measuring rod) for the
consumer for comparing alternative items and making the final choice.
Pricing is the process of setting objectives, determining the available flexibility,
developing strategies, setting prices, and engaging in implementation and control.
(Marketing Management, David W. Carvens, Gerald E, Hills and Robert B Woodruff,
Richard D, Irwin, Inc Illinois 1988, P.455). Pricing as a marketing function has an
important role to play both at the macro and micro-levels. In this lesson, we are
concerned with the role of pricing at the micro-level i.e. a firm’s level. Pricing plays
a far greater role in the marketing mix of a company and contributes significantly to
the effectiveness and success of the marketing strategy, Price is said to be the
demand regulator, a competitive weapon, a probability determinant, etc. It is an
important decision input in a variety of marketing decisions. For example, when
product planning or modification programmes are undertaken, the price that the
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product would fetch relative to the cost provides an important decision base to
approve or discard a product idea. Pricing begins with an understanding of the
corporate mission, target markets, and marketing objectives.
Pricing objectives are specific quantitative and qualitative operating targets
that reflect the basis role of pricing in the marketing plan. The pricing objectives
should be clear, concise and understood by all involved in making pricing
decisions. These should be so stated as to enable those charged with pricing
responsibility to compare performance with them. We may discuss the following
pricing objectives:
Profit-Oriented Objectives
1. To achieve a target return.
To maximize profit
Sales-Oriented Objectives
1. To increase sales volume.
To maintain or increase market share
Status-Quo Oriented
1. To stabilize prices
To meet competition
To Achieve a Target Return
An adequate rate of return on the investment involved is the principal objective
of any pricing policy. The rate of return may be a specified percentage return on its
sales or on its investment. The idea here is to secure a sufficient return on
investment from specific products or divisions so that the sales revenue will
ultimately yield a pre-determined average return for the whole company. Many
retailers and wholesalers use a target return on sales as a pricing objectives. They
add an amount to the cost of the product called mark up, to cover anticipated
operating experts and provide a desired profit for the period.
To Maximize Profits
Stanton, Etzel and Walker have rightly observed. “The pricing objective of
making as much money as possible is probably followed more than any other goal.”
(Fundamentals of Marketing. McGraw-Hill, 1994. P.301). It may be pointed out here
that profit maximization should not be equated with profiteering, high prices, and
monopoly. The objective of profit maximization implies in a given set of market
conditions, management attempts to maximize profits through the instrument of
price. Stanton and others further observe that a profit maximization goal is likely to
be far more beneficial to a company if it is pursued over the long term. To do this
hoverer, first may be have to accept modest profits or even losses over the short
term. For example, a firm entering a new geographic territory or introducing a new
product thinks best by initially setting low prices to build a customer base. Repeat
purchases from this large group of customers may allow the firm to maximize its
profits over the long term.
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To Increase Sales Volume

This is one of the sales oriented objectives. This objective is adopted to achieve
either a rapid growth or to discourage potential competitors from entering a market.
The increase in sales is usually stated as a percentage increase in sales volume
over a certain period say, 1 year or 3 years or 5 years. Management may seek
higher sales volume by discounting or by some other aggressive pricing strategy.
Sometimes companies are prepared to incur a loss in the short run to expand sales
volume. Cloth Merchants, Garments Dealers, Electrical appliances Dealers run end
of season sales. In hotel industry reduction to prices in tariff for accommodation is
seen during off-season to increase sales volume.
To Maintain or Increase Market Share
Another important pricing objective is to maintain or enlarge market share. A
firm may aim to secure a target market share by employing price as an input. The
market share as a pricing objective is especially relevant for companies in
developing countries like India, where market expansion is a phenomenon of
economic development.
To Stabilise Prices
This is a long-range objective which aims at preventing frequent and violent
fluctuations in prices. It also aims at preventing price wars amongst competitors.
Price stabilization often is the goal in industries where the product is highly
standardized such as steel or bulk chemicals. Many public sector companies aim at
achieving this objective so as to impart a sort of stability to economic conditions.
To Meet Competition
To meet or prevent competition may be another pricing objective of no less
importance. The object to meet competition is appropriate when a company is not a
price leader and does not want to initiate price changes. In such a situation it only
aims to neutralize the impact of competitive manoeuvres by appropriate pricing
moves.
Besides these, the other pricing objectives may be to expedite cash collection,
to mobilize resource, to promote developmental activity etc.
Expediting cash collection may be resorted to as a pricing objective to
accelerate cash inflow for developmental projects for debt-servicing or repayment.
In times of credit squeeze this pricing object is so special relevance. The price
structure may be so designed that it encourages cash sales and discourages credit
sales, besides, it may expedite realization of bills receivables.
A firm set pricing objective so as to promote developmental activity in those
sectors or areas of the economy which are weaker. The price may be so designed as
may favour the weakest and be affordable by the weaker. In such circumstances
government subsidy is usually available to prevent losses. The National small
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industries corporation (NSIC) assists small firms to grow by availing of its nominally
priced services.
Resource mobilization as a pricing objective may be adopted by companies
through higher resale prices which have a strong demand in the market so that the
adequate resources are made available either for their own expansion or for the
developmental investment elsewhere in the country.
15.3.2. Pricing Policies and Strategies
A pricing policy is the standing answer for a company to recurring problem of
pricing. It provides guidelines to the marketing manager to evolve appropriate
pricing decisions.
Policies Involving Prices Variations
Under these we can discuss (a) One price-policy and (b) Variable price policy.
Under one-price policy, a seller charges all similar types of buyers exactly the
same price and there shall be no discrimination or difference among the buyers of
the same commodity. There is no chance for negotiations, bargaining or haggling.
Terms of sale are the same for similar quantities of the product. The merits of one
price or single-price policy may be enumerated as follows:
1. It is fair and builds goodwill among buyers owing to its non discriminatory
character.
It is easy to administer and saves the salesman’s time.
Uniform return on each sale and a certain profit is assured.
However, this pricing policy does not allow company to match price to buyer
needs. It particularly does not appeal to large buyers who want variable price on
account of bulk transactions. In the absence of a strong brand, it is likely, that a
company may lose bulk buyers.
Variable price policy may be defined as one in which a company charges
different prices for sale of its similar goods at a given time to similar buyer
purchasing in comparable quantities under similar conditions of sale.
The variable price policy is relevant in small businesses and where products
are not standardized. It can be adopted where the individual sale transactions
involve large sums and bargaining power of individual buyers varies with the size of
the transaction. Flexible character in use as a promotional weapon is its strength.
It can be used to match price with individual consumer needs and demand
elasticities. However, such pricing polices often produces friction and
dissatisfaction among consumers who feel unfairly discriminated against when
charged higher prices relative to others.
Geographical pricing
Geographical pricing involves the company in deciding how to price its
products to customers in different locations. We find transportation expenses on
the distribution of goods to different regions or zones. Hence the firms adopt two
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policies, viz, f.o.b. factory or f.o.b. destination. In the former, the transport cost
from sellers dock is met by the buyers. In the f.o.b destination, the cost of
transportation is borne by the sellers. On the basis of geographical condition, the
pricing policies may be any one of the following:
1. Uniform delivery pricing policy.
2. Zone pricing
3. Basing point pricing.
4. Production point pricing policy.
5. Freight absorption policy.
In uniform delivery pricing policy the sellers charge equal prices form all
consumers. In the other words, the consumer belonging to the different regions or
zones pay similar prices. In such pricing policy the sellers price includes cost of
goods and the transportation charges. This pricing is also called postage stamp
pricing policy. It is suitable to the products covering the least transportation
charges.
Under Zone pricing policy different prices are charged to the different zones.
Buyers are classified in to different and equal prices are charged for the consumers
coming under the particular zone.
In the Basing point pricing policy, the sellers are the producers charge prices to
a given destination. A basing point is a geographical location from which all sellers
of a given commodity compute transportation charges to a given destination. The
basing point for a given transaction may be location of the mill nearest to the buyer
or it may be some arbitrary location. The ultimate aim of this pricing policy is to
allow all competitors to quote identical transportation charges to any one buyer.
This pricing policy is seen in industries producing the standardized industrial
products.
Production-point policy is adopted by majority of firms. The firms adopting the
pricing policy make delivery of the goods at the gate of the factory or the
warehouses. The transportation cost there from is borne by the buyer. The price is
known as factory price or f.o.b. factory price.
Freight absorption pricing policy is generally adopted when market for a
product expands. In this policy, the sellers or producers bear a portion of freight.
Hence the name freight absorption policy. This pricing policy is found suitable only
for such firms whose fixed cost or production is high but the marginal cost is low. It
may also be adopted to protect the interest of the producers from the nearest rival
competitors. This may also be followed by firms offering the same quality product at
the same price being located at differing distance. Let us take an distance of say
250 Km from customer C and B at the distance say the cost of freight is likely to be
low. But factory B agrees to pay excess freight on 100 Km, the customer in question
would not have any objection to make purchase.
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Psychological pricing
Psychological pricing is based on customer price perceptions so has to have
special appeal in certain target markets. It is used to create an illusion of bargain.
It is the practice of setting the prices at odd points e.g. Rs. 99, Rs. 199, Rs. 190.95
etc. Bata Shoe company adopts psychological pricing. Prices of consumer durables
such a care, refrigerators, etc. are usually fixed in odd amounts.
Promotional pricing
Under certain situations, companies price their products below the list price,
of course, for a temporary period and sometimes even below the cost. Such pricing
policy is known as Promotional pricing. It takes various forms, viz. Loss – leader
pricing. Special – Event pricing, special – Event pricing Low-interest Financing, etc.
Loss-leader pricing policy helps in raising the sales volume or make possible
the generation of profits at an increased scale. For example manufacturer has been
able to create a positive image for its product(s), he may attempt at encashing the
goodwill or reputation. He then brings down the prices of a particular product and
takes help of advertising. Ultimately, the consumers realize that the producers have
been showing their good gesture by minimizing the price. Supermarkets and
department stores at times drop the price on well-known brands to stimulate
additional store traffic.
The notable examples of Special-event pricing are pricing followed when a new
show room is opened, e.g. Titan show Room, Bombay Dying or any other retail
outlet. During exhibitions also, the stalls price their products at lower than the
market price.
Low-Interest Financing as a form of promotional pricing is being followed by
some of the automobile manufacturers, e.g. Telco and Premier Automobiles, instead
of lowering the price, the companies offer customers low-interest financing.
Pricing strategies for new products
The introduction stage of the product life cycle (PLC) is characteristised by
product distinctiveness. This distinctiveness gradually perishes during the
product’s travel through the subsequent stages. During its introduction stage, the
product is offered to customers at a basic price which may be set on the basis of
cost or demand or both. Two common price strategy options are available to a
manufacturer during the introduction stage of new products, they are:
1. Skimming pricing
2. Penetration pricing
Skimming pricing is also known as skim-the-cream pricing. It is characterised
by high initial price of the product when it is introduced in the market resulting in
enormous profits in the product’s initial on the market period and then allows the
price to fall as competitors enter the field. This is a strategy of recovering rapidly
the investment made in the product. This policy is followed where it is felt that
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there will be rapid competitive in roads and the company wants to take the cream
before this happens. The principal object underlying this pricing strategy is to fully
exploit the product distinctiveness by offering the product to consumers in the
higher income level group so as to skim the milk of the market.
An important advantage of keeping the price high in the initial stage is that if
the market does not respond satisfactorily, the price can be lowered. Secondly, the
initial high price generates more profits which can be used subsequently for further
market development and expansion.
As opposed to skimming pricing strategy, penetration pricing strategy is
characterised by low initial price product when product is introduced in the
market. The principal object underlying this pricing strategy is to attain a large
volume and reduce cost by stimulating rapid and widespread market acceptance.
Penetration pricing is desirable in the following situations.
 Existence of a high short-run price elasticity of demand.
 Substantial economics of large-scale production are possible.
 Possibility of rapid competitive imitation.
Market generation pricing strategy may also be adopted to capture a share of a
market form a competing product which the new product is likely to replace. It also
discourages competitors from entering the market in view of the fact that the low-
price policy allows a small margin.
Policies involving price differentials
Price differential may be defined as the difference between the quoted price
and the net price charged to the buyer. Price differentials are designed to
accommodate various situations such as meeting competitive pressures,
encouraging early payments, compensating buyers for the loss of some value
satisfaction, providing incentives to buy in bulk. Some of the important differentials
involving reduction in quoted price include discounts and rebates. A brief mention
may be made on each class of discount.
Trade Discount: It is also known as functional discount and is offered by the
manufacturer to channel members such as distributers, wholesalers, retailers for
performing certain functions viz; selling, storing and record keeping. Functional
discount is allowed as a certain percentage of the quoted price and its rate varies
among different classes of middlemen. For example, a company may quote Rs.
2,000.00 as the price of a product and offer 20 per cent and 5 per cent trade
discount from the channel end to retailers and wholesalers respectively. It implies
20
retailers buying from a wholesaler would pay (Rs.2000 x = 400) Rs. 1,600/-
100
(Rs. 2000/- - Rs. 400/-). Thus the wholesaler is given 25 per cent keeps 5 per cent
and possess 15 per cent to the retailers.
Cash discount: A cash discount is a price reduction to buyers who promptly
pay their bills. It amounts to a reduction from the invoice price. This is in addition
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to trade discount. Such discount is best used when money market is tight and
company needs to augement liquidity. It serves not only the purpose of improving
the seller’s liquidity but also helps in reducing credit collection costs and bad debts.
Quality discount: A quantity discount is a price reduction to buyers who buy
large quantity of a product(s). It may be allowed on the aggregate of all or specific
class of product purchases measured in rupee value or physical units, in terms of
purchases at a time or over a period of time (cumulative), or beyond a specific flow
volume (incremental purchases) or absolute volume. In india, such discounts are
allowed by a number of companies in order to stimulate their sales (J.C. Gandhi,
Marketing- A Managerial Introduction, TMH, New Delhi, 1990, P. 244).
Quantity discounts is being allowed because of some benefits that accrue from
it. It stimulates larger orders especially in case of slow moving items. It is possible
to force full line on buyers by so structuring the discount schedule that slow
moving items attract more discount Despite these, one major difficulty that arises
in structuring the discount shedule which is not discriminatory and anticompetitive
so that it does not attract provisions of MRTP Act, 1969. According to the
judgement given in the case of Carona Sahu Company Limited “the practice of
allowing discriminatory or differential incentive bonuses based on larger turnover is
a trade practice within the meaning of Sec. 2(c) of the MRTP Act and therefore,
restrictive trade”. (Restrictive Trade Practices in India, Vol. I, 1978, P. 288).
Seasonal Discounts: A seasonal discount is a price reduction to buyers who
buy merchandise or services out of season i.e. during the slack/off-season. The
purpose of this pricing policy is to enable the manufacturer to level his production
throughout the year. This policy is generally found in the consumer durables of
seasonal uses. E.g. refrigerators, electric fans, coolers, etc.
Rebate: It is deduction from the quoted price. It is designed to accommodate
different claims of buyers arising out of loss of some value satisfiaction, e.g. making
of defective or delayed deliveries of goods and deterioration in the quality of
products on shelf or in transit, etc. The rate of rebate or its quantum is seldom
fixed. It varies from situation to situtation depending on the loss of value
satisfaction.
Allowances: These are also a type of reductions from the list price. Promotional
allowances are payments or price reductions to reward dealers for participating in
advertising and sales-support programmes. Trade-in allowances are price
reductions granted for turning in an old item when buying a new one. These are
found in durable – goods markets.
15.3.3. Pricing Methods
A number of methods are available for setting prices. The price setting may be
either on the basis of cost or on the basis of market conditions.
Pricing methods
Cost plays an important role in making the pricing decisions. The cost based
method of price determinations is one in which the cost of manufacturing a product
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serves as the base for price fixation. The important pricing methods falling under
this broad head are:
Cost-plus pricing method
Marginal or Incremental cost
Break-even Pricing Method
Cost-plus pricing method
It is simple method of price setting. In this method, the cost of manufacturing
a product serves as the base for price fixation. However in order to cover an
anticipated profit on the product being sold, management usually adds to this cost
some amount referred to as mark-up. This mark-up may be a certain per cent of
the cost. It is for this reason that this method is also called cost-plus or Target
pricing method. It is also called flow price since it provides the flow below which
any sale would loss to the company.
The mark-up when based on cost is arrived at as follows:
Markup in Rs.
Mark – up % based on cost = x 100
Cost price
When the mark-up is based on selling price the formula adopted is :
Markup in Rs.
Markup % based on sale price = x 100
Selling price
It is a simple method of price selling since the calculation stands like:
Selling Price = Unit Total cost+Derived Unit Profit
This method is a weak and unrealistic one since it completely ignores the
influences of competition and market demand. It is suitable only to such producers
who maintain the minimum possible cost of production.
Cost-plus pricing is generally preffered by the middlemen. A middleman
includes in it acquistion cost, the selling expenses, the interest, deprecation,
expected profit margin mark-up.
Marginal or incremental cost pricing method
In this method, the price is fixed on the basis of the additional variable cost
associated with an additional unit of output. The cost of producing and selling one
more unit, i.e. the cost of the last unit, is taken as the price of the final article. This
method of setting prices is found useful, particularly while introducing a new
product. It is also useful for keeping labour employed during slack seasons and to
prevent a shut-down. Despite all, the method cannot be followed for long. Because,
we do not find the relevance of fixed cost in this method.
Break –even pricing method
This is the most sophisticated pricing method which takes into account both
fixed costs and variable costs. Breakeven analysis is a managerial tool that
emphasizes the relationship among decision variables such as price, costs and
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volume of sales. Sales volume is a function of prices charged and the amount of
products sold. (Price per unit multiplied by quantity sold). Any marketing plan is
based on the sales budget and the sales budget is itself based on the sales
forecasts, i.e. estimated sales volume.
As regards costs, we know that there are broadly two categories of cost viz.
Fixed costs and variable costs. Fixed costs remain constant for a given range of
operations. Variable costs vary with the output or number of units produced.
The concept of contribution is important in breakeven analysis. Unit
contribution to fixed costs is found out by subtracting variable costs per unit from
the selling price per unit. Mathematically:
Unit Contribution to Fixed Costs = [Selling price per unit] – [Variable Costs per
unit]
Break-even point is the point at which the firm has neither gains nor losses.
The firm just manages to cover its total costs. When the sales revenue exceeds total
costs, the result or difference is profit and when sales revenue is less than total
costs, the result or difference is loss. Thus, break even point is that point at which
sales revenue is just equal to total costs. The equation for arriving at BEP is:
FC FC
BEP = or
SP  VC C
Where FC = Fixed Cost
SP = Selling Price
VC = Variable Cost
C = Contribution
A diagrammatic representation of the breakeven point has been depicted in
Fig. 1.
Y
800
700
TOTAL COST & REVENUE (Rs.)
TOTAL REVENUE
600 IT
OF
BREAK-EVEN POINT PR
500
400
B
300
TOTAL VARIABLE COST
200
SS TOTAL FIXED COST
100 LO
0 X
0 1 2 3 4 5 6 7 8 9 10 11 12
QUANTITY
Figure 1 Break even Analysis
In Figure –1, OX axis indicates the quality of production and OY the cost
revenue in rupees. With a rise in production, we find a rise in the variable cost. But
the fixed cost remains static. The point where the total cost is equal to the revenue
is the break-even point. In Fig.1, this point is B. The assumption that fixed costs
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remain static is not true in the long run. Again, the demand estimate would also
vary. Hence, it is doubted whether this method of pricing is perfect. Especially in a
firm where we find fluctuation in costs, this method would not be suitable.
Pricing method based on market conditions
Besides costs, the market condition is also a reliable basis of the setting of
pricing. The stage of competition determines the market condition. Usually three
method exist which are based on market condition or demand viz;
 Pricing to meet competition.
 Pricing above competition.
 Pricing below competition.
Pricing to meet the competition
This is the simplest method of price setting. Here, each company or firm prices
its products the same as rival competitors. Competitive price is the basis of this
method of price setting. It is found applicable in the perfect market situation. In
such a market, the buyers have details of the prices adopted by the competitors.
The standardized products prefer to adopt this pricing method. This pricing method
is also found suitable for products having inelastic demand.
Pricing above competition
In this method of price setting, the seller may set higher than average prices
for the product. The main object is to give an impression that his product(s) is
superior to that of the competitors. At times, that producers set more than average
prices, particularly to give some share to the middlemen. Above competition pricing
is suitable to the producers who have established fair image among the consumers
at large.
Despite the above, the method is criticized on the ground that the producer
charge high prices not only to make high profits but also to give a chance to
middlemen to get handsome pay offs. In the process it is alleged that the ultimate
consumers suffer. Hindustan Lever Ltd (HLL) follows this method of pricing.
Pricing below competition
In this method the firms price their product(s) below the prevailing competitive
price it is observed, the price of a product is usually low when the quality of
product is low. The firms following this method of price setting must either have
very low costs or be willing to accept a very low profit pen unity in the hope of
radically increasing sales volume. This method of pricing is found suitable to the
firms, particularly new and interested in penetrating the new market. The products
having elastic demand may go through this method of pricing.
Pricing policies & strategies, pricing methods
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1. What is the rationale of following policies involving price-differentials?
Describe the kinds of differentials usually allowed by the marketers.
2. Write short notes on:
a) Variable Pricing, b) Zone Pricing, c) Loss-Leader Pricing d) Promotional
Pricing
3. Distinguish between
(a) Skimming Pricing and Penetration Pricing
(b) Trade Discount and Quantity Discount
(c) Break-even Pricing and Incremental Cost Pricing.
15.6. SUMMARY
Price is an important element in the marketing-mix. Price exists all around us.
It is a like that binds consumers and the company. Pricing management begins
which an understanding of the corporate mission, target markets and marketing
objectives. Pricing objectives can be grouped under three broad categories, viz,
profit – oriented objectives, sales –oriented objectives and status –quo oriented
objectives. Of the objectives, achieving a target return, increasing market share,
and meeting competition are the principal ones.
Every company follows a particular pricing policy or a combination of two.
Pricing policy may either be one-price policy or variable price policy. One –price
policy is fair and builds goodwill, easy to administer etc. Geographical pricing policy
may be one of uniform delivery pricing policy, zone pricing, basing point pricing,
production point pricing and freight absorption pricing policy. Some firms also
follow psychological pricing or odd pricing policy. Promotional pricing takes that
form of Loss-Leader Pricing, Special –Event Pricing, Low-Interest Financing, etc. For
new products two products two principal pricing strategies are (a) skimming pricing
and (b) penetration pricing. The former is characterized by high initial price of the
product and the later is characterized by low initial price.
Discount is an element in the price-mix. Trade discount, Quantity discount,
Cash discount, Seasonal discounts are the most popular forms of discounts allowed
by the marketers. Besides, rebate and allowances are also given.
The pricing methods inter alia include Cost-plus pricing method. Marginal or
Incremental cost pricing method and Breakeven Pricing method. Cost-plus pricing
is generally preferred by the middlemen. In case of marginal cost pricing the cost of
the last unit is taken as the price of the final article. Breakeven pricing is said to be
the most sophisticated pricing method which takes into account both fixed costs
and variable costs. Break-even analysis is a managerial tool.
Thus, price policies and strategies are guidelines and frameworks within which
management of a company administers prices so as to match them with the market
needs.
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1. Describe the major pricing objectives which a company may set out to
achieve
2. Describe the cost based methods of pricing and outline its strength the
limitations.
15.9. ASSIGNMENTS
1. “The break-even pricing method overcomes the weaknesses of both the cost-
based and demand-based pricing methods”- Discuss.
“Pricing provides guidelines to the marketing manages to evolve appropriate
decisions – Comment.
15.12. KEYWORDS
Mark-up, Promotional Pricing, Rebate, Trade – in Allowances, Contribution
❑
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LESSON – 16
PROMOTION
16.1. INTRODUCTION
In an exchange activity such as marketing, communication is vital. A
manufacturer may have the best product, reasonable price, an efficient distribution
system. But it is a fact that people will never buy the product unless they have
heard of it. They must know that the right product is available at the right place
and at the right price. This is the job of promotion. It is an important element in the
marketing-mix.
16.2. OBJECTIVES
After reading this lesson, you will understand,
 the concept of promotion-mix.
 the aims/purposes of promotion.
 the scope of sales promotion.
 the promotion strategy.
16.3. CONTENT
16.3.1. Promotion-Meaning, Nature and Scope
16.3.2. Need for Purpose of Promotion
16.3.3. Sales promotion
16.3.4. Promotion Strategy
16.3.1. Promotion – Meaning and Scope
Meaning
Basically, promotion is an attempt to influence. More specifically, promotion is
the element in organisation’s marketing –mix that serves to inform. Persuade, and
remind the market of a product and/or the organisation selling it. [Stanton, et al,
Fundamentals of marketing, Mc Graw Hill, New York, 1994, P. 456]. It has also been
defined as ”the coordinated self-initiated efforts to establish channels of information
and persuasion to facilitate or foster the sale of goods or services, or the acceptance
of ideas or points of view”. [Quoted in S.A. Sherlekar, Marketing Management,
Himalaya, New Delhi, 1993, p. 264].
Since the promotion-mix is also known as the marketing communication-mix,
let us at this stage have an idea about the communication process and the various
elements (Fig. 1) involved in it.
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Sender Encoding Message Decoding Receiver
Media
Noise
Feedback Response
Fig. 1: Elements in the Communication Process
Source: Philip Kotler, Marketing Management, PHI, 1992, New Delhi P. 568.
A glance at the figure indicates nine elements which may be explained as
follows:
Sender: It is the source or communicator, a marketing company. In other
words, he is the party sending the message to another party.
Encoding: The process of putting through into symbolic form
Message: The set of symbols that the sender transmits. (may be sales story,
the copy theme)
Media: The communication channels through which the message moves from
sender to receiver. (may be a salesman, an ad., telephone, postcard, newspaper,
etc.)
Decoding: The process by which the receiver assigns meaning to the symbols
transmitted by the sender.
Receiver: The party receiving the message sent by another party. (the target
customers, purchase influencer, etc)
Response: The set of reactions that the receiver has after being exposed to the
message.
Feedback: That part of the receiver’s response that the receiver communicates
back to the sender.
Noise: Unplanned static or distortion during the communication process.
Nature and Scope
The nature and scope of promotion-mix can be studied under five heads, viz;
Personal Selling, Advertising, Sales Promotion, Packaging, public Relations, and
Publicity. These can be the elements of the promotion-mix.
Personal Selling: It is the direct presentation of a product to a prospective
customer by a representative of the selling organisation. Personal selling takes
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place face to face or over the phone, and it may be directed to an intermediary in
the distribution channel or a final consumer.
Advertising: Any paid form of non-personal personal presentation and
promotion of ideas, goods, or services by an identified sponsor. (The American
Marketing Association) The key words are “non-personal” and “paid by an identified
sponsor”.
Publicity: It is non-personal stimulation of demand for a product, service or a
business unit by place commercially significant news about it in a publication or
obtaining favourable presentation of it upon radio, television, or stage that is not
paid for by the sponsor.
Public Relations: A variety of programmer designed to improve, maintain or
product a company or product image.
Sales promotion: It embraces those marketing activities other than advertising,
publicity and person selling that induce consumer purchasing and dealer
effectiveness. Sales promotion aims at complementing other means of publication.
Packaging: Packaging has become increasingly important as a promotional
tool. With the introduction of new packaging technology, the value of packaging
especially in consumer products has assumed a fascinating communication
channel. The polypacking is an example. Marketers have designed their
communication message around new and innovative packaging (Dalda Refined Oil,
Cosmetic, Pan Masala, etc.) service industry e.g. catering, courier too have begun to
use packaging as a promotion.
Some common promotional tools have been presented in figure-2.
Personal selling Advertising Publicity Sales Promotion

In person sales Print and Print, Media, Contents
Presentation Broadcast ads New Stories
Sales Meeting Bill Boards Broadcast media Couponing
New Stories
Tele Marketing 1. Display signs 1. Annual Reports 1. Free samples
2. POP display 2. Speeches 2. Rebates
3. Catalogues 3. Premium and gifts
4. Motion Pictures
5. Direct Mails
Fig.2 Some Common Promotional Tools
A mention made this at this stage about the suitability of promotion elements.
Advertising is the efficient tool in obtaining customer awareness of new products
and services whereas customer comprehension is influenced about equally by
advertising and personal selling.fig.3 shows personal selling is considered the most
important of the promotion tools in the marketing of industrial goods. But
advertising is most important in the marketing of consumer goods.
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Personal
Advertising Sales Promotion Publicity
selling
Form of communication Personal Non- Non-personal Non-

personal personal
Contact with prospect Direct Indirect Indirect Indirect
Message flexibility Flexible Inflexible Inflexible Inflexible
Prospect feedback Direct Indirect Indirect Indirect
Cost per contact High Low Moderate to None
high
Relative importance for 3 1 2 4
consumer marketing
Relative importance for 1 3 2 4
industrial marketing
Fig.3 Characteristic and Relative Importance of Four Elements of Promotion

16.3.2. Need for / Purposes of Promotion
Someone has rightly said, “Nothing happens until somebody promotes
something”. Promotion is said to be the spark plug in the marketing-mix. Sales do
not take place automatically without promotion, even though the product is superb.
Promotion is persuasive communication to inform potential customer of the
existence of products, to persuade and convince them that those products have
want satisfying capabilities. The promotion message has two basic purposes viz;
persuasive communication, and tool of competition.
Promotion is responsible for awakening and stimulating consumer demand for
a product. It can create and stimulating demand, capture demand from rivals and
maintain demand for one’s products even against keen competition.
The main purpose of promotion is to influence buyer behaviour and alter the
location and shape of the consumer demand curve in favour of the products.
Figure-4 demonstrates the effect of promotion on the demand curve.
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PRICE
HIGHER PRICE FOR SAME SALES
Y
D2
DE
MA
N
P2 PR D G
OM O
O T AL W
D1 IO
N ITH
P1
PR
PA ESE
TT NT RESULT OF
ER PROMOTION
N
D2
D1
X
Y Q1 Q2 SALES VOLUME
MORE SALES AT SAME PRICE
1. Large quantity OQ2 sold at the same price OP1
2. Same quantity OQ1 sold a the higher price OP2
Fig. 4: Influence of Promotion on Demand
Source: S. A. Sherlekar, Marketing Management, Himalaya, New Delhi, 1993,

P.270.
Thus promotion tries to alter demand curve to the right (from D1 to D2). It is
employed to retain the price and secure increasing sales at the price. Promotion can
also raise the price but retain the sales level by marketing the demand relatively
inelastic e.g. through creating brand loyalty and patronage by intensive advertising
and sales promotion. Either through shifting the demand to the right or marketing
the demand more inelastic, the object of higher sales revenue can be accomplished
with the help of persuasive marketing communication. In brief, all forms of
promotion can act as the best means of non-price competition.
16.3.3. Sales Promotion
Sales promotion is an integral part or promotion-mix. It is referred to those
marketing activities other than personal selling, advertising and publicity that
stimulate consumer purchasing and dealer effectiveness such as display, shows
and exhibitions, demonstrations and various non-recurrent selling effort not in the
ordinary routine. Sale promotion also means “any steps that are taken or the
purpose of obtaining or increasing sales”.
137
Objectives of Sales Promotion

1. The primary objective of sales promotion is to introduce new product. The
basic purpose is to expand market for the new product by influencing or
motivating the potential buyers, actual users, re-sellers or middlemen.
Sales promotion activities are also undertaken with a view to attract new
customers. The potential buyers or the actual users are motivated by paying to
them different incentives. They are induced by free samples, gifts, premium, etc.
To reduce seasonal fluctuations in sales is another important objective of sales
promotion. The demand for electric fan, air cooler, refrigerator or so is reduced,
particularly in the winter season. To maintain their normal demand, we find the
provision of off-season discount/concession/gifts.
The sales promotion activities also aim at influencing or inducing the
middlemen. Hence dealers’ promotion is as important as consumer promotion.
To counter-attack the competitors in some cases is also the objective of sales
promotion actives. As and when a competing firm provides promotional benefits,
the rival competitors are forced to adopt the same.
Sales Promotion Vs Advertising
Sales promotion is the temporary offer of a material reward to the customer.
Whereas advertising is the communication of information. More specifically the
points of distinction between the two are as follows:
1. Advertising is a day-to-day matter of the business. But sales promotion is an
occasional tool.
2. Advertising is a necessity for any marketer/manufacturer, but the sales
promotion can be dispensed with.
3. Advertising is impersonal communication or we can say it is a media of
information transmission. The sales promotion is a persuasive
communication.
Classification of Sales Promotion Activities
Sales promotions are targeted at consumers, dealers and sales force of the
organisation. Hence we can classify the sales promotion activities into three broad
groups viz; Consumer Promotion, Dealer promotion and Sales-force Promotion.
Consumer Promotion
Consumer Promotion activities are those incentives which are intended to
educate or inform the consumers and at the same time stimulate the product/
service usage at the consumer level. A few consumer promotional tools may be
mentioned here.
Free samples are given to consumers with the object of introducing a new
product in the market as well as to enlarge the market for the product. The free
samples accelerate sale by motivating the consumers as they get an opportunity of
using the product before making the buyer decisions. Free samples are prevalent in
consumer non-durables market.
138
Price-off is a consumer-oriented sales promotion device which provides an

opportunity to the buyers to get the product at a reduced price. The chief objective
of price-off or money-off is to boost sales. It is available in two forms; first, the
reduction in price and the second, more than one item is packed and made
available at a reduced price. Price-off label is printed on the package. This is
common.
Premium is the product which is given free of cost to the purchaser. This is
introduced to attract new customers or actual users or to improve off-season sales
or to introduce a new product or to discourage price competition. The premium is of
four types, viz; in-pack or non-pack premium, free in the mail premium, self-
liquidating premium and re-usable container premium.
In the in-pack premium, the goods are packed with premium. One finds its
descriptions on the package of goods. In the mail premium, the purchasers get the
premiums after a certificate producing a certificate regarding the purchase of goods.
The premiums are sent to the concerned purchasers free of cost by mail. In the self-
liquidating premium, the purchasers get the goods at the reduced prices. In the
container premium, the purchasers get a container of domestic use.
Key chains, artificial flowers, ball pens, combs, blades, toilet soaps, etc. were
given as in pack premiums. Attractive jars costing separately Rs.8.00 or so may be
given at an extra change of Rs.4.00 or Rs.5.00 only. Recently Brooke Bond Tea gave
sugar in a separate pack weighting 50grams for each pack of 250grams of tea.
Sweepstakes are some sort of lottery. In this device, a consumer who buys the
product is given a coupon containing a serial number. All the coupons received
from the consumers are kept in a place, lots are drawn and names of winners are
declared.
Consumer contests are competitions where in individuals are invited to
compete on the basis of create skills. Consumer contests are indirect manner of
introducing a new product or attracting new users. The contests remain open for a
period of five weeks of more and among others aim at generating greater degree of
awareness and enthusiasm in the sponsor and/or his brand. Being capable of
meeting diverse objectives the popular types of contest include; reason why,
sentence completion, brand name/slogan/essay writing contest, special skills,
sewing, knitting, cookery contest, etc., each capable of delivering the purpose with
which a contest is organized. The contest should be easy and fun in order to attract
greater participation.
Trades or Dealer Promotion
Trade promotions are incentives which are offered to wholesalers, distributors,
retailers, etc. and aim at motivating them to back up the sponsored brand by giving
more than their usual push. The dealer promotions thus are introduced to induce
the dealer to keep a larger stock of the manufacturer’s product. The middlemen are
interested in profits. Hence, the forms of promotion which attract them may include
139
(1) offered of cash discount on various bases i.e. percentage, quantity bought /
ordered, (2) advertising or display allowances, (3) prizes and gift, etc.
Quantity discounts and higher rate cash discount/trade discount induce the
dealers to stock larger quantities. These are also known as buyer allowance. This
device is used for the new products intended to be penetrated in the market. But
the manufacturers can also use it for the existing goods.
Retail demonstrators are supplied by manufacturers for preparing and
distributing the product as a retail sample. For example, Nescafe Instant Coffee and
Rasna use this device by trying the sample with visitors to the retail outlets on the
spot. Even Surf at times shows on the spot demonstration regarding the method of
using the product.
Dealer and distributor training for salesmen which may be provided to give
them a better knowledge of a product and how to use it.
Displays and advertising allowances otherwise known as merchandising
allowances are also offered to the dealers. A merchandise allowance may be defined
as a short-term contractual agreement through advertising or in store display of his
product. The advertising allowance is paid to them for making advertisements. The
payment of display allowance is for displaying the goods and the merchandise
allowance combines both.
Free goods are an important sales promotion device meant for the middlemen.
In this method, the middle men get few goods free of cost, especially after crossing
the minimum limit.
While organizing trade/dealer promotional activities some of the following
points should be borne in mind.
 Trade promotion schemes should match with the capability of the different
members of the trade. The wholesalers might be put at primary demand
creation of the product and the retailers in administration of complete
schemes. Hence the sponsors of trade/dealer promotion schemes should
perform these tasks for them instead of expecting them to carry them out.
 Regular availability of product supplies and gifts must be ensured during
the period of the promotion schemes.
 In case of gifts are offered as incentives to trade members, these article
should be reputed brand and of household or personal use.
Sales force promotions
Sales promotion schemes can be aimed at a company’s own sales force .these
include broadly incentive programmes and sales contest. The sales incentive
awards may be for the sales-force by following any one of the four methods, viz.
 Awards are tied to unit sales on the annual basis.
 Awards are given to those who achieve more than a specific percentage of
their sales quota performance.
140
 Awards are given to those who perform best in relation to their Individual
quota.
 Awards are given on account of specials achievements as notified by the
organisation from time to time.
Besides sales contest the other promotional tools used for motivating sales
force are bonus, meetings, sales aids, trainings materials, etc. all these lead to
increase sales productivity, to increase average sales per account, to promote dealer
activity, to revive old product. To boost recession period sales, etc.
A sales contest is a competition among members of the sales force of a firm. It
aims at fulfilling the needs of the sales person for achievement, esteem and self-
actualization. Contests are employed to increase sales on an entire product line, to
launch and introduce new products, to obtain new customers, and to evaluate the
real capacity of salesmen. However, sales contests suffer from limitations. They may
lead to jealousy among salesmen. They may also lead to overstocking or under
servicing of customers. If contests are wisely used, they can remove many
disadvantages. Contest awards must be cash prizes or merchandise prizes or a
combination of both.
Sales meeting/convention/conferences are the devices of group motivation.
They promote team work, dissolve social barriers, inspire and raise salesmen’s
morale.
The sales promotion activities now can be summarized and put in Figure 5.
Tools of Dealer Tools of Sales Force
Tools of Consumers Promotion
Promotion Promotion
 Banners  Price deals  Contests
 Samples  Sales contests  Bonuses
 Calendars  Gifts  Meetings
 Point-of-purchase materials  Trade shows  Sales aids
 Contests  Meetings  Training Materials
 Coupons  Merchandising
 Trade Fairs
Fig. 5 Sales Promotion Activities
16.3.4. Promotion Strategy
Promotion strategies are influenced by the life cycle stages of a product.
During the introduction stage, the prospective buyers must be informed about the
product’s existence and its benefits, the middlemen must be convinced to carry it.
In such a situation both advertising (to consumers) and personal selling (to
middlemen) are critical in a product’s introductory stage. Later, if a product
succeeds in the markets competition is seen which gradually intensifies. Hence,
more emphasis is placed on persuasive advertising.
Promotions strategies may also be studied under (a) push strategy, (b) pull
strategy, and (c) push and pull strategy.
141
A promotion programme aimed primarily at middlemen is called a push

strategy and promotion programme directed primarily at end users is called a pull
strategy. Figure-6 gives an idea about both the promotion.
Demand Demand
Manufactuer Intermediaries End User
Push Strategy
Marketig activities
Demand Demand
Manufactuer Intermediaries End User
Pull Strategy
Marketing activities
Fig.6 : Push Versus Pull Strategy
Source: Philip Kotler; Marketing Management, PHI, New Delhi, 1992, P. 588
Push strategy
It is also called a pressure strategy. A channel member directs its promotion
primarily at the middlemen that are the next link forward in the distribution
channel. The product is pushed through the channel. The producer promotes
heavily to wholesales, which then also use a push strategy to retailers. In turn, the
retailers promotes to consumer. A push strategy usually involves a lot of personal
selling and sales promotion, including contests for sales people and displays at
trade shows. Advertising plays a minor role. This promotion strategy is appropriate
for many manufactures of business products and for various consumer goods.
The conditions favouring push strategy are:
 Quality product with unique product features and talking points of
salesmen.
 High priced product.
 Higher profit margins to resellers.
Pull strategy
A pull strategy involves marketing activities primarily advertising and
consumer promotion directed at end user to them to ask intermediaries for the
product and thus induce the intermediaries to order the product from the
142
manufacturer. This strategy is also known as suction strategy. The product is

literally pulled through the marketing channel by consumer.
Contests, Buyer allowance, Push strategy, Pull strategy
1. Explain in brief the process of communication in marketing. Give
illustration.
2. Define promotion and give its classification. Also describe the purposes of
promotion.
3. How does sales promotion differ from advertising? State the importance of
sales promotional activities
4. Write notes on:
(a) Sales contests, (b) Premium, (c) Push strategy, (d) Pop materials
5. Distinguish between:
(a) Push strategy and pull strategy
(b) Premium and sweepstakes.
(c) Advertising and sales promotion.
16.6. SUMMARY
Promotion is one of the important elements in the marketing-mix. Personal
selling, advertising, publicity, public relations and sales promotion constitute the
promotion-mix. In the present day competitive business world promotion in general
and sales promotion in particular plays a key role. These elements vary in their
relative importance depending on whether the product is a consumer one or
industrial one. The principal objective of promotion is to influence the behaviour of
the buyer and increase demand. It is a persuasive communication. Sales promotion
activities are necessary while introducing a new product, to attract new customer,
to reduce seasonal fluctuation, to counter-attack the competitors, promotion
strategy.
Sales promotional activities can be broadly divided into (a) consumer promotion
(b) dealer promotion (c) sales force promotion.
Broadly two promotional strategies exists viz. Push Strategy and Pull Strategy.
1. What is message?
2. What is feedback?
1. International journal of advertising.
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16.9. ASSIGNMENTS
1. What is the need for motivating the sales force? Explain the various tools
that are used for sales force promotion.
2. V.S.Ramaswamy and Namakumari, Marketing Management, Mac Millan.
1. Discuss the important promotional tools that are being employed by the
markers in present day environment.
16.12. KEYWORDS
Encoding Contests
Decoding Buyer allowance
Identified Push strategy
Premium Pull strategy
Sweepstakes
❑
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LESSON – 17
ADVERTISING
17.1. INTRODUCTION
In the preceding lesson promotion in general and sales promotion in particular
were discussed. In this lesson an attempt is made to explain advertising and its
various important aspects as another important element in the promotion-mix.
17.2. OBJECTIVES
After studying this lesson you will be in a position to learn the following:
 The meaning and nature of advertising – an important element, in the
promotion.
 Kinds of advertising.
 Ad. Budgeting/appropriation for advertising.
 Evaluation of advertising effectiveness.
17.3. CONTENT
17.3.1. Advertising-Meaning and Nature
17.3.2. Role/Functions of Advertising
17.3.3. Classification of Advertising
17.3.4. Advertising Budget
17.3.5. Evaluation of Ad. Effectiveness
17.3.1. Advertising-Meaning & Nature
Several authors have defined advertising in various ways. However, the theme
has more or less remained the same. According to W.J. Stanton and others
advertising consists of all activities involved in presenting to an audience a non-
personal, sponsor-identified, paid-for message about a product or organisation.
(Fundamentals of Marketing, Mc Graw Hill, New York, 1994, P. 502) one of the most
representative and widely accepted definitions is that of the American Marketing
Association. According to it, advertising is, “any paid of non-personal presentation
and promotion of ideas, goods, or services by an identified sponsor.” This definition
indicates that advertising is a paid, non-personal communication.
It lays emphasis on presentation and promotion. The presentation of the sales
message may be visual as well as oral. Importance is also attached to the sponsor.
Wright, winter and Zeigler say “advertising is controlled, identifiable information
and persuasion by means of mass communication media.” (Advertising, TMH, New
Delhi, 1982, P. 10) It is considered controlled information because it has to use the
time, space and content of the message effectively and economically. It is controlled
again because it is directed at a particular group.
The field of advertising management is made up of a system of interacting
organisations and institutions, all of which play a role in the advertising process. At
the core of this system are advertisers, the organisations that provide the financial
that support advertising. Advertising management is heavily focused on the
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analysis, planning, control, and decision-making activities of this core institution

i.e. the advertiser (David A. Aaker et. al. Advertising Management, PHI, New Delhi,
1992, P.1).
The nature or characteristics of advertising may be enumerated as follows:
1. It is an essential element in the promotion-mix. Personal selling, sales
promotion and publicity are the other elements.
2. Mass communication is the basic purpose of advertising. It informs not one
person but a group of persons who are the prospective buyers of the
product. The mass communication media such as radio, television,
newspaper, bill boards and magazines, etc., are used for advertising
purpose.
3. Advertising activity is undertaken by some advertising agencies which
charge the price of advertising. Space, time, language, etc., are sold by
advertising agencies.
4. An advertisement is sponsored by some identified advertiser, disclosing
ideas, messages and information.
5. The advertising message is persuasive & informative enough to motivate
potential customers. It has been said that success in business depends on
persuasion. Advertising informs, entertains and ultimately persuades a
group or society to purchase the advertised products.
The distinction made between advertising and sales promotion in the
preceding chapter helps us in further understanding the nature of advertising.
Advertising may here be differentiated from publicity.
1. Publicity may or may not be for, whereas advertising is always paid for.
Publicity may or may not be openly sponsored or initiated by any party
17.3.2. Role / Functions of Advertising
Advertising is a communication which informs, persuades and reminds. It
performs a number of functions. The role of advertising can be traced from the
functions it performs.
Introduces New Product
Advertising introduces a new product to potential customers. The prospective
buyers are given information on the attributes, qualities and prices of the product.
New products are advertised first before production commences. Such advertising
gives an edge to the new product over the existing products.
Stimulates Demand
Advertising as a communication medium informs consumers about the
presence of a product in the market. The knowledge so gained about the advertised
product in two ways. First, it aroused latent needs and secondly, it reinforces and
strengthens the aroused needs. Promotional activity had definite impact on
aggregate consumption.
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Increases Sales Volume

By stimulating demand, supplementing other selling efforts, and creating a
brand preference, advertising influences in a positive way a company’s sales
volume. It ultimately increases the share of market.
Reinforces Middlemen’s Promotional Efforts
Advertising helps middlemen to achieve better performance. They are informed
about the prices, qualities, etc., so that they may pass on the information to
customers. Newsletters, coupled with newspaper advertisement, may give
information on the names of shops and retailers where the advertised products
would be available at a lower cost. Distribution is accelerated by extensive
advertising by the manufactures which acts as the dealer support.
Develops Brand Preference
Consistent advertising, coupled with other selling efforts, makes consumers to
buy company’s product. It also tries to create and retain brand preference and
brand loyalty. Once a brand preference is developed, advertising goes on to reduce
the post-purchase consumer dissonance and the influence of competitive
advertising so as to sustain consumer’s brand preference.
Makes De-marketing Possible
Advertising is the prime instrument of a company’s demarketing strategy. Its
contribution is particularly relevant in a country like India where demand for goods
has to be regulated so as to check the adverse effects of the demand –supply
disequilibrium (J.C. Gandhi, Marketing – A Managerial Introduction, TMH, Delhi,
1985, P. 298).
Miscellaneous Role
Advertising helps in cutting costs both production and selling. When sales go
up on account of advertising, there is a greater spread of over head production cost
as a result of which unit cost also goes down (when variable cost remains constant).
When unit cost of a product goes down there are both internal and external
environmental pressures which compel companies to lower their prices to the
advantage of consumers.
The major contribution of advertising is in maximizing profits under a given
set of constraints. The collective and cumulative effect of demand stimulation,
brand preference and cost reduction is better price realisation on the product sold.
Besides, the product differentiation created by advertising enables a company to
maximize its profits on sales of those who value product distinctiveness.
17.3.3. Classification of Advertising Media
In advertising, media refer to those through which the message of an
advertisement is presented. The message may appear in newspapers, magazines or
calender, or may be heard in a ratio or shown on a screen in a cinema hall or
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displayed on posters or in neon sign. A classification of advertising media is

presented below:
I. Indoor Advertising
* Press media
*News Papers
*Magazines
* Radio
* TV
* Film
II. Outdoor advertising
* Mural (Posters * Hand Bills
* Advertising Board * Painted Displays
* Vehicular * Electric Displays
* Sky advertising * Sandwichman
III. Direct Advertising
* Sales Letters * Booklets & Catalogues
* Circular Letters * Package Inserts
* Folders * Stores Publications
IV. Promotional Advertising
* Window Display * Interior Display
* Showrooms * Exhibitions
4. Indoor Advertising
Press Media: Press Media are broadly divided into News paper and Magazines.
There are mainly three types of news papers viz; Morning Newspapers, Evening
Newspapers, Sunday Newspapers. A Newspaper is suitable for any type of
advertisement. Newspapers have wide circulation, the appeal in such advertisement
has a very extensive coverage. Effectiveness of the advertisement has a very
extensive coverage. Compared to the cost in other media like radio or film, the cost
of newspaper advertising is cheaper.
Magazines/periodicals are published monthly, quarterly, even fortnightly/and
weekly. Now – a – days magazines are published practically on every discipline viz.
Agriculture, banking, astrology, trade and commerce. There are magazines for men
and women, children and so on. Trade journals or industrial magazines are also
published. Advertisements in magazines look more attractive compared to
newspapers because of the quality of paper. Magazines enjoy longer life than
newspapers. Production can be illustrated through advertisements in magazines.
Different magazines have different classes of readers. A suitable magazine may be
selected to make an appeal to a particular class or section of the society.
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Selecting Press Media: The following are the important considerations which
must be taken into account while selecting the press media.
1. Circulation: News papers and magazines having more circulation in a
particular area or all over the country is a major consideration.
2. Frequency: If the demand for the product to be advertised is seasonal,
advertisement must appear in a number of newspapers, magazines during
and before that season.
3. Appeal: If appeal is to be made through illustrations, magazines are to be
selected in preference to newspapers. But if only general appeal is to be
made over a wide area, newspapers shall be better than those of magazines.
If appeal is to be made to a specific group of persons specific magazines are
to be selected.
4. Cost: The amount which can be spent towards advertisement is another
consideration. The higher the circulation of newspaper or magazine, the
higher while be the cost of advertisement. The space and position of
advertisement also decide its cost.
Radio Advertising: Radio advertising is advertising by sound and voice and not
by illustration. Broadcasting stations in several parts of the country are selling time
for the purposes of commercial advertisements. Commercial broadcasting is a good
source of income to broadcasting stations. Radio advertising comprises to methods,
viz; Spot Announcements and Sponsored Programmes. The former are made by the
broadcasting stations where they charge on the basis of words contained in the
announcement. On the other hand, sponsored programmes are relayed by
purchasing the time. Usually longer time is purchased for making the programmes
interesting.
Film advertising: Cinema or film advertising is an indoor medium of advertising
where customers are approached indirectly. Cinema advertising is of two types viz;
feature films for products and slides for products. Feature films contain
advertisement of products. Many advertisers take the help of advertising agency for
the purpose on payment. These films are exhibited in cinema halls or outside.
Sildes are the simplest form of cinema advertising. Here, a slide is made for the
product to be advertised. The final design is handled over to a photo-engraver who
transfers the design to a small squares glass plates. These slides are shown in the
cinema usually before the commencement of the main film or during the interval.
Film advertising has goods demonstrative value. People can see as well as hear
the salient features of products. Hence, the attention of audiences is not diverted,
Both educated and uneducated sections of people can understand the message of
advertisement through films. The films or slides can be prepared in the regional
language of the area where they are to be exhibited. This ensures easy
understanding of products by people.
Television: Television uses both video (vision) and audio (sound) signals.
Television has all the advantages or radio, namely, sound and explanation, plus the
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additional advantage of sight. Advertising though television is a powerful medium.

Television reaches the audience almost like personal face-to-face contact. T.V.
combines all of the elements of communication viz. Illustration, music, spoken
word, written words. We can have short commercials as well as sponsored
programmes confining entertainment with advertisement. In fact, it represents
typical combination of salesmanship and advertising.
Outdoor or Rural Advertising
The outdoor or mural advertising is suitable for the outdoor readers. Outdoor
advertisements are displayed on the walls. The outdoor advertising includes the
following forms:
The Posters are placards displayed in public places like street corners,
junction areas, railway station, etc. The message conveyed in posters is very brief. It
contains in brief the attractive feature of articles, name of manufactures, etc.
Posters are less expensive than many media of advertising.
The Advertising Board is generally displayed at the focal points of big cities
where the potential buyers are expected. Such advertisements are displayed on the
big boards.
Electric and Neon-signs: These are glass tubes or signs with electric wiring
made in the form of letters or designs to represent the advertisement message. Like
the advertising board, this form of advertising is also reminds the consumers. They
are lighted with attractive coloured lights after sunset and therefore, are very
effective in attracting the attention of the people.
Sandwitch Board Advertising: These are two advertisement boards connected
at the top having space in the middle. A man with fancy dress carries or pushes
these boards and attracts the attention of people sitting or walking on both the
sides and roads. He goes on repeating some slogans.
Vehicular advertising also constitutes an important place, specially among the
outdoor advertisements. The advertisements are displayed on the bus, tram and
trains where general passengers view the advertisement. One can see the display of
posters on the different modes of transportation either inside or outside.
Some manufactures possess their own vans and they display posters, sign
boards, etc. inside the vehicles. Such vans use of colourful smokes designing the
map or shape of products to be advertised. No doubt, it is a costly advertising
media which is suitable for the big business houses.
Sky advertising is generally found in the advanced countries where aero planes
are used for advertisements. We find use of colourful smokes designing the map or
shape of products to be advertised. No doubt, it is a costly advertising media which
is suitable for the big business houses.
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Sticker advertising is also a suitable form of outdoor advertising. In the Indian

context, such type of advertising is found at the very nascent stage. Of late a good
number of big business houses has started sticker advertising.
Direct Mail Advertising
Direct mail advertising includes circular letters, business replay, envelopes/
cards, price list, catalogue, leaflets and folders, booklets, novelty gifts, etc. Direct
mail is considered the most personal and selective media. It reaches only the
desired prospects. It has maximum possible personal features even without
personal contact. It provides detailed information about the product or service,
creating lasting impression. The results of direct mail advertising can be checked by
means of an offer incorporated in the mailing.
Some of the strengths of direct advertising are:
The impact of direct advertising can be tested
Catalogues, booklets, etc. have educative value.
Explanations of product become more elaborate and illustrations more distinct
and pleasant through these media.
There exists a more personal touch in direct advertising.
Promotional Advertising
Promotional advertising consists of window display, interior display, show
rooms, exhibitions, etc.
Window Display: It is otherwise called ‘Window Dressing’. It is the art of
dressing windows by an attractive display of articles inside shop windows. The
object of the window display is to bring the store to the notice of the likely
customers and induce them to enter into it by creating a favourable impression and
interest in the goods displayed by an appeal through the eye to some emotion or
instinct.
Attractive window display is an important factor in effecting sales. Just as the
face is the index of mind, so also the window display is the indicator of shop
contents. Window displays with a good combination of light and colour can have an
impelling effect on the prospective buyers.
Interior Display: Display made in the interior portion of a shop is known as
interior display. It includes within itself display of articles on counters in front of
the selling personnel, displays on the floor, on walls, in show-cases and show-
boxes. Effective interior display holds on the attention of the customers who have
been attracted into the shop by outside display. It make easy the selection of the
goods by the customers. With proper use of light and colour, it makes the store’s
atmosphere congenial, cheerful etc.
Showrooms and Show Cases: Show rooms are specially designed rooms in
which products of a concern are displayed and where people can go near the
products and see them from a close quarter. Show cases are glass boxes, or cup-
boards containing the displayed articles depicting the wide range of products of a
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particular firm. The purpose is to exhibit a sample of an article for show purpose.
Show-cases from an important part of interior display. The leading textiles mills like
DCM, VIMAL, BOMBAY DYEING and TITAN & HMT watch have their show-rooms in
urban areas.
Show rooms and show cases have more than one use. Show rooms act as
places to get orders from the prospective customers who visit them. They provide an
opportunity to the customers to examine the displayed commodities for their
satisfaction. Recently show rooms have offered the ‘after – sale’ services particularly
in case of T.V, Automobiles, Watches etc.
Exhibitions: An exhibition is a huge fair, where many manufacturers get
together to display their products to the dealers and the general public. The
importance of exhibitions is increasing in modern days. The principal object of
advertising at exhibitions is to keep the product before the public and to
demonstrate its uses and merits. Exhibitions are also a good means of introducing
new products and educating the public about their uses. Besides displaying their
products, the manufacturers who organize the exhibitions, distributes sales
literature to the visitors and at times samples to the dealers and stockists.
17.3.4. Advertising Budget
The most important aspect of the management of advertising is budgeting.
Advertising budgeting is also known as advertising appropriation. Budget is a
detailed plan of the amount to be spent within a specified time. The advertising
budget sets the limit of amount to be spent on various promotional measures.
5. Factors to be considered in setting advertising budget
(Schultz. Martin & Brown, Strategic Advertising Compaigns, Crain Books,
Chicago, 1984, p. 192 – 97)
The following specific factors are taken into account while setting the
advertising budget.
1. STAGE IN THE PLC: New products typically receive large advertising
budgets to build awareness and to gain consumer trial. Established brands usually
are supported with lower budgets as a ratio to sales.
2. MARKET SHARE & CONSUMER BASE: Higher –market-share brands
usually require less advertising expenditures as a percentage of sales to maintain
their. To build share by increasing market size or market share requires larger
advertising expenditures.
3. COMPETITION: In a market with a large number of competitors and high
advertising spending, a brand must advertise more heavily to be heard above the
noise in the market.
4. ADVERTISING FREQUENCY: The number of repetitions needed to put
across the brand’s message to consumers also determines the advertising budget.
5. PRODUCT SUBSTITUTABILITY: Brands in a commodity class e.g. cigarettes,
beer, soft drinks require heavy advertising to establish a differential image.
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Advertising is also important when a brand can offer unique physical benefits of
features.
5. Methods of Ad. Budgeting
The following are the principal methods for determining the advertising
budget.
Percentage on Sales Method: In this case a pre-determined percentage of sales
value is earmarked for advertising purposes. The previous year’s (years’) sales are
taken as the yardstick for the allocation of the Budget. At times the estimated sale
of the coming year is also taken as the basis for budget allocation. This method
may be explained as follows:
Advertising Appropriation = Rupee Sales x %
The main advantage of this method is its simplicity. The budget varies with
what the firm can afford on the basis of its sales. Further, this method provides
ample opportunity to the management to maintain optimum relation between the
advertising cost, selling price and profit. However, the fundamental drawback of
this method relates to the fixation of the percentage itself. There are firms which
spend 10 percent or more of their sales on advertising while there are many others
who spend possibly less than 1 per cent.
Affordable Method: This method is based on the capacity of a firm in a given
business situation. Since a company seldom spends more than it can afford there is
an element of financial discipline. On the contrary, advertising expenses are
deemed to be unaffordable.
Competitive Parity Method: This method envisages determination of advertising
appropriation in such a way that a company maintain parity with its competitors
advertising outlays. This method is explicitly out-ward looking. The procedure is to
estimate a accurately as possible what the other competitors in the industry are
spending and to fix own appropriation at the same level.
Despite the fact that this method is more market oriented than any other
method, it is extremely difficult to estimate very accurately what other competitors
are spending advertising. For example, while the amount spent on print media or
TV can be easily found out, it is very difficult to estimate what a firm is spending on
direct mail or out-door advertising. Secondly, competitors in general would not have
identical product line and to that extent direct comparability would not be justified.
Finally, there is no reason to assume of that what the competitors are spending is
optional and therefore should be followed.
Objective and Task Method: This method is based on the relationship between
the objective and task. At the outset, the objectives are determined and there after
the media and frequency are determined. Finally, the cost on advertisement is
computed.
This method is more realistic. It compels management to think in terms of
advertising objectives and awakens it to the need for their achievement. It is flexible
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and may be adopted to changing company needs. Of course, some of the critics feel
that this method lacks a correlation between the cost and objectives of advertising.
17.3.5. Evaluation of Advertising Effectiveness
Advertising effectiveness is measured by pre-testing and post-testing.
Pre-Testing Techniques
Pre-testing is preferred because it enables one to know how effective an
advertising is likely to be, before spending the budget and adopting advertising
actions. Pre-testing may involve a consumer jury, story board tests, laboratory
tests, tachistoscope, pychogalvanometer, eye camera, pupil dilation, attitude test
and depth interviewing.
Consumer Jury: The consumer-jury test involves persons most likely to be
exposed to the advertisement. Consumer reactions have greater validity than the
reactions of non-consumers. Consumers can provide true and correct information
on reaction to and adaptability of products following an advertising campaign. The
copy, illustrations, filming techniques, layout, etc., can be properly evaluated by the
consumers concerned with the product. The message of the print media’s should be
evaluated before its publication. Similarly, the other media’s messages should be
evaluated before their presentation. The consumer jury technique is adopted for
print media, broadcast media and direct mail.
Story-board Tests: The story-board prepared for television advertising is tested
before it is used. The story board pictures are transferred to a film strip and the
audio section on to a tape. Vision and sound are synchronized and shown to an
audience for evaluation. The costs involved can be cut by reducing the unnecessary
part of the story board. This test uncovers the unnecessary part for deletion. The
important part of advertising is accepted for telecasting.
Laboratory Tests: Laboratory tests have been an important method of pre-
testing advertisements. The respondents’ responses are recorded and special
laboratory tests are conducted to examine the effect of the advertisements.
Important means are developed to measure the stimuli. Laboratory conditions offer
a controlled environment that is used to measure awareness, attention, desire,
retention, etc. The respondents are placed in laboratory situations.
Tachistoscope: Tachistoscope is a projector that can project objects into a
screen at rates so fast that the viewer cannot detect the message. It is slowed down
to a level where the message can be perceived easily. The respondents should
understand and appreciate the message, interesting words, slogans, headlines, etc.
They can be easily segregated from the less interesting message. This process can
separate the messages which are more effective from those which are less effective.
Psychogalvanometer: It is a mechanical device that measures the amount of
perspiration. The change in perspiration rate in a respondent is supposedly
indicative of a change in emotional reaction. The psychogalvanometer measures a
respondent’s reactions to new records and slogans. Electrodes are attached to his
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palms to detect changes in electrical resistance arising from perspiration. If the

machine registers lower electrical resistance, it is stated that a tension exists as a
result of advertisement. The main objective of advertising is to attract attention to
the product which is reflected by the galvanic skin response. However, it should not
be concluded that greater tension reflects the treater success of the advertisement.
Attitude Test: A number of techniques for measuring the attitudes of
respondents are available. There are known as psychological techniques. The
semaetic differential is a rating scale which has been used extensively to measure
advertising effectiveness. Respondents are asked the questions to be answered on a
seven-point bipolar scale about their feelings about a particular advertisement. The
psychological technique is characterized by a prediposition or state of readiness to
act or react in a particular way to some stimuli. The attitude is closely related to
advertising effectiveness. If the attitudes of potential customers are changed
towards the products, the advertisement is considered effective. Consumer
behaviour towards an advertisement can be measured on the attitude scale. This
scale measures the position of the consumer’s attitudes on a continuum, varying
from favourable at one end and to unfavourable at the other end with the neutral
point in the middle. The degrees of variation on the left side and the right side of
the neutral point indicate the favourable and unfavourable attitudes respectively.
This measurement is applied before the use of the advertising media, message and
campaign to find out how far they would influence consumer attitudes.
Post-testing techniques
Post-testing techniques are applied after the advertisement has ended. The
techniques are used to find out how far advertising has been successful. The
immediate objective of advertising is to arouse consumer awareness, his interest,
desire and develop his attitude to the product. Hence, the post-testing techniques
are in the nature of recognition tests, recall tests, attitude change, sales tests,
enquiry tests, etc. The most important ones may be elaborated on this stage.
Recognition Tests: Recognition test is also known as readership test. This test
in relation to print media information regarding the percentage of readers who have
seen the advertisement and remember it, who recall seeing or reading any part of it,
identifying the product and brand, and who reported reading at least one half of the
advertisement. Recognition tests have been helpful in determining the actual
percentage of persons who ‘recognised’ the advertising. A recognition test is based
on the assumption that there is a high correlation between the reading of the
advertising and the purchase of the product.
The advantage of the recognition test is that it measures something which has
been realised under normal conditions. The recognition tests show the importance
of each type of advertisement on the basis of the readership test. It is a simple test
does not require any specialized knowledge.
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Recall Tests: A recall test depends on the memory on the memory of the
respondents. This test is applied to measure the penetration of, or the impression
made by an advertisement on the reader’s mind. Recall tests have been divided into
aided recall and unaided recall.
The aided method is used to measure the reading memory of magazine
advertising impressions. This test has a high degree of objectivity which arises from
the respondents attempting to perform at the maximum level of recall without
subjectively screening out the response. The aided test is used mainly to measure
television advertising.
Under the unaided recall, little or no aid is given because the purpose is to
measure the penetration of the advertisement. Respondents are asked whether the
advertisements included a particular picture or message. The name of the product
is not given to the audience. They has to recall it themselves. If they do remember,
it is established that there was some impact of the advertisement. The impact may
be probed to find out the attitude, etc., of the audience to the product.
Attitude Test: Such tests measures advertising effectiveness. It measures the
extent to which favourable opinions have been created about the product, image
and company. Loyalty, acceptance, preference, intent, etc., are measured with this
technique. There are several techniques for the measurement of attitude change
after the advertising campaign has ended, viz. semantic differential, the Likert
scale, the ranking techniques and the projective techniques.
The semantic differential technique is used to measure attitude in the field of
marketing and advertising research. It uses a bi-polar (opposite) adjective statement
about the subject of evaluation. An illustration of semantic differential is given in
Fig.1.
Semantic Differential
Known Unknown
Informative Uninformative
Realistic Unrealistic
Persuasive Not persuasive
Useful Useless
Effective Ineffective
Fig. Illustration of Semantic differential
This technique may be used to determine how far the advertising of a
particular brand has been effective.
The Likert Scale is used to measure audience attitude to advertisements. A
series of statements are described to measure the attributes of the advertisement.
Only relevant statements are used for the purpose.
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Examples
11. Radio advertising has been heard by a majority of the population.
Strongly agree Agree Uncertain Disagree Strongly disagree
2. BPL advertising has applied to people who have accepted it.
Strongly agree Agree Uncertain Disagree Strongly disagree
A review of the various methods reveals that no one method is perfect and,
therefore, usually a mix of these methods is developed to evaluate the effectiveness
of advertising. However, the selection of appropriate technique depends on the
needs of a company, its resources and information constraints.
1. Advertising is an essential element in the promotion mil.
2. Advertising is paid, non-personal communication.
1. Describe the importance of advertising in the marketing strategy of a firm
2. Expand the following statements:
(a) ‘Advertising stimulates demand’
(b) ‘Advertising reinforces the middlemen’s promotional efforts’
(a) Outdoor advertising
(b) Exhibitions
(c) Recall Tests
(d) Direct Mail Advertising
17.6. SUMMARY
Advertising is an important element in promotion – mix. It is any paid form of
non-personal presentation and promotion of ideas, goods, or services by an
identified sponsor. Advertising helps in introducing new products, stimulates
demand, increases sales volume, reinforce the middle men’s promotional efforts,
develops brand preference, and so on. Advertising may be indoor, outdoor, direct or
promotional. A variety of tools are available under each category. While selecting
press media, circulation, frequency, appeal and cost factors are taken account.
Film and TV advertising especially the sponsored programmes have gradually
assumed increasing importance.
Of the outdoor advertising the prominent ones are posters, electric and neon
signs, hoardings, vehicular advertising, sticker advertising, Interior display, window
display, participation in exhibitions and fairs have also become popular as
promotional tools.
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Various methods of advertising appropriation or budgeting such as percentage

of sales, affordable method, competitive parity method etc., are available. Each of
these have its own strengths and weaknesses.
It is important to measure the effectiveness of advertising from time to time.
Pre-testing and post-testing of advertising are undertaken to ascertain the impact of
advertising on consumer. Consumer Jury, Story Board Tests, Laboratory Tests,
Techistoscope, Attitude Change Tests are the various devices available for pre-
testing. Post-testing techniques comprise Recognition Test, Recall Test (aided and
unaided), Projective Techniques.
1. What is promotion mix?
2. What is outdoor advertising?
1. International Journal of advertising.
2. Journal of advertising.
17.9. ASSIGNMENTS
1. a) What factors are taken into account in setting and advertising budget?
b) Explain in brief the various methods of appropriating for advertising.
2. Why should effectiveness of advertising be evaluated? Describe the various
methods/ tools available for the purpose.
1. Aaker, A. David et al. Advertising Management PHI, New Delhi, 1992.
2. Ghandi, J. C. Marketing – A Managerial Introduction, TMH, New Delhi,
1985.
3. Kotler P. Marketing Management (Analysis, Planning, Implementation and
Control), PHI, New Delhi, 1992.
4. Stantion, W. H. et al. Fundamentals of marketing. Mc Graw Hill, New York,
1994. Wright, et al., Advertising, TMH, New Delhi, 1984.
1. What media choices would you suggest in the following cases?
(a) Family planning,
(b) Garments,
(c) Refrigerators,
(d) LPG. Give you reasons.
17.12. KEYWORDS
Non-Personal Presentation, Sponsor, Frequency, Mural Advertising, Promotional
Advertising, Consumer Jury.

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LESSON – 18
SALES MANAGEMENT
18.1. INTRODUCTION
Sales management is an integral part of marketing management. The sales
function of a business is a basic function, especially in a commercial concern i.e.
wholesale or retail trade. In the present lesson an attempt is made to examine some
important aspects of sales management and personal selling.
18.2. OBJECTIVES
After studying this lesson the reader will be in a position to understand the
following:
 The concept of sales management, its scope and importance.
 Salesmanship qualities.
 The stages of selling process.
 The effective selling.
18.3. CONTENT
18.3.1. Meaning, Nature and Scope.
18.3.2. Qualities of a Salesmanship.
18.3.3. Selling Process.
18.3.4. AIDCA Process of Selling.
18.3.5. Effective Selling.
18.3.1. Meaning, Nature and Scope
Sales management has assured the position of a challenging profession. Sales
management may be defined as the management of a firm’s personal selling
function. All the principles of general management such as planning, organising,
direction, motivation and control are applied to sales management for securing
better sales performance. It is responsible for obtaining sales volume, handling the
sales operations so as to make contributions to profits, and for ensuring
continuous growth. Under the socially responsible marketing policy, sales
executives must assure the delivery of products with satisfying experiences.
The importance of the sales function various across organisations depending
upon its nature and variety of products, target market, consumer density and
dispersion and the competitive practices. It is the sales management that translates
the marketing plan into action. Sales management is sometimes described as the
muscle behind marketing management. In fact, it does much more than provide
muscle. In a modern organisation, sales management means the management of
the sales effort into. (V.S.Ramaswamy and S.Namakumari, Marketing Management,
Planning, Implementation and Control, Mc Millan, New Delhi, 1990, P. 362).
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The following mega-trends affect the growing importance of sales management

 Intense foreign competition
 Rising customer expectations
 Increasing buyer expertise
 Revolutionary developments in communications
There is a increased integration of marketing and sales functions. The nature
and scope of a sales management functions can be clearly understood from the
check list given below.
Checklist-Sales Management Functions
I. Administration
- Organize sales department at headquarters and at branches
- Arrange for office space, layout, appliances and staff
- Establish sales policies and programmes
- Explain policies and programmes to the staff
- Sell sales programmes to top management
- Plan communication channel
- Delegate duties to subordinate and assign necessary authority to operate
effectively
- Plan current and long-range sales operations
- Supervise budgets and quotes
- Lay down clear channels for operating procedures
- Supervise handling of sales correspondence
- Supervise hiring and training of salesmen
- Stress professional salesmanship
- Supervise allocation of sales territories
- Analyse salesmen’s reports and expense accounts
- Keep customer control-records
- Contact important customers and distributors
- Participate in activities of trade association
- Supervise regional, district and branch offices as well as distribution
agencies.
II. Coordination
- Keep in touch with board of directors’ decisions
- Co-operate with top management executives
- Co-ordinate activities of regional, district and branch managers, as well as
supervisors and salesmen
- Co-ordinate area sales activities with headquarters
- Co-ordinate all promotional materials and campaigns
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- Co-ordinate export selling with headquarters’ operations

- Co-ordinate dealer activities with company operations.
III. Sales Planning
- Determine how and where sales can be effected
- Plan sales offices, locations, personnel, etc.
- Establish regional, district and branch offices
- Determine types of sales organization suitable for various branches
- Plan for efficient administration at headquarters and in the field
- Plan sales strategy
- Ascertain types of promotion and advertising provided.
- Select distribution channels such as wholesalers, distributors, dealers and
retailers.
- Plan warehousing facilities throughout the field
- Plan packaging, packing and transportation; e.g. branch office delivering;
transportation from warehouses: and time schedules for such
transportation.
IV. Selecting the Sales Force
- Build job specification
- Determine suitable sources for recruitment
- Prepare application blanks
- Arrange interviews and rating blanks
- Determine methods of interviewing
- Decide who should interview
- Decide when and where interviews should be held
- Cross –check on interviews
- Prepare checking of reference blanks
- Arrange for medical reports
V. Training the Sales Force
- Develop training plans for new salesmen
- Arrange refresher courses for existing salesmen
- Emphasize professional, salesmanship
- Arrange training for regional, district and branch managers as well as
supervisors and salesmen
- Develop and use sales-training tools, such as:
- Textbooks
- Sales manuals
- Sales-training bulletins
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- Instruction manuals
- Modern catalogues
- Correspondence courses
- Headquarters’ schools
- Branch office training
- Field supervisory training
- Special product presentations
- Slide films
- Motion pictures
- Sales meetings
- Determine how training is to be done
- Follow –up on training programmes
VI. Remunerating the Sales Personnel
- Fix base salary scales
- Plan commission incentives
- Fix rules for submission of expense accounts
- Arrange vacation plans
- Fix how bonus is to be paid
- Arrange contests and award of prizes
- Fix pension and retirement plans.
VII. Motivation – Human Relations
- Determine what motivates salesman
- Plan advancements and promotions
- Arrange exciting sales contests
- Draft enthusiastic letters and bulletins
- Arrange interesting sales meetings and conventions
- Provide reasonable satisfaction of the security need
- Build employee pride
- Analyse what motivates distribution channels
- Find out what motivates consumers
- Provide adequate public relations
- Be fair to all, i.e. employees, distribution channel and consumers
- Conduct continuing motivation research
- Provide emphasis on the dignity of man
VIII. Quota Setting
- Use sales forecasting as an aid to quota setting
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- Determine methods of arriving at quotas

- Fix overall quota
- Break down overall quota into quotas for territories, etc.
- Determines special quotas for large users
- Sell quotas to salesmen
IX. Territory Allocation
- Analyse territory potentials
- Allocate territories on basis of geographical areas
- Prospect density
- Economic condition
- Industrial centres
- Special income groups
- Population increases
- Increase in number of households
- Rearrange territories for more effective effort
- Develop routing lists for territories
- Review territories allocations periodically for improvements.
X. Controlling the Sales Personnel
- Visit regional, district and branch offices
- Pay periodic visits to salesmen in the field
- Arrange and attend meetings, conferences and conventions
- Control salesmen through
- Daily, weekly, monthly reports
- Letters and bulletins
- Personal contacts
- Expense meetings
- Supervisors and branch managers
- Quotas and special assignments
- Commission and bonuses
- Incentive plans
- Visit important distributors and dealers
- Bring distributors and dealers into home office occasionally
- Analyse orders from distributors and dealers
- Find and develop new distributors and dealers
- Check complaints and adjustments
- Visit large and important customers
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- Tap information from trade association contacts

- Arrange marketing research trips to old and possible
The various decision areas of sales management may be exhibited as a cycle in
Fig. 2.
Analysis
Control Organisation Planning
Direction
Fig. 2 Sales Management Cycle
Analysis: Review of the firm’s internal sales records and sales person’s
reports.
Planning: Selling objectives of the firm’s sales effort and pointing out strategies
and facts for achieving them.
Organisation: Setting up structure and procedures for smooth and effective
execution of sales programmes and plans.
Direction: Staffing and supervision of the day-to-day implementation of sales
policies, programmes and plans.
Control: Performance comparison of actual and planned sales results,
examination of the reasons for observed divergences and evaluation of the need for
plan revision.
18.3.2. Qualities of a Salesman
Under this let us examine first what is personal selling or salesmanship.
Meaning of salesmanship
The American Marketing Association has defined personal selling as an “Oral
presentation in a conversation with one or more prospective purchasers for the
purpose of making sales”. Whitehead defines salesmanship as. “The art of so
presenting an offering that a mutually satisfactory sale follows…” The ability to
handle people is also salesmanship. A good salesman looks upon the work of selling
as a process of making the customer buy. It is affected only if the prospect is
convinced in his own mind that it will be beneficial for him to make the purchase.
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In terms of psychology salesmanship is persuasion which motivates feelings to

action or evidence which convinces reason and judgment.
The work of a salesman is service because he helps the customer to get the
most for the money he spends. He performs two important tasks viz., he serves as a
link between the producer and the distributor to their mutual advantage and
secondly, he enables to customer to satisfy his wants better.
Classification of salesmen
Sales can be classified on the basis of (a) organisations they represent, (b) the
goods they sell, and (c) the services they render.
The following Figure gives an idea about the classification of salesmen on the
basis of organisations they serve.
SALESMAN
Manufactuer's Wholesaler's Retailer's

Sales Salesmen Salesmen
Counter or Travelling or
Pioneer Dealer Servicing Merchandising
Indoor Outdoor
Salesmen Salesmen Salesmen
Salesmen Salesmen
Fig.1 Classification of Salesmen
On the basis of the types of goods they sell, the salesman may be classified
into
1. Staple salesmen.
2. Speciality salesmen.
On the basis of services of field or field of operation the salesmen may be
classified into House-to-House salesmen, Missionary salesmen, Service salesmen
and Exporter’s salesmen.
Qualities of good salesmen
The personality of the salesman plays a very important role in the field of
sales. Sales personality includes all the qualities of a good salesman. When one
compares two salesmen, one having a good personality and the other not having it
there will be remarkable difference in the sales by them. Since the success of sales
is primarily influenced by the personality of the salesman, firms become careful in
selecting the right type of salesman whose personality is impressive.
The qualities may broadly by divided into (a) physical, (b) mental, (c) social and
(d) character traits
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Physical Qualities
The sales man is the ambassador of the company. Physically he must be fit.
Sound health is of first necessity. The personality of a salesman will be pleasing
only when he has a good health. A good health is usually associated with a good
breath. Offensive breath repels the customers. Since the salesman has to meet and
talk with many customers, oral hygiene is of utmost importance. The quality and
the tone of voice have also its influence on the listeners. A good appearance is
another important physical quality which goes a long way to create a good
impression. A tall, fair, healthy looking and well proportioned young man with a
good poise makes an excellent impression on the prospects. Appearance includes
many things viz, clean and neat dress, general cleanliness, good facial expression of
the salesman, etc. A well-dressed salesman can work with ease and confidence and
uphold the prestige of the firm he represents. It is said, “Apparel often counts a
man”. A healthy and happy facial expression is a sure indication of the confidence
with which a salesman works. It is aptly remarked, “Smile and the world smiles
with you. Weep and you keep your goods”.
Mental qualities
The important mental traits or qualities which must be developed by a
salesman to be successful are accuracy, alertness, imagination, resourcefulness,
initiative, self-confidence, cheerfulness, and so on. A salesman should be accurate
in his speech or statements. By making accurate statements he is able to establish
confidence of the customers in himself. While meeting the inquiries of the
customers he has to convince them by stating the facts and advantages of the
products. Alertness relates to the presence of mind. It also means keen power of
observation and common sense to take correct decisions quickly. If the salesman
will be alert, he will inspire confidence in the customers and this result in more
sales. Imagination is also another important mental quality. Imagination is needed
to enable devise means for solving them. It is the ability to invent new angles of
approach to sales problem that characterizes the imaginative salesman. This
quality can be cultivated through study products and psychology of customers.
Resourcefulness is a mental ability to think and find out alternatives. A
resourceful salesman is one who can analyse the situation by alertness and use of
common sense. A salesman who can understand the psychology of the customer
better shall ultimately be a resourceful salesman. Self-confidence is another
important quality, which every salesman should possess and cultivate. Self-
confidence comes to him through study, experience and knowledge of himself,
goods he sells and the customers.
Social Traits
Some of the qualities under this category are ability of the salesman to meet
the public, tact, courtesy, manners and mannerism, etc.
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A salesman has to initiate talks and should feel happy in meeting the public
and enjoy their presence. He should be an extrovert. He should have the ability to
meet strangers, open up new territories and create friendship. He must have the
ability to speak very effectively to impress the customers. Conversation is an art
and can be developed by proper thought and practice.
Tact is the skillful way of doing things. A good salesman understands the
attitude and feeling of the customers and answers all questions fully, calmly and
tactfully, inspiring confidence. It implies doing the right thing at the right moment.
This can be developed through experience and mixing with people easily.
Courtesy is an indication of refinement and culture. The salesman should
always be polite and courteous. By showing polite behaviour he exercises courtesy.
Being punctual appointments, becoming polite to customers, receptionists and
secretaries, listening attentively and maintaining a cool temperament are some of
the important courtesy rules. A salesman has to show good manners to customer.
The success of an organisation greatly depends on good manners and politeness of
the salesmen. Manners of a salesman either make him prosper or mar his career. A
salesman should avoid biting nails, clasping and unclasping hands, swinging back
and forth in the chair, keeping hands swinging back and forth in the chair etc.
Character attributes
Honesty, integrity, loyalty, reliability, industriousness etc., are some of the
important character traits which a salesman must possess and develop.
Honesty in dealings and statements, and keeping one’s promise make
salesman successful. An honest salesman appeals to the customer’s desire for
safety and protection. Though, an honest salesman might take time to win
customers will frequently come to his shop. Hence, the significance of honesty in
selling, Integrity implies uprightness of character, moral soundness and good
behaviour, honesty, fulfillment of promises and strength of character. There is no
substitute for this quality. Loyalty is another character attribute which a salesman
should posses and develop. He should be loyal to (1) the organisation in which he
works and its products (2) his customers, and (3) his fellow-workers. He has to
work in harmony with the authority given to him. Secretly making any profit,
stealing or misusing any property of the firm are some of the acts of disloyalty.
Reliability is the outcome of honesty, integrity and loyalty. A salesman should
be reliable or trustworthy. A reliable salesman takes his work seriously and is
honest in his dealings. Such a salesman gives value to his promises, fulfills them
and loses no friend. In the process, he commands the confidence of the customers.
Industriousness is another quality which means the ability to work hard. It
implies persistent work to achieve a desired goal. Willingness to work is a great
thing in salesmanship also.
It may be pointed out here that a salesman may not possess all the qualities
that are present in the best salesmen. The personality of a salesman can be
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improved. Salesmen are not necessarily born as qualified salesmen. They can be
made qualified or ideal salesmen by developing their personality through constant
and sincere efforts. Sales managers impart necessary training to their salesmen to
develop their personality. Self-examination and self-improvement may turn out to
prove amazingly rewarding, throughout the life of a salesman.
18.3.3. Selling Process
Personal selling is an oral representation in conversation. The actual process,
the salesman goes through to sell a product are more or less than the same. (Fig.
2). All salesmen attempt to locate the prospect buyers (prospecting), collect valuable
information about their testes and habits (pre-approach) initial contact (meeting)
with the potential buyers (approach), show the product and its use (Presentation
and demonstration), attempt to overcome the objections, and then close the sale.
POST SALE
PROSPECTING PREAPPROACH PRESENTATION
SERVICE
Identifying Information AIDA Reduce

Profiles Attention Dissonance
Leads Habits Interest
Records Desire Build goodwill
Qualifying Preferences Action
Capability
Willingness
Fig.2 The Personal Selling Process

Source: William J. Stanton et al. Fundamentals of Marketing, McGraw Hill,
New York, 1994, p 487.
Prospecting
This is the first step in the personal selling process. Prospecting implies
locating of prospects or locating the potential customers. The prospect or potential
customers have an unsatisfied need, the ability to purchase and a willingness to
buy the product. A salesman can locate potential buyer by analysing the telephone
directory, yellow pages, Membership Registers of club, etc. The task of prospecting
beings with obtained names and addresses of people who might be needier. Such,
names with addressed are of no use if he does not quality each person according to
the requirements of a prospect. Before approaching a prospect the salesman should
ascertain whether the prospect has a need to buy the product. This can be assessed
from his profession, income and environment. Many persons may have the need to
buy but they may not have the ability to pay for them. The salesman should ensure
that the prospect has the necessary financial capacity and also the desire to spend
in that product.
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The prospect that the salesman contacts may be quite convinced about the
product but he may not have the authority to buy the same. In case of institutions,
big organisations of Government concerns, all executive officers do not have the
authority to buy. The salesman should ascertain the authority of the executive or
officer before approaching to persuade him.
Accessibility is another criterion to know whether person/organisation could
be a potential buyer. Accessibility means whether a prospect is approachable by the
salesman or not. Physical accessibility approaches a prospect, but with very high
expenses it is said that such prospect does not have accessibility.
The important prospecting methods are:
1. Endless chain method
2. Centre of influence method
3. Cold canvass method
4. Direct mail and Telephone method.
In additional to these methods of prospecting, the salesman may take
advantage of other methods under suitable circumstances. The persons visiting
various exhibitions and fairs are likely to become prospects.
Pre-approach
This is the second step in the sales process and starts soon after the salesman
obtains the names and addresses of the prospectus. Hereafter the salesman
prepares for the next step i.e. approaching the prospects. In the pre-approach
stage, the salesman obtains some other detailed information like the ability need,
authority, accessibility, etc., of the prospects. The objectives of the pre-approach
are:
 To obtain additional qualifying information.
 To obtain information around which the presentation can be better
planned.
 To give the salesman more confidence.
 To gain insights into how best to approach the prospect.
During this stage the salesman would be required to go through the age,
martial status, children, income, occupation, education, religion, hobbies, etc. The
information gathered in the pre-approach will differ with the selling problem facing
the salesman. If he is selling to an individual for his own use, the salesman will
confine his investigations to the prospect as a person. On the other hand, if the
prospect is buying for a business the pre-approach should be broad and it includes
many facts about that business also.
Approach
The initial few minutes of the sales talk are known as the “approach” to the
prospect. The purpose of the talk is to arouse and sustain the customer’s attention.
Before the talk, the salesman should introduce himself by using the telephone, by
obtaining introduction from a customer and by handing his business card. In the
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first contact, he should attract the attention of the customers and get them
interested in the talk. Some of the popular techniques for this purpose are reference
approach, benefit approach, sample approach, and mutual approach.
The reference approach involves reference of the product by the friends of the
prospects.
The benefit approach indicates the benefits of the product.
The sample approach involves giving the sample to prospect.
The mutual approach considers the prospect supreme.
Whatever methods of approach the salesman adopts, he must make it a point
to include something of interest to the prospect. The salesman should put him in
the place of the prospect when planning his approach in person and asks himself,
“Will this interest me and cause me to like the salesman?”
Approach by travelling salesmen differs from approach by retail salesman
faces many difficulties in approaching people who are completely strangers to him.
He has to meet many subordinates like receptionists, secretary and others who may
not allow them to go in unless they have some real value to offer to the executives
proposed to be met by him. Gaining an interview with the right man is the biggest
problem. It is rightly observed gaining the interview is in fact a selling process; it is
like making a sale. The salesman is to sell an idea to the subordinate i.e. secretary
or receptionist who prevents him from meeting the boss, or to the prospect who has
the power to grant or refuse the interview to the prospect proper. The salesman
should give due respect and recognition to the subordinates, praise them to get
their favour and thank them for their co-operation.
A traveling salesman may follow any one of the following ways of approach for
gaining an interview with the prospect.
 Personal call without introduction.
 Personal call with introduction.
 Sending business card.
 Writing for an interview.
 Appointment over telephone.
 Use of sales letters.
The approach followed by the retail salesman/indoor salesman is different.
This class of salesman does not move from place to place for prospecting. Collecting
details of the prospects is also required in retail selling. Such prospects are aware
of the products and one attracted to the store by means of advertising, displays,
etc.
Presentation and Demonstration
“Presentation” means the presentation of the product to the customer or
prospect, and is closely related to the buying process. Sales presentation involves
the presentation of the product and a demonstration of its features and benefits to
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the prospect, and shows how the product meets the customers’ needs. It attempts
to increase the desire for the product and arouses the willingness of the prospect to
purchase the product and arouses the willingness of the prospect to purchase the
product. If the salesman will be prompt in presenting the articles to the prospects,
he usually conveys willingness or indication to serve them. Prompt action creates a
favourable mood in the minds of the prospects. Clarity in presentation in essential
and the salesman should always try to complete it for the satisfaction of prospects.
The details of articles, about their uses and working, model, texture, etc., have to
be explained to the prospect. The prospect should be allowed to fondle, handle, and
test the articles for their satisfaction.
Demonstration in personal selling is the task of proving the statements by a
salesman about quality, utility, service, etc., of a product with the help of
experiments, operation, and test or by any other satisfactory evidence.
Demonstration gives rise to following advantages:
It enables the salesman to present all the salient features of products in a
more concrete way.
It also affords an opportunity to the salesman to prove the truth of what he
has stated about the products.
It appeals to the senses of the customers.
It enables the salesman to reduce his sales talk to some extent and sometimes
to a substantial extent.
The main forms of demonstration are; (a) Demonstration is use and
(b) Demonstration of a specific feature of the article. The most effective form of
demonstration would be to show how the article will appear when actually used by
the customer. For example, while selling a TV or audio-set one may ask the
customer to which on and switch off the see the picture clarity (TV) or stereo effect
(Audio-set). The specific features like ‘leak proof’, ‘unbreakable’, etc. can also be
demonstrated.
Meeting objections
Sometimes, customers raise some objections to the product. The objections or
resistance may be either psychological or logical. Psychological resistance relates to
interference, preference for established products or habits and traditions. A
customer may be reluctant to give up the product and adopt the new product.
Logical resistance or objections may pertain to price, product, transport, payment
systems of the company. A salesman has to answer these objections and overcome
the customer’s resistance. He should break down the customer’s objections.
Experience and training would enable him to deal with the objections satisfactorily.
The best time for meeting objections is the moment they are raised. The way and
the time of answering questions or meeting objections depend upon the attitude of
the prospects, the nature of the product and the type of objections. Listening
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attentively is the fundamental principle of overcoming objections. The mere act of

listening to the prospect is likely to feed his ego.
Various methods are available to overcome objections viz., Direct Denial
Method, Indirect Denial Methods/Yes, but method, Superior point/Compensation
Method, Boomerang Method, etc. Indirect denial method is invariably used in
meeting most of the important objections. It removes the idea from the mind of the
prospect inoffensively and courteously. Direct denial method may be applied when
the objection raised is a false one, mostly due to ignorance of prospects.
Closing and follow-up
The main object of the salesman is to sell and hence closing the sale. It is said
a poor closer is always a poor salesman. The ultimate goal of salesman is to get the
order. The salesman should be expert enough to close the sales talk at the right
moment and ask for the order. He should know the closing signal, including
physical actions, statements or comments. He can ask for the order, help the
customer to select a particular product and offer special inducements to close the
sale. Self confidence and positive attitudes help the salesman to secure favourable
buying decisions.
Follow – up action begins when the prospect signs the order and asks for
delivery. He prices to remove any post-purchase problems. After sales service is a
good example of follow-up action. The sale is said to complete when the buyer is
satisfied. It is true that sale is made not in the mind of the buyer. The follow-up
action also provides feedback to the salesman because if graces him a chance to
evaluate his actions and persuasions. One should keep in mind that the close of
one is the beginning of another.
18.3.4. AIDCA Process of Selling
In order to effect a sale, the salesman must persuade the customer to buy his
product. This act of persuasion needs proper planning of the strategy and tactics.
The customer must be taken through various stages of the mid. These stages are
summarized by what is known as the AIDCA formula.
Attention (A): It is the starting point in the sales process. The attention of the
customer must be attracted to the product, the want what the product is able to
satisfy and the buying motive to which the product appeals. Until the customer’s
attentions secured by the salesman, the sale process does not develop. At stage, the
salesman informs the customer about his needs. He also informs him about the
existence of products or services to satisfy his needs. The salesman induces the
customer to think about the goods. In this way the prospect’s attention is attracted
towards the product. The attention of the prospects may be attracted in many ways
such as advertisements, display, etc.
Interest (I): The salesman must awaken an interest in the mind of the
customer. Awakening interest means getting a person interested in an article or
proposition. The salesman can arouse interest and held his attention by specifying
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to him interesting features of his product. One can arouse interest by offering
something useful, supplying sure information, distributing samples etc. The
customer must be made to realize how the product will benefit him, and must feel
curious to know more about the product, its features, and its merits.
Desires (D): A salesman must ignite the desire of the prospect after securing
his attention and after arousing his interest in the products. From the stage of
interest or curiosity must develop the desire to buy the product. The first thing
which is involved here is to make the prospect feel that the article is necessary for
them. Interest can be converted into desire for the product mainly by three means
viz.
 Emphasizing the selling points of the article/product.
 Making suggestions.
 Making demonstration.
Conviction (C): After a desire for the product has been created in the mind of
the prospect. Some doubts may remain to be removed. In order to convince him all
objections must be met adequately. He has to convince him about the soundness of
his proposition. After the desire is created in the mind of the prospect, he must be
made to feel that the product to be sold is worth buying. Once he is convinced of
this fact he would be ready to buy.
Action (A): It means gaining an order. The culmination of the first three stages
should be in the actual purchase of the product. Action can be stimulated by
permitting the prospect to feel sensually gratified by seeing, smelling, testing,
touching, hearing, etc. and by explaining once more the important selling points of
the products. If the prospect is convinced or his confidence is reported in the
product, firm and the salesman, it leads the prospect to the ultimate decision or
action, i.e. purchasing.
18.3.5. Effective Selling
There are six pre-requisites of effective selling i.e. know your company, know
your product, know your competitors and their products, know your customers,
know the process of selling and know yourself.
Knowledge of the company
It is essential that the salesman has an in-depth knowledge of the company in
which he has been working. In a good number of cases, the potential customers
make buying decisions in the background of brand, name or fame earned by a
particular corporation. Hence, the salesman should essentially be company-
oriented. As the representative of the company, he is expected to know everything
about the company. The potential buyers may raise different queries regarding the
policies, after sale-servicing, discounts, guarantees and so on. It is the
responsibility of the salesman to answer all the questions asked by the potential
buyers and albeit to satisfy them. Unless, the salesman has an in-depth knowledge
of the corporate multi-faceted development programmes, he would not be
successful in answering the questions asked by the potential customers.
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Knowledge of product
A salesman should know all about his product. (a) materials from which it is
made, (b) how it is used and how it is maintained, (c) product features, (d) selling
points of the product in relation to its rival, etc. this would help his particularly
while convince the potential customers. The whole responsibility before a salesman
is to convert the potential customer into the actual users and this would not be
possible. If the salesmen lacks details about the products.
Knowledge of competition
It is essential that the salesman constantly studies the emerging trends in
competition. He should constantly study the products offered by his competitors
and determine their strengths and weaknesses in comparison to his own products.
Awareness of competition enables a salesman, if necessary, to compare his product
with that of the rival on those points in which the buyer seems most interested.
Buyers have faith in well-informed salesman. Then again knowledge gives salesmen
confidence in themselves.
Knowledge of customers
To make the personal selling effective, it is also essential that the salesman
must have adequate knowledge about the customers. A salesman should have
details of the customers’ wants, desires and habits. The changing trends in fashion
should also be studied by a salesman. The principal responsibility before a
salesman is to establish a fair match between the goods desired and goods offered.
The buying motives of the customers would help the salesman, particularly while
studying the customers. The perception, motivation and learning processes would
help the salesman, especially while studying the buyers’ behaviour. Sales
presentation cannot be effective unless a salesman knows socio-psychological
factors influencing buyer behaviour.
Knowledge of selling process
The various stages of personal selling process have already been discussed in
this lesson. The salesman should know the details of prospecting, pre-approach,
approach, etc. The AIDCA formula also helps the salesman, particularly while sales
presentation. The post-sale activities like writing of order, execution preferences
facilitating grant of credit should also be known to the salesman. The details
regarding the selling processes would help a salesman, in making the processes
effective, pro-active or sensitive.
Know-Yourself
Last but not the least essential requisite for successful selling is knowledge of
self. To make the selling process effective, it is essential that a salesman evaluates
his own performance. Self-evaluation of preference is the best criterion to diagnose
the loopholes. This evaluation should be made not only in terms of the salesmen
but also in respect of the quality of goods and services offered and the prices
charged.
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Thus, all the aforesaid prerequisites would help the salesman in raising the
volume of sales. But it must not be forgotten that the mere possession of selling
techniques does little to ensure success. It is the ability or perfectibility of the
salesman that counts more in the process.
1. Sales executives must assure the delivery of products with satisfying
experiences.
2. Personality of the salesman plays a very important role in the field of sales.
1. Define sales management. Give an overview of its scope and functions.
2. Define personal selling. State and explain in brief the various stages which
are followed by salesmen.
3. Describe the various qualities of a successful salesman.
4. Write notes on
(a) Prospecting.
(b) Direct denial method of overcoming objections.
(c) After sale service.
(d) Canons of a successful close.
5. Explain the AIDCA process of selling
18.6. SUMMARY
Sales management is an important aspect of overall marketing management. It
embraces within itself the planning, organizing, directing, coordinating, motivating
and controlling of sales-force. Recruitment selection, training and evaluation of
sales personnel also come within the purview of sales management. Personal selling
is an element in the promotion – mix of any marketing strategy. It involves
primarily prospecting, pre-approach, approach, presentation and demonstration
and meeting objections of prospective buyers.
AIDCA- attracting attention, awakening interest, creating desire, conviction an
ultimately action process is also followed by the salesmen. Various methods of
principles exist for successful personal selling at each stage. An effective and
successful salesman should have the knowledge of self, the knowledge of the
company and its product and that of the competitors too. He has to develop his
sales personality. He must possess a certain qualities in order to become
successful.
1. Define planning?
2. What is control?
1. Journals of personal selling and sales management.
2. Journals of marketing research.
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18.9. ASSIGNMENTS
1. What is effective personal selling? How can this be developed?
1. Anderson Rolph E. et al. Professional Sales Management, McGraw-Hill, New
York, 1988.
2. Jha, S.M. and Singh L.P. Marketing Management in Indian Perspective,
Himalaya, New Delhi, 1988.
3. Nayak, A.P. & Sahoo S.C. Salesmanship, Sales Management and Advertising,
Books and Books, Cuttack, 1994.
4. Still R.R. et al. Sales Management: Decisions, Policies and Cases, PHI, New
Delhi, 1976.
1. Essential requisite for successful selling is knowledge of self – Comment.
18.12. KEYWORDS
Sales Management Cycle, Tact, Prospecting.
❑
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LESSON – 19
DISTRIBUTION CHANNELS
19.1. INTRODUCTION
Placement or distribution of goods is an important element in the marketing-
mix since the product/service must reach the consumer in right quantity and at
right time. There are a number of middlemen with varied roles and functions
between the manufacturer or producer and the consumer or user. They constitute
the marketing channel involving them on the process of making a product or
service available for use or consumption by consumers or industrial users.
19.2. OBJECTIVES
After reading this you will be able to understand.
 Meaning and importance of distribution in marketing.
 Major channels of distribution for both industrial and consumer products.
 The role and functions of wholesales and retailers.
 The considerations/factors involved in alternative method of distribution.
19.3. CONTENT
19.3.1. Meaning and Importance of distribution Channels
19.3.2. Role and Function of Wholesalers
19.3.3. Role and Function of Retailers
19.3.4. Selection of Channels of Distribution
19.3.5. Channels of Distribution for Consumer and Industrial Goods.
19.3.1. Meaning & Importance of Distribution Channels
Large- scale production of today has necessitated the use of different channels
of distribution or marketing channel. Richard M.Clewett states, “A channel is the
pipeline through which a product flows on its way to the ultimate consumer. The
manufacturer puts his product into the pipeline or marketing channel and various
people move it along to the consumer at the other end of the channel. (Marketing
channels fore manufacturer products, Richard D, Irwin, Illinois, 1954) Somebody
has said, “Marketing Channels are the combination of agencies through which the
seller who is often through not necessarily, the manufacturer markets his product
to the ultimate user.”
The American Marketing Association defines marketing or distribution channel
on “the structure of intra-company organisation units or extra-company agents and
dealers, whole and retail, through which a commodity, product or service is
marketed.”
Importance of Distribution Channel
The importance of distribution channels can be examined with reference to the
need for their emergence and functions they perform.
1. Intermediaries arise in the process of exchange because they can improve
the efficiency of the process. Since the location of supply and demand points
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are at widely different locations, there is the need for physical movement of
products. The demands of consumers at different geographical locations are
intermittent and smaller in quantity, prohibiting individual customer specific
transportation. This is referred to as spatial in advance to cater to the
demand. This difference in line of production and consumption are referred
to as temporal discrepancy which requires for risk inventory stocking.
There is a variation in quantities and assortment demanded. The producers
produce large quantities of an item while the individual consumer purchases
a limited quantity of wide variety if items at a given point of time. So to
facilitate exchange specific quantities and unique assortments must be built
up from the product range. This is the discrepancy of quantity and
assortment in the exchange process. The other factor is the buyers’ intention
to buy on believes that right products are available at right quantities and at
desired assortments. This does not guarantee and exchange.
2. Channel intermediaries arise to adjust the discrepancy of assortment and
through the performance of sorting processes. The Sorting function is
necessary to bridge the discrepancy between the assortment of goods and
services generated by the producer and demand by consumer. This
discrepancy arises out of the fact that manufacturers typically produce a
large quantity of limited variety of goods whereas consumers usually desire
only a limited quantity of wide variety of goods. The sorting function
performed by intermediates includes the following activities.
(a) Sorting out: It involves breaking down a heterogeneous supply into
separate stocks that are relatively homogeneous. For example,
separating the potatoes from the supply of vegetables to a
restaurant.
(b) Accumulation: It involves bringing similar stocks from a number of
sources together into a larger homogeneous supply (wholesalers
accumulating various goods for retailers and in turn, retailers for
consumers).
(c) Allocation: It involves breaking a homogeneous supply down into
smaller and smaller lots. Good received in car loads are sold in case
lots.
(d) Assorting: It involves building up the assortment of products for
resale in association with each other.
While sorting out the accumulation predominate in the agricultural
marketing, allocation and assorting are marked in finished goods.
3. Marketing agencies group together in channel arrangements to provide for
the routinization of transactions. Every transaction involves ordering of,
valuation of and payment for goods and services. The seller and buyer must
agree to the mode, amount and timing of payment. The cost of distribution
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can be minimized if the transactions are routinised. The process facilitates

the development of exchange system. Routinisation leads to standardisation
of performance of goods and services and encouraged high valued items
production. Since Exchange relationships between buyer and seller are
standardised resulting to routinization of lot size, frequency of delivery and
payment, a sequence of marketing intermediaries can group together in a
channel structure.
4. Channels facilitate the searching process: There is a double search for each
other by both buyers and sellers in market place. This process involves the
risk of uncertainty because producers are not certain of consumer needs
and consumers are not certain about their products they are looking for.
Marketing channels facilitate the process of searching when, for example,
 Wholesale and retail institutions are organized by separate lines to trade
such as hardware, grocery, medicine, etc.
 Mass consumption products like chocolates, bread, sugar are available
through various types of outlets like general stores, chain shops, super
markets etc.
 Thousands of automotive parts are supplied to the spare part retailers by
the local wholesalers within few hours or requisition.
Distribution channels play a decisive role in the successful marketing of many
products because they aid in mass consumption. The channels provide
distributional efficiency to the manufacturers. They also provide a vital input for
salesmanship. Channels help in merchandising and implementing price
mechanism. Channels also look-after physical distribution and financing function,
they promote transfer of technology and act as change agents. The channel’s role is
to specialize in exchange efficiency and value assortment to provide customer
satisfaction at the right time with right product at correct price.
Intermediaries make possible the flow of products from producers to buyers by
performing three basic functions.
1. Intermediaries perform a transactional function that involves buying, selling
and risk taking because they stock merchandise in anticipation of sales.
2. Intermediaries perform a logistical function evident in the gathering, storing
and dispersing of products.
3. Intermediaries perform facilitating functions, which assist producers in
making goods and services more attractive to buyers.
All three groups of functions (Fig. 1) must be performed in a marketing
channel even though each channel member may not participate in all three. The
members often negotiate about which specific function they will perform which
results in reducing the channel conflict.
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Type of function Description

a) Transaction Buying : Purchasing products for resale or
functions as an agent for supply
Selling : Contacting potential customers
promoting products and soliciting
orders
Risk taking : Assuming business risks in the
ownership of inventory that can
become obsolete or deteriorate.
b) Logistical Assorting : Creating product assortments
functions from several sources to serve
customers
Sorting : Assembling and protecting
products at a convenient location
to offer better customer service.
Sorting : Purchasing in large quantities and
breaking into smaller amounts
desired by customers
Transporting : Physically moving a product to
customers
c) Facilitating Financing : Extending credit to customers
functions
Grading : Inspecting, testing or judging
products and assigning them
quality grades
Marketing : Providing information to
information & customers and suppliers including
Research competitive conditions and trends.
Fig.1. Broad Functions of intermediaries
Source: Reproduced from Fredrick E. Webster Jr, Industrial Marketing
Strategy, New York, John Willey & Sons, 1979, pp. 162-63.
A channel symbolizes the path for movement. This movement may be title,
possession and payment for goods or services. Eight flow functions take place
through channel. Physical possession, ownership and promotion are typically
forward flows from producer to consumer. Each of there moves ‘down’ the
distribution channels. The negotiation finance and risk flows move in both
directions. Ordering payment are backward flows. At any point of time, when
inventories along with its title are held by a channel member, financing of the
proceeding level takes place.
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a) Product flows
Suppliers Shippers Manufacturer Dealers Buyers
b) Title flows
Suppliers Shippers Manufacturer Dealers Buyers
c) Payment flows
Suppliers Banks Manufacturer Banks Dealers Banks Buyers
d) Information flows
Suppliers Shippers Manufacturer Distributors Buyers
e) Promotion flows
Ad. agency & Media Manufacturer Dealers Buyers
Fig. 2 Marketing Flows in Channels
19.3.2. Role and Function of Wholesaler

Wholesaler is one of the important members among the primary participants
in a channel system. Wholesaler is commonly defined as an intermediary who sells
to other intermediaries usually to retailers. Wholesalers are defined as all
establishments or places of business engaged in selling merchandise to retailers,
industrial, commercial and institutional users or to other wholesalers.
The wholesaler’s role in the modern business is shaped by the vast economic
task of coordinating periods and places in which goods are produced and
consumers. This sort preceding the essence of their economic viability that helps in
reducing the discrepancy of assortment. The wholesaler’s role is for value addition
for suppliers and customers as illustrated below:
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Marketing functions Marketing functions

performed for performed for
Manufacturer Customer
* Market coverage * Product availability

* Inventory holding Wholesalers * Assortment convenience
* Customer support perform all * Bulk Breaking
* Market information these * Customer service
* Order processing functions * Credit & Finance
* Sales contract * Advice & Technical Support
RESULT
Value added (Reflected in Margins earned by wholesalers)
Fig. 2 Value Addition by Wholesaler through the performance of Marketing Function
Classification of Wholesalers
Full Service Wholesaler
Merchant wholesaler
General merchandise
Specialty merchandise
Limited Service Wholesaler
Rack jobbers
Cash and Carry
Drop Shippers
Truck Jobbers
Agents
Agents and Brokers

Manufacturer's Agent
Selling Agent
Brokers
Branch Offices
Manufacturers Branches and
Offices
Sales Offices
Fig. 3: Types of wholesaling intermediaries
Merchant wholesalers are independently owned firms that take title to the
merchandise they handle. A merchant wholesaler’s compensation is the profit made
on the sale of goods. Merchant wholesalers are classified as either fill service or
limited service wholesaler, depending upon the number of functions performed.
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Two major types of full service wholesalers exist. General Merchandise (full
time) wholesalers carry a board assortment of merchandise and perform all channel
functions. These wholesalers do not maintain much depth of assortment within
specific product lines. Specialty merchandise (limited time) wholesalers offer
relatively narrow range of product but have an extensive assortment within the
product line carried. They are found in health drinks, automotive parts and seafood
industries.
Four major types of limited service wholesalers exist. Rack jobbers furnish the
racks or shelves that display merchandise in retail stores, perform all channel
functions and sell on consignment to retailers which means that they retain the
title to the products displayed and bill retailers only for the merchandise sold.
Familiar products such as history, toys, house wares, health and beauty aids are
sold by rack jobbers.
Cash and carry wholesalers take title to merchandise but sell only to buyers
who call on them, pay cash for merchandise and furnish their own transportation
for merchandise. They carry limited product information. This wholesaler is
common in electric, office supplies, hardware products and groceries.
Drop Shippers or desk jobbers are wholesalers who one the merchandise they
sell but do not physically handle, stock or deliver if the simply solicit orders from
retailers and other wholesaler and have the merchandise shipped directly from a
product to a buyer. Drop shippers are used for bulky products like coal, lumber
and chemicals. Truck jobbers are small wholesalers who have a small warehouse
from which they stock their trucks for distribution to retailers. They usually handle
limited assortments for fast moving or perishable items.
Agents and brokers: Unlike merchant wholesalers, agents and brokers do not
take title to merchandise and typically provide fewer channel functions. They make
their profit from commissions or fees paid for their services where as merchant
wholesalers make their profit from the merchandise sold.
Manufacturer’s agent and selling agent are the two major types of agents used
by producers.
Manufacturer’s Agents work for several producers and carry non-competitive,
complementary merchandise in the exclusive territory. They act as a producer’s
sale arm in a territory and are principally responsible for the transactional
channels functions. They are used extensively automotive industry, footwear and
fabricated steel industries. Selling agents represent a single producer and are
responsible for the entire marketing function of that producer. They design
promotional marketing function of the producer. They design promotional plans set
prices, determine distribution policies and make recommendations on product
strategy. Brokers are independent firms or individuals whose principal function is
to bring buyers and seller and together to make sale. They usually do not have
continuous relationship with the buyers or seller but negotiate a contract between
two parties and then move on to another task.
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Manufacture’s Branches and Offices: Unlike merchant wholesalers, agents and

brokers, manufacturer’s branches and offices are wholly owned extensions of the
producer that perform wholesaling activities. Producers will assume wholesaling
functions when there are no intermediaries to perform these activities, customers
are few in number and geographically concentrated or orders are large or require
significant attention. A Manufacturer’s Branch Office carries a producer’s
inventory, performs the functions of a full service wholesaler and is an alternative
to merchant wholesaler.
A Manufacturer’s Sales Office does not carry inventory typically performs only
a sales function and serves as an alternative to agents and brokers.
Functions of wholesalers
The following are the marketing functions performed by the wholesalers.
I. Market Coverage Function: Markets for the product of most manufacturers
consists of many customers spread over large geographical areas. To have good
market coverage so that their products are readily available to customers when
needed, manufacturers can call on wholesalers to secure the necessary market
coverage at reasonable cost.
II. Sales Contact Functions: The cost to cover the spread over market by sales force
will be prohibitive. By using wholesalers to cover a substantial portion of the market,
manufacturers are able to reduce significantly the costs of outside sales contacts.
III. Inventory holding function: Wholesalers take title to and usually stock the
products of the manufactures, which they represent. By doing so, they can reduce
the manufacture’s financial burden and reduce the risk with holding large
inventories and also help in planning better production schedule.
IV. Market Information Function: Wholesalers are quite close to the customers
geographically and in many cases have continual contact through frequent sales
calls on their customers. So they are in a good position to learn about customers’
product and service requirement, number and type of customer orders and
supports required by customers from the company in the form of ineffective
merchandise return, after sales service information. They also provide advice and
technical support in the cast of high-tech industrial goods.
V. Product Availability Function: Probably the most basic marketing function
offered by wholesalers to their customers is providing for the ready availability of
products which sometimes cover the fabricating operation, assembly and set up of
products. There is also the wholesalers’ ability to bring together from a variety of
manufacturers an assortment of product that can greatly simplify their customer’s
ordering tasks. Customers also do not need large quantities. Many manufacturers find
it uneconomical to sell it to small customers by performing bulk – breaking functions.
VI. Credit and Finance Function: Wholesaler provide their customer with
financial assistance by extending open account credit on products sold, their
customers have time to use products in their business before having to pay for
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them. Second, by stocking and providing ready availability for many of the items
needed by their customers would bear if they had to stock all of the products
themselves.
19.3.3. Role and Function of Retailers
Retail trade is defined by the Bureau of Census as “all establishment engaged
in selling merchandise for personal or household consumption and rending services
incident to the sale of such goods”.
Retailing includes all activities involved in selling, renting and providing
services to ultimate customers for personal, non-business use. They are
distinguished from wholesalers by the fact that they sell primarily to ultimate
users.
The utilities provides by intermediaries are of major value to retailers. Time,
place, possession and form utilities are offered by most retailers in varying degrees.
Many retailers often are able to influence marketing policies and practices of their
suppliers. Any time a retailer is able to obtain a price concession advertising
support or faster delivery from a manufacturer influence has been exerted over that
manufacturers policies. Retailers have many sources of power to draw upon in their
attempt to develop market leadership. These powers emerged because of their:
I. Close Proximity to the Customers: They collect market information and
consumers raise their complaints, preference desires and needs to the firms which
supply them directly the desired market knowledge.
II. Local Monopoly: Retailing is highly distributed and spread over activity. So
within a specific market area, the manufacturer’s alternatives are limited. The
amount of space or shelf area is restricted providing a local monopoly to the retailer.
III. Customer Franchise: Related to local monopoly is the concept of retail
customer franchise. The capabilities of a retailer to develop a large customer
franchise and being trusted by consumers have included private label merchandise
within their product assortments,
Forms of retail outlets
There is a wide variety of retail outlets but broadly they can be classified into
I. Form of ownership : Who owns the outlet
II. Level of service : The degree of service provided to customer
III. Merchandise line : How many different types of products a
store carries and in what assortment
IV. Method of operation : The manner in which services are provided
– how and where the customer purchase
products.
I. Form of ownership
a) Independent retailer: This is the retail outlet common to everyday life which
is owned by an individual e.g. dry cleaner, fluorist etc. The customer gets a
personalised service in these kinds of stores.
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b) Corporate chain: It involves multiple outlets under common ownership. In a

chain operation, centralisation in decision making and purchasing is common.
Chain stores have advantage in dealing with manufacturers particularly as the size
of the chain grows.
c) Contractual system: It involves independently owned stores that band
together to act like chain. The example include retailer sponsored co-operative,
wholesaler sponsored voluntary chains and franchising.
II. Level of service
a) Self Service: It is at the extreme end of the level of service continuum because
the customer performs many functions and little is provided by the outlet. Home
building supply outlets, discount stores and catalogue showroom are often self service.
b) Limited Service: These outlets provide some services which as credit,
merchandise return and telephone ordering. Department stores are considered as
limited service outlets.
c) Full Service: These retailers provide a complete list of services to cater to its
customers. Specialty stores are among the few stores in this category.
III. Merchandise line
a) Depth of Line: These kinds of stores carry a considerable assortment (depth)
of a related line of items. There are limited line stores. Stores that carry tremendous
depth in one primary line of merchandise are single line stores.
b) Breadth of Line: These stores carry a board product line with limited depth.
These are referred to as general merchandise stores, e.g. a large department store
carries a wide range of different types of products, but not unusual size.
IV. Method of operation
a) Store Retailing: Traditionally, retailing meant the consumer went to the store
and purchased a product which is store retailing e.g. corporate chains,
departmental stores and limited and single the specialty stores.
b) Non-store Retailing: It occur outside a retail outlet such as through direct
marketing e.g. mail order, vending machines, computer and tele-shopping.
Functions of retailer
The retailer is the ultimate connecting point to the consumer in distribution
channel. The retailers perform various functions such as:
a) Physical flow
1. Take possession of merchandise from wholesaler.
2. Provide inventory facility
3. Make the required assortment in variety and quantity
4. Change the title of the merchandise to customers.
b) Promotion
Retailer takes an active part in producers promotion programme by facilitating
POP display, store display and act as final dispenser of sales promotion schemes to
the consumer.
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c) Negotiation, Financing and Risk Bearing

The retailer negotiates with the wholesaler and manufacturer is quality, price
stocked quantity and terms of sale. Also negotiates with consumers. They also help
in financing consumer by extending credit facility for regular or bulk buying. As
risk accompanies ownership, the retailers assume all the risk inherent in
ownership of goods.
d) Order, payment and information flow
Anticipating or reacting to the needs of customer, the retailers order the
merchandise through the wholesaler to manufacturer. Accepting payment from the
customer is consideration for the transfer of ownership retailer pass on the
payment, after deducting their margin, backward in the channel. Retailers form a
vital link in the two way flow of information about customer response, product and
promotional information.
19.3.4. Selection of Channel of Distribution
A new firm typically starts as a local operation selling in a limited market.
Since it has limited capital, it uses existing middlemen. The number of middlemen
in any local is ought to be limited i.e. a few manufacturer’s selling agents, few
wholesalers, several established retailers. Deciding upon the best channels is a
challenging task if the new firm is successful, it branches out to new markets and
operates with existing intermediaries. The following steps are involved while
selecting and designing a distribution channel.
Step I : Analysing service output levels desired by customers
Step II : Establishing channel objectives
Step III : Identifying the major channel alternatives
Step IV : Evaluating channels.
Analysing service output levels desired by customer
There is diversity in the customer’s buying needs, product assortments,
merchandise choice and frequency of buying. There are five service outputs
produced by channels. They include:
Lot Size: It is the number of units that the channel permits an individual
customer to buy on one situation. The smaller the lot size the greater the service
output level that the channel must provide.
Product variety: It represents the breadth of assortment provided by the
marketing channel customers like greater assortment breadth because the chance
of exactly meeting their need.
Waiting time: It is the average time that customers wait for receiving the goods.
Customers normally prefer fast delivery channels. Faster service requires a greater
service output level.
Convenience: This expresses the degree to which the marketing channel makes
it easy for customers to purchase the product.
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Service back up: Services back up represents the addition on services like
credit, delivery, installation, repairs provided by the channel. The greater the
service back up, the greater the work provided by the channel.
Establishing channel objectives
These objectives should be stated in terms of targeted service output levels.
Channel objectives vary with product characteristics. Perishable products require
more direct marketing. Bulking products such as building and machinery material
require channels minimizing transportation and shipping distance and the number
of handling in the movement form producer to customer. Non standardised
products are sold directly by company sales representatives. Products which
require installation, fabrication and maintenance are sold by company itself.
Similarly high unit value products are often sold through a company sales-force.
Channel design decision maker should do the strength and weakness analysis of
each member and the decision should be adaptable to a larger environment.
Identifying the major channel alternatives
After defining the target market and the variability of customer needs, there
should be the identification of channel alternatives. A channel alternative is
characterized by:
(a) Types of business intermediaries
(b) The number of intermediaries
(c) The responsibility and duty of each channel participant.
a) There are various kinds of intermediaries and each them differ in their role
and function. As in the ultimate flow of products, price and communication these
channel members perform a varying degree of function. The intermediaries can be
of the manufacture’s agents or independent units or manufacture’s sales-force.
b) The number of intermediaries decides the type of distribution the
organisation prefers. An exclusive distribution involves severely limiting the number
of intermediaries handling the company’s merchandise. In this case the producer
exercises a great deal of control. Selective distribution involves the use of more than
a few but less than all of the intermediaries who are willing to carry a particular
product. This type of distribution is used by established as all as new
organisations. An intensive distribution involves planning the goods or services in
as many outlets as possible. To get the locational convenience, it is required to offer
greater intensity of distribution.
c) The manufacturer must determine the conditions and responsibilities of the
participating channel members. The policies involved are price policies conditions of
sale, territorial rights and mutual services to be performed by each party.
Evaluating channels
The various channels so selected needs to be evaluated against (a) Economic
criteria, (b) Adaptive criteria, (c) Control criteria.
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a) Economic Criteria : Each channel member produce a different level of sales

and cost. Whether the company salesforce or the intermediaries will be generating
more sales and the cost involved in maintaining each of these alternatives are to be
analysed.
b) Adaptive Criteria: The order to develop a channel, the members must make
some degree of commitment to each other for a specified period of time. So in
rapidly changing volatile or uncertain product markets, the producer needs the
channel structure and policies to maximize control over the members.
c) Control Criteria: The area of channel evaluation should be broadened to
include the control criteria. The balance of the dynamics of marketing control
between intermediaries and manufacturer should be considered.
19.3.5. Channels of Distribution for Consumer and Industrial Goods
The channels for consumer goods and industrial goods differ widely because of
customer demands. As the intermediaries between a producer and buyer, increases
the channel is viewed as increasing in length.
A. Channels for Consumer Goods
A B C D
Producer Producer Producer Producer
Agent
Whole saler Whole saler
Retailer Retailer Retailer
Consumer Consumer Consumer Consumer
Fig. 4 Common Marketing Channels for Consumer Goods and Services

Channel A represents a direct channel, because a producer deals directly with
each consumer. Many products and services are distributed this way. The
remaining three channels B,C,D, are indirect channels, because intermediaries are
inserted between the producer and consumers and perform numerous channel
functions. Channel B, with a retailer added is most common when a retailer is large
and can buy in large quantities from a producer. Adding a wholesaler in channel C
is most common for low cost, low unit value items that are frequently purchased by
consumers such as sweets, chocolates and magazines. Channels D, is
manufacturers and many small retailers and an agent is used to help coordinate a
large supply of the product.
189
B. Channels for Industrial Goods and Services

In contrast with channels for consumer products, individual channels typically
are shorter and rely on one intermediary or none at all because industrial users are
fewer in number and tend to be concentrated geographically and buy in larger
quantities.
Channel A is a direct channel and firms using this channel maintain their own
sales-force and are responsible for all channel functions. This channel arrangement
is employed when buyers are large and well defined, the sales effort requires
extensive negotiations and the products are of high unit value and require hands
on expertise in terms of installation or use.
A B C D
Producer Producer Producer Producer
Agent
Agent
Industrial Industrial
Distributor Distributor
Industrial User Industrial User Industrial User Industrial User
Fig. 5 Common Marketing Channels for Industrial Gods and Services
Other channels are indirect channels. In channel B an industrial distributor

performs a variety of marketing channel functions. Channel C, introduces a second
intermediary, an agent, who serve primarily as the independent selling arms of
producers are represent and producer to industrial users. Channel D is the longest
channel and includes both agents and distributors.
Channel structures for consumer and industrial products assume various
forms based on the number and type of intermediaries. Knowledge of the roles
played by these intermediaries is important for understanding the channel
operation.
1. Large scale production necessitated the use of different channels of
distribution.
2. Retailing includes selling, renting and providing services to customers.
1. Answer the following:
a) What is meant by marketing channel?
b) What are the basic functions performed by intermediaries?
c) What utilities are created by intermediaries?
2. Discuss the type and role of wholesalers in a channel?
3. What are the functions of wholesalers and retailers?
190
19.6. SUMMARY
Distribution is also an important element in the marketing – mix. The motto of
any marketer is to see that the right production in right quantity at price is made
available at the right place. The methods of distribution may broadly be divided into
direct and indirect methods. A number of intermediaries/middlemen are engaged in
the distribution of goods and service. The wholesalers and retailers perform a
number of functions such a sorting out, accumulation, allocation and assorting.
While sorting out and accumulation predominate in the agricultural marketing,
allocation and assorting are marked in finished goods. The channel members also
facilitate the searching process. The wholesaler more specifically performs the
functions which can be broadly grouped under market coverage function; sales
contact function, inventory holding function, market information function, credit
and finance function.
The retailer is the ultimate connecting like between the wholesaler and the
consumer/user. He takes possession of merchandise from the wholesaler, provides
inventory facility, etc. He also takes active part in producer’s promotion
programmes by facilitating POP display, store display and act as final dispenser of
sales promotion schemes to the consumer.
Four major steps are involved in selecting the designing the distribution
channel viz., analysing service output levels desired by customers, establishing
channel objectives, identifying the major channel alternatives, and evaluating
channels.
1. Who is a wholesales?
2. Define Retailer?
19.9. ASSIGNMENTS
1. What are the various types of retailers and their functions?
1. Clewett, R.M. (ed.) Marketing Channels for Manufactured Products, Richard
D. Irwin, Illinois, 1954.
2. Cravens, David W. et al. Marketing Management, Richard D. Irwin, Illinois ,
1988.
3. Kotler, P. Marketing Management, Analysis, Planning and Control, PHI, New
Delhi, 1992.
4. Stren, Lowis W. (ed.) Distribution Channels: Behavioural Dimensions,
Houghton Mifflin Co.,
191

Comment on the statement. “The only distinction among merchant wholesalers
and agents and pokers in that merchant wholesaler take title to the products they
sell.
19.12. KEYWORDS
Sorting out, Assorting, Logistical function, Transactional function, Product
flows, Title flows, Information flows

192
LESSON – 20
PHYSICAL DISTRIBUTION
20.1. INTRODUCTION
Physical distribution activities and decisions are important for many kinds of
manufacturers, wholesalers, and retailers, affecting both customer satisfaction and
bottom – line profit performance. The management of physical distribution provides
and exciting opportunity for improving customer services and reducing costs.
Managing the physical distribution function is considered in this lesson.
20.2. OBJECTIVES
After studying this lesson you will be able to understand the following:
 The importance of physical distribution in marketing.
 The various important elements in physical distribution.
20.3. CONTENT
20.3.1. Meaning, Objectives and Importance.
20.3.2. Components of PDS.
20.3.3. Managing Physical Distribution.
20.3.1. Meaning, Objectives and Importance
Meaning
Physical distribution involves planning, implementing, and controlling the
physical flows of materials and final goods from points of origin to points of use to
meet customer needs at a profit (Kotler, P. Marketing Management, PHI, New Delhi,
1992, P. 554). The National Council of Physical Distribution Management, Chicago,
USA status that physical distribution is a term employed in manufacturing and
commerce to describe the broad range of activities concerned with efficient
movement of finished products from the end of the production line to the
consumer, these activities include freight transportation, warehousing, materials
handling, protective packaging, inventory control, plant and warehousing site
location, order processing, market forecasting, and customer service. In some cases
the physical distribution also includes the movement of raw materials from the
source of supply to the beginning of the production line. Mc Carthy states that
physical distribution is the actual handling and moving of goods within individual
firms and along channel systems.
Thus, it could be observed from the above definitions that physical distribution
is a marketing term which refers to the broad range of activities connected with
efficient movement of goods from the place of production to the place of consumption.
Objectives
Like other components of the marketing – mix, physical distribution, too
strikes to achieve two broad marketing objectives, viz., Consumer satisfaction and
profit maximization.
193
By delivering products to target consumers at the places and time required,

physical distribution ensures better customer services. In the process it adds to the
value satisfactions of consumers. An efficient service increases the probability of
repeat sales, a higher customer retention rate and the addition of new customers.
An efficient physical distribution facilitates lowering the level of stock and to
avoid out of stock situations. This is achieved through devising a constant delivery
schedule. Devising a constant delivery schedule results into lower inventory
carrying costs and a reduction in the amount of capital tied-up in inventory. A
significant reduction in cost is also brought about by determining the optimum
number and location of warehouses, improving the handling of materials,
increasing stock turnover and so on. All these help ultimately in profit
maximization. The specific objectives of physical distribution are:
Minimizing inventory level
Speeder transportation
Minimum handling
Minimum transshipment
Of course, these objectives may very from company to company and even from
situation to situation in a company. They physical distribution strategy will, thus,
largely depend on what the company aims to achieve within given cost revenue
constraints.
Importance
Physical distribution system is the most powerful support to distribution
channel. Even the best distribution channels are not likely to yield derived results
without adequate support a provided by the system of physical distribution. The
importance of physical distribution system will be better understood from the
following:
1. A well-devised Physical Distribution system helps to minimize cost of
marketing. Recently, all the major components of marketing cost, viz.,
transportation cost, materials handling, inventories, order processing, etc. have
registered a sharp increase primarily due to inflationary conditions all the world
over. It is against this that physical distribution management assumes particular
significance. A sizable chunk of marketing cost cold very well is curtailed by
evolving an appropriate PDS.
2. Physical distribution system helps to attain the objective of utmost
customer satisfaction. Customer satisfaction is the end of all marketing activities. A
satisfactory physical distribution system ensures best possible warehousing,
inventory control, transport, protective packaging, physical handling, order
processing, etc. which gives the customer the service they expect.
194
3. PDS creates time and place utilities: Physical distribution creates utilities of
time and place of making available a product at the time it is needed and at the
place where it is needed.
4. PDS form a major part of national wealth: PDS in the form of rail, road,
highways, trucks, aircraft, ships docks, etc. represents a major portion of national
income. Hence PDS becomes important from the point of view of the national
economy as well.
Thus, the process of physical distribution is of utmost importance not only
from the view point of the enterprise in question but also from the broader national
angle.
20.3.2. Components of PDS
PDS comprises the following broad areas:
Transportation
As a component of the physical distribution system of an organisation,
transportation refers to the movement of products from the warehouse (s) to the
consumer destination (s). Transportation is the crux of the problem of physical
distribution. It plays an important role in the economic development of nation. In
marketing, transport discharges an important function, since the entire work of
assembling and dispersing of goods is done with the help of some form of transport.
Better transport opens up new markets, which, in turn, increases the volume of
production requiring the support of wider and larger transport facilities. Without
the development of transport, large scale production would have been impossible.
There are several models of transport such as,
Land/Road Transport (Road & Rail way)
Water Transport
Air Transport
Some of the factors determining the choice of selecting transport medium may
be pointed out here.
1. Cost: Cost of transport is indicated by the freight rate and total freight bill
that a company is required to pay on the goods / Cargo. The distance to be traveled
and the volume of products to be moved go to determine the cost. The distance
criterion influences the ratio between the fixed and variable components of the total
movement cost. Anyway, other things being equal, management chooses that mode
which involves the minimum cost.
2. Performance Criteria: Performance characteristics of each mode of transport
considerably influence the choice of management. The important performance
criteria are speed, reliability, frequency, availability and safety.
Speed refers to the pace of movement and it usually indicated in kilometers
per hour. While calculating speed, the time involved in transhipment, handling,
stoppages, loading and unloading, and starting from station to customer
195
destination are taken into account. It’s the total time taken from warehouse to
customer destination that is relevant.
Reliability: It implies the dependability of the transport medium. Dependability
in indicated by the number of in-transit interruptions, dislocation owing to
inclement weather, accident proveness, etc. Both railways and roadways in these
terms rank before airways and waterways.
Frequency: It refers to repetitive movement of the mode of transport from one
place to the other. There are daily rail and road cargo services from practically all
trading centre in the country.
Availability: It implies flexibility and accessibility of the transport medium. The
chromic wagon shortage makes railways a purely available mode; road transport
emerges successfully in this test.
Safety: Safe and secure movement of products is important. Safety is indicated
by the possibilities of product loss and damage.
Product suitability: Not all media are suitable for the movement of all types of
products. Hence the choice of the transport medium is also determined by its
suitability from the view point of product character. Perishable products and
products having a high replacement rate and time value are best moved by the
roadways whereas bulky goods like coal, oil, etc, is best moved by railways and
water ways. Similarly, products with a high unit value, such as diamond, jewellery,
electronic equipment, etc. are best moved by air owing to the low ratio of the
transport cost to the product price.
Inventory Management
Inventory refers to all kinds of materials, component parts, supplies, in-
process goods and finished goods available with a firm. A firm cannot succeed in
maximizing customer satisfaction without effective management of inventories. It is
because of this reason that inventory management of physical distribution.
Inventory management means the laying down of the policy to be followed
regarding the holdings of stocks or raw materials and finished products and the
implementation of this policy in the business. The principal aim of inventory
management is to ensure enough supply of all the materials and supplies of the
quality essential to the business with the least of the inventory investment and
inventory carrying cost.
Inventory control means holding balanced stock of materials and / or finished
goods. It aims at three objectives:
 Never run of anything (out of stock)
 Never build up a very large inventory i.e. having much of anything on
hand (unwanted stock)
 Never send out too many small orders for more i.e. never pay high prices
and incur high freight and lose quantity discount because of buying in
small quantities.
196
It should be noted that the efficient inventory management can not eliminate
business risk but it can certainly reduce it. We can only assess risk, plan a strategy
and accept risk and most favourable terms.
Standards in inventory control: There are four important standards in inventory
control
1. The Maximum: It indicates the upper limit of inventory or stock. It is the
largest quantity to be kept in the interest of the economy.
2. The Minimum: It is the lower limit of inventory. It is also called safety or
reserve stock. It must be always on hand. It acts as a safety value.
3. The ordering point: It indicates when to order or reorder. It is the level of
inventory necessary to protect against exhaustion of the stock during the
time gap between the order date and date of receipt of stock. The supplier
can help his customer by assuring delivery within a certain period, say 10
days from the date of receipt of an order. Under such assured delivery time,
the ordering point can be easily determined. When the level of inventory or
the balance of stocks on hand reaches this ordering point, it is an indication
that a new order or reorder must be placed at once. Of course, sufficient
margin must be provided for contingent delay or transport bottlenecks.
4. The standard order: It is the quantity of inventory to be requisitioned for
purchase at any one time. A reorder or repeat order for a commodity is
always the same quantity until conditions change, necessitating a revision of
the standard order. The standard order. The standard order is the quantity
for replenishment of stocks.
Storage and warehousing
Storage and warehousing is one of the important physical distribution
functions of marketing. The word storage means holding the stock of goods for a
relatively longer period. Thus, storage is a function that helps in preserving the
goods at one place until they are needed at another place. Warehousing, on the
other hand, involves more than storage. Warehouse, perform many of the usual
functions of wholesalers’ e.g. breaking bulk, dispatch of smaller consignments to
retailers, providing market intelligence and many other merchandising services of
manufacturers.
As regards the location of warehouse, usually two options are available, viz. to
centralize warehouse facilities at one geographical location or to decentralize them
at more than one location. The centralized warehouse is built around the
manufacturing plant while the decentralized warehouse is built at or in the vicinity
of market. In centralized warehouse products are moved to the warehouse from the
plant from where these are distributed to different markets irrespective of the
distance. Thus, there is only one dispatch point. In decentralized warehousing, on
the other hand, the products are first moved in bulk from the plant to different
warehouse called distribution centers where these are assorted, regrouped, and
repackaged in customer acceptable sizes and delivered. It is a full service
197
warehouse, primarily related to market. A distribution center provides services with

the help of a computer and modern materials handling equipment. It can reduce
cost of inventory, storage, handling and transport. Products are shifted from the
factory to the distribution center directly and not to a storage warehouse. The
distribution center is a new idea developed recently in India. Many companies are
shifting steadily from storage warehouses, to distribution centers in their plans of
physical distribution.
As regards the ownership of warehouses, broadly two options are available viz.,
private warehouse(s) or/and public warehouse(s). The former are owned and
operated by the company itself and are often exclusively used by it. The latter are
those which are owned and operated by public institutions or other persons and are
open for use by anybody at a charge who can confirm to certain rules and
regulations.
20.3.3. Managing Physical Distribution
The design and management of physical distribution systems involve a
number of business functions in addition to marketing, including raw materials
management, inventory control, manufacturing, transportation, and warehouse
and plant location. The major steps in designing the PDS are:
 Establish PDS objective.
 Measure customer service
 Examine cost trade – offs,
 Identify and select design alternatives.
Establish PDS objectives
We have already pointed out earlier the objectives of effectives PDS. The
principal objective was to provide better customer service. Customer service as it
relates to the physical distribution function consists of providing products at the
time and location corresponding to the customer’s needs. The customer services
levels that may be provided range from very good to very poor. It is a measure of
how all the customer service function is being accomplished. The ideal solution to
the problem of PDS design is to develop minimum cost systems for a range of
acceptable levels of customer service is a complex collection of demand-related
factors under the control of the firm, but whose importance in determining supplier
patronage is ultimately evaluated by the customer receiving the service. (Ronald H.
Ballow, Business Logistics Management, Prentice Hall, Englewood (Iiffs, N.J. 1973)).
Five major factors affect customer service, Time dependability, communication,
availability and convenience.
198
Measure customer service

Several possible measure of customer services are shown in fig. 1.
Pretransaction Inventory availabilty

elements Target delivery dates
Order status
Order tracing
Backorder status
Customer Transaction Shipment shortages
service elements Shipment delays
Product substitutions
Routing change
Postransaction Actual delivery dates

elements Returns adjustments
Fig. 1 Possible Measures of Customer Service Performance

Source: Douglas M. Lambert and James R. Stock, Strategic Distribution
Management (Homewood, III: Richard D. Irwin. 1982), p. 75
The choice of an appropriate measure or measures is situation specific and is
based on the service factors(s) most closely linked to customer satisfaction. The
pre-transaction elements use measure that designate service capability before it is
provided. A target delivery date indicates the planned time or delivery. The
transactions elements gauge service performance for various components of buyer –
seller transactions. The post-transaction elements measure customer service based
and sellers is an important factor in customer service.
Examine cost trade - offs
Trade-off analysis in PDS design is the evaluation of the costs of each system
component with the objective of determining the combination of components that
provides a minimum total cost system for specified customer service level. The
inter–relationships of various PDS components are shown fig.2. The arrows indicate
the trade –offs between activities the must be evaluated in:
 Estimating customer service levels.
 Developing purchasing policies
 Selecting transportation policies
 Making warehousing decisions
 Setting inventory levels
199
Product
Price Promotion
Marketing
Plac-customer
service levels
(cost of lost
sales)
Physical distribution
Inventory Transportation
carrying costs costs
Order
Production processing Warehousing
lot quality and costs
costs infomation (throughput costs
costs not storage)
Fig.2 Cost Trade-offs in a Physical Distribution System
Source: Douglas M. Lambert. The Development of an Inventory Methodology: A

study of the costs Associates with Holding Inventory (Chicago: National council of
Physical Distribution Management, 1976) p.7.
Since certain elements of the distribution function are often more important
than others in a given firm, trade-off analysis should be directed to those elements
that comprise the major portion of distribution costs.
Identify and select design alternatives
A key issue in designing the PDS is how to incorporate the customer service
objective into the design process. Management judgment and experience will often
dictate a range of customer satisfaction levels that are acceptable to the firm. In
many cases, these levels may be expressed not as percentage, but rather in terms
of lot orders, delays, stock-outs etc. Two possible approaches may be considered as
alternative ways of handling the customer service objective. They are:
 Estimate sales response to customer service
200
 Minimize total PDS costs

Like product management, distribution involves areas of the firm that have
traditionally been separated. Approaches for organizing physical distribution
include:
 The use of a task force to monitor, coordinate and when necessary, modify
distribution activities and interrelationships.
 The assignment of management responsibility to an existing functional
area in which several distribution activities are already being performed.
 The establishment of a separate organisational until for distribution
management and coordination. The unit should be headed by a
professional physical distribution executive. It may range from a small
staff organisation that is primarily responsible for analysis, planning, and
coordination to a line operation with responsibility for such distribution
activities as warehousing, transportation, and order processing.
The integration of physical distribution activities may evolve time, beginning
with a task force approach and ultimately developing into a separate organizational
until.
Components of PDS
1. What do you mean by physical distribution? Describe its importance in
marketing of goods and service.
2. (a) State how the PDS can contribute to the creation of time, place and
possession utilities.
(b) How does physical distribution contribute to the firm’s marketing
programme?
3. State the objectives of an effective PDS. What are its major components?
Discuss in brief.
20.6. SUMMARY
Physical distribution is an important aspect of overall distribution in
marketing. It is also termed as the other half of marketing. To ensure better
customer service, to lower the level of stock, to reduce cost and ultimately to
provide best service to customers are the important objectives of any efficient PDS,
PDS helps to minimize marketing cost, creates time and place utilities, cultivates
demand and has a direct bearing on the standard of living of the people at large.
Transportation, inventory management and control, storage and warehousing
are the major components of any PDS. Various criteria are followed in selecting the
mode of transport, such as speed, safety, reliability etc. inventory decisions are
concerned with balancing the costs of carrying inventory, ordering products from
suppliers, and controlling other inventory costs to achieve a desired level of
customer satisfaction.
201
The PDS planning and designing process involve establishing PDS objectives,
measuring customer service, examining cost trade – offs, and identifying and
selecting design alternatives. It is observed that many companies are shifting
steadily from storage warehouse to distribution centers in their plans of physical
distribution. Such companies have succeeded in reducing appreciably the number
of storage warehouses.
1. Define physical distribution.
2. Define Inventory management.
2. Journal of marketing
20.9. ASSIGNMENTS
1. “Managing physical distribution involved balancing distribution costs
against acceptable level of customer services and satisfaction”, Explain :-
1. Douglas M. Lambert and James R. Stock, Strategic distribution
management, Richard D. Irwin, Homewood, Illinois, 1982.
2. Cravens, David W. Marketing management, Richard D. Irwin, Inc.
Homewood, Illinois, 1982.
3. Gandhi J.C. marketing – A management, introduction, TMH, New Delhi,
1990.
4. Snykay, E.M., et al. Physical Distribution management, Macmillan Co, New
York, 1961.
1. As marketing director of Kellogg’s, evolve a market driven distribution
system for the Indian market.
20.12. KEY WORDS
Customer service level, Cost trade-offs, Distribution centers

202
LESSON – 21
MARKETING RESEARCH
21.1. INTRODUCTION
Decisions – making in various areas marketing management, such as pricing,
product development, promotion and distribution, is a complex problem. It is both
a problem and a challenge. It is essential for every marketer to develop a
dependable marketing data and information base for rational decision – making.
This in turn, depends on collection, recording and analysing relevant data. This job
of collecting, recording and analysing relevant data for marketing decisions is
known as marketing research.
21.2. OBJECTIVES
After studying this lesson, you should understand the following:
 The meaning, scope and objects, of marketing research.
 The marketing research process.
21.3. CONTENT
21.3.1. Marketing research – meaning, Importance and scope
21.3.2. Objects of marketing research
21.3.3. Marketing research process
21.3.1. Marketing Research Meaning Importance and Scope
Meaning and importance
Marketing research has been variously defined. It is the systematic, objective
and exhaustive search for and study of the facts relating to any problem in the field
of marketing. (Richard Crisp).
The American marketing Association has defined marketing research as the
systematic gathering, recording and analysing of data about problems relating to
the marketing of goods and services.
Marketing research is a step – by – step process of planning for, acquiring,
analysing, and interpreting information relevant to a marketing decision – making
situation (Cravens, Hills and Woodruff, Marketing management, Richard D. Irwin,
Illusions, 1988. P. 631).
An analysis of the definition reveals the following salient features of marketing
research:
1. It is a search for data which are relevant to marketing problems –
distribution, promotion, pricing, etc.
2. It is a carried out in a systematic manner as opposed to a hazard or hit-
and -miss manner.
3. It involves a process or gathering, recording, and analysis of data.
As regards the importance, it can be said that marketing research plays a key
role in the entire marketing process. It helps the firm in market measurement,
assessment of market potential and development of sales forecasts. Marketing
203
research can significantly help each and every function of marketing. It is rightly
observed, “Marketing Research is the radiology and pathology of marketing
operations of a business. It diagnoses the business ailments when there is a
trouble, it is also means regular checks. Like the radiologist who provides an X-ray,
the market researcher gives a true picture of the business position. As the
pathologist gives test reports to the medical practitioner, the marketing research
furnishes reports that can guide the business executives”.
With the emphasis shifting from the product to the consumer and his needs
and with the consumer becoming more involved and the market turning into a
buyers market, it became necessary to get information on the needs, preference and
evaluations of the consumer.
One of the important tasks is to deliver the right product to the right person at
the place at right time. It also required obtaining information on consumer’s
satisfaction and dissatisfaction for bringing requisite change in company’s
marketing programme, so that the customer remains loyal to the enterprise and its
product.
Thus, marketing research is described as an activity, the results of which are
useful in enhancing the ability to make marketing decisions in the ever changing
world.
Scope
A wide range of research activities are carried on by marketing researchers of
this century. They can be broadly categorized into 7 groups.
1. Product/Service research which covers the research on customer
acceptance of the proposed new product, comparative study of
competitive products, and determination of new uses of existing
products. Test marketing of proposed product, study of customer
dissatisfaction, product line decision, packaging labeling and design
decision.
2. Market research which covers analysis of market potentials for existing
products, Estimation of demand for new products, sales forecasting,
characteristics of product markets, analysis of sales potential and study
of trends in markets.
3. Promotion research which covers advertising campaign evaluation,
analysis of advertising and selling practices, selection of advertising
media, motivational study establishment of sales territory, evaluation
present and proposed sales methods, studying competitive pricing
analysing salesman’s effectiveness and establishing sales quota.
4. Distribution research which covers location and design of distribution
centers, handling and packing of merchandise, cost analysis of
transportation methods, Dealer supply and storage requirements.
204
5. Pricing Research which covers demand elasticities, perceived prices, cost

analysis and margin analysis.
6. Corporate Responsibility research which covers research on ecological
impact of business, protection of customer’s rights, studies on legal
restraints and regulations, studies on social values and policies.
7. Miscellaneous Research activities cover various research activities which
are not conducted regularly but has some marketing implication. This
cover research on diversification satisfaction and motivation of sales
personnel, governmental actions and attitudes towards corporate sector,
international marketing research.
The scope of modern marketing research is two fold i.e. routine problem
analysis and non-routine problem analysis. The above categorization helps in giving
a broader look to the scope of marketing research.
Marketing information system – Vs marketing Research
A marketing information system is an ongoing future – oriented structure
designed to generate, process, store and later retrieve information to aid decision-
making in an organization’s marketing programme. It is a set of procedures and
methods for the regular and planned collection, analysis and presentation of
information in making marketing decisions. It consists of people, equipment and
procedures to gather, sort, analyse, evaluate and distribute needed, timely and
accurate information to marketing decision makers.
In order to carry out their analysis planning implementation and control
responsibilities, the marketing managers need information about developments in
the marketing environment. The role of the MIS is to assess the manager’s
information needs, develop the needed information and distribute the information
in time to marketing managers.
INFORMATION PROCESSING INFORMATION
OUT
MACRO PERIODICAL
REPORTS
MARKETING
MICRO INFORMATION
SYSTEM
SPECIAL
INTERNAL REPORTS
Fig.1 The Information Flow and Marketing Informatin System

There is an increasing need for marketing information system because
1. There is a growing consumer discontent.
2. There is a shortage in scarce resources.
3. There is the emergence of complex marketing environment
4. There is a knowledge explosion
205
5. There is shortening of time span for decision making

There is a varying degree of contradiction among theorists regarding the
relationship between the MIS and MR. Some view marketing intelligence system as
simply a logical, computer based extension of marketing research. Others view
them distinctly different. Some opinions that if a company has a formal MIS, then
marketing research is a part of this broader information system.
CONTRAST BETWEEN MARKETING INFORMATION SYSTEM AND MARKETING
RESEARCH
Marketing Information System Marketing Research
1. Handles both internal and external 1. Depends largely on the handling of
data. external data
2. Concerned with prevention and 2. Concerned with solution of problems
solution of marketing problems. 3. operates in a fragmented & interment
3. operates continuously as a system basis
4. Tends to be futuristic 4. Tends to concentrate on past
5. Mostly a computerized/process information
6. Includes other subsystems besides 5. Need not be a computerised process
marketing research 6. Is one of the sources of input for an
effective marketing information system
21.3.2. Objects of Marketing Research
The first and foremost objective of marketing research is to enable
manufactures to make product acceptable and saleable and to see that they reach
the market easily, quickly, cheaply and profitably without sacrificing consumer
interest. MR aims at providing the following information to the marketing manager:
1. To define his present market situation together with the long range trends
which have led up to it?
2. To discover what major and underlying factors are dominating the
situation and how these factors can be influenced or controlled.
3. To set up a plan for keeping in touch with the behaviour to these
dominating factors and for measuring the results of any efforts made to
influence or control them.
21.3.3. Marketing Research Process
The marketing research begins with the recognition of a marketing related
problem. Identifying and stating the right problems is like winning half of the
marketing war. This is followed by a formulation of the objectives of the study and
the methodology to be used to achieve these objectives. The detailed steps involved
in the marketing research process are explained in the following flow chart.
206
Step - 1 Definition of Problem
Statment of research
Step - 2 objectives
List of needed
Step - 3 informations
Design of data
Step - 4 Collection Project
Selecting the sampling

Step - 5 scheme & sample size
Organising
Step - 6
field work
Step - 7 Analysing the data
Findings and
Step - 8 Conclusions
Fig. 2 Stages of Marketing Research Process
Step – 1 Definition of Problem: This is the first step in marketing research

process. The problem may be of different types depending on the
marketing situation e.g. product failure, sales decrease, market
gossip etc. the problem may be solved internally or external
assistance from a marketing research agency, is required
depending on the gravity of the problem. The problems then are
formulated into statements known as hypotheses can be
translated into research objectives which give an indication on
information to be collected and variables to be studied.
Step – 2 Statement of Research Objectives: The hypotheses are translated
into research objectives. The information so obtained while
formulating the problems pass through a subjective exercise to
assess the possible outcomes. The hypothesis and objectives are
formulated having the idea about the possible set of outcomes,
the subjective probabilities associated with each outcome and the
pay-offs associated with each outcome.
Step – 3 List of Needed Information’s: Information is required about
attitudes, beliefs, values, knowledge, intention and socio-
economic status of prospects. The main source of information
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may be the prospects themselves. The data may be primary or

secondary in character.
The primary data are original data gathered specifically for the
project at hand. The secondary data have already been gathered
for some other purpose. The sources of secondary data are
libraries, government, trade, professional and business
associations, private business firms, Advertising media, University
research organizations and foundation. The primary sources of
data are obtained from respondents on their attitude, opinion,
preference, behaviour etc. for the specific research purpose.
Step – 4 Design of data Collection Project: This covers two broad concepts
viz., the type of research design and the methods to collect
information for the project.
The development of research design largely depends upon the
purpose for which the research is conducted. The depth and extent
of data required the costs and benefits of the research, the urgency
of the work and the tone available for the work also affects the
research design. It provides the blueprint for research work.
All marketing research projects start with exploratory research.
This is required to obtain a proper definition of the problem and
helps in providing insight to the problem. It is helpful in
establishing in studying the competing explanations of
phenomenon: conclusive research is an elaborate and systematic
collection of the information needed, its analysis and findings as
per the research findings.
The second aspect of the design of data collection project is the
selection of methods for gathering data. Primary data can be
collected in various ways such as:
a) Survey Method: A survey consists of gathering data by
interviewing a limited number of people selected from a larger
group. It has the advantage of getting original information. The
interviewing in a survey method can be done by the researcher by
person, telephone and mail.
b) Personal interviews are more flexible because they are able to probe
more deeply is the answer is not satisfactory. In addition to high
cost and time consuming, personal interviews also face the possible
limitation of inviting respondent’s bias. Telephone surveys can be
conducted more rapidly and at least cost but it is time specific and
it leaves the scope of reaching non-telephone holders. Interviewing
by mail involves mailing a questionnaire to potential respondents
and having them returned the completed form by mail.
c) Observational Method: In this method data are collected by observing
some action of the respondent. It is the observation of some
208
occurrence, people and incident. The observation can be personal and

mechanical but this method suffers from recording covert behavior.
d) Experimental Method: This method of gathering primary data
involves the establishment of a controlled experiment that
stimulates the real market situation as much as possible. The
small scale experiment will provide valuable information for
designing a large scale marketing programme.
Step – 5 Selecting the Sampling Scheme & Sample Size: A complete
enumeration or census involves in decisive data gathering and the
cost involved is prohibitive in character, so it is prudent in
marketing to select a small group (sample) out of the population
(universe). This process of selecting small number of items out of
a larger number of items is called sampling. Their process of
sampling can be probabilistic as well a non-probabilistic or
judgmental. A probabilistic or random sample is one that is
selected in such a way that every unit in the predetermined
universe has a known and equal chance of being selected. Some
common probabilistic sampling methods are simple random
sampling and quota sampling. In non-probabilistic, there is an
unequal chance of few members being selected and rest others of
being not selected out of the whole population.
Step – 6 Organizing the Field Work: This step involves the real research
work on the field. The actual collection of data in the field by
interviewing, observation is the weakest link in the entire research
process. In other steps, marketing prudent are involved to ensure
the accuracy of the result, so if the field workers are inadequately
trained and supervised, the whole labour will be lost. There is the
chance of bias because people in the sample may not feel at home
and refuse to answer; the field workers may be unable to establish
rapport with respondents. So organizing the field work is an uphill
task for the researcher.
Step – 7 & 8 Analysis the Data, Finding and conclusion: The data so obtained
from field survey are subjected to editing. Editing is a process of
reviewing the data to avoid and check the error arising out of
illegibility, non-response and response from non-competent
respondents. Then these data are categorized by tabulation.
Tabulation process involves manual as well as mechanical
tabulation by using punched card, computers etc. After data
processing various statistical and non-statistical tools are used to
analyze the data quickly and inexpensively which invariably leads to
finding solutions to the marketing problem and conclusions. These
findings and conclusions are presented in the form of a report.
Marketing research process to be effective should be always regulated with a
follow up action. This helps the decision makers in finding out the effectiveness of
the research.
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1. Marketing research process
1. Why does a company need a marketing information system?
2. How does a marketing information system differ from marketing research?
3. Describe the types of goods/services which would definitely need
exploratory/research
4. In depth interviews are similar to individual case studies – Comments.
21.6. SUMMARY
Marketing research has become vital weapon in the armory of a modern
marketer. It is an activity, the results of which are useful in enhancing the ability of
the marketer to make marketing decisions in the ever changing world. He has to
gather information and process them for taking a decision on any marketing aspect.
The scope of marketing research is widening. It has embraced with itself consumer
research, advertising research, and product and price research. MR involves a
number of steps starting with definition of problem and ending with finds and
conclusions.
The future of marketing research in India is bringing on account of the
growing business awareness about its usefulness and the steady growth of data
base. Specialised research skill and data processing facilities are also improving.
1. What is marketing research?
2. Define survey method?
1. Journal of marketing research
21.9. ASSIGNMENTS
1. Evaluate the merits of personal, telephone and mail survey method on the
basis of accuracy, speed, cost case of implementation, flexibility and
amount of information obtained.
1. Beri, G.C. Marketing Research, TMH, New Delhi, 1994.
2. Boyd Jr. et al., Marketing Research: Text and Cases, Richard D. Irwin,
Illinois, 1964.
3. Green P.E. & D.S. Tull, Research for Marketing Decisions, PHI New Delhi,
1973.
4. Stanton, et al. Fundamental of Marketing. Mr. Graw Hill, New York, 1967.
210

1. Develop a suitable marketing research procedure for a departmental
store for the following problems:
 Inability to cope up with large turnover of customers
 Lake of proper stock status
 Stock accounting
 Cash collection and reconciliation
 Excessive reliance on the owner in day to day operations of the store
made him unable to devote sufficient time for developing business.
21.12. KEYWORDS
Marketing information system, Corporate responsibility research, Conclusive
research, Exploratory research

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LESSON – 22
CONSUMERISM
22.1. INTRODUCTION
Consumer is the centre of all economic activities. In our Indian culture,
Philosophers and Thinkers have thought consumer as a God. He is a kingpin of any
democracy. But unfortunately the Indian consumer has always been neglected in
our economy because of many reasons.
22.2. OBJECTIVES
After studying this lesson, you will understand:
 The meaning and need for consumerism.
 The problems of consumer protection and related legislations.
22.3. CONTENT
22.3.1. Consumerism – Definition and Scope
22.3.2. Need for Consumer Protection
22.3.3. Consumer Movement – Abroad and in India
22.3.4. The Problems of Consumer Protection
22.3.5. Consumer Protection – The Legal Framework
22.3.1. Consumerism – Definition & Scope
Consumerism was thought of as a consumer movement first in mid 1960s. It
was considered as another ism like socialism and communism threatening
capitalism. In simple words, consumerism is a protest of consumers against unfair
business practices and business injustices. It is in fact a social force designed to
protect consumer interests in the market place by organizing consumer pressure on
business. Peter Drucker defines consumerism as follows:
“Consumerism means that the consumer looks upon the manufacturer as
somebody who is interested but who really does not know what the consumers’
realities are. He regards the manufacturer as somebody who has not made the
effort to find out, who does not understand the world which the consumer likes,
and who expects the consumer to be able to make distinctions which the consumer
is neither willing nor able to make”. (“Consumerism in Marketing” – a Speech to the
National Association of Manufacturers, New York, April, 1969).
According to Buskirk and Rothe, consumerism means the organized efforts of
consumers seeking redress, restitution and remedy for the dissatisfaction they have
accumulated in the acquisition of their standard of living. Kotler defines
consumerism as an organized movement of citizens and government to strengthen
the rights and power of the buyers in relation to sellers. G.S. Kamat says,
consumerism is a process through which consumers seek redress for their
dissatisfaction and frustration on the basis of organized efforts and activities.
Consumerism according to former Senator Charles Percy is “a broad public
reaction against bureaucratic neglect and corporate disregard of the public”. Some
others have defined consumerism as policies and activities designed to protect
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consumer rights as they are involved in an exchange relationship with any type of
organisation.
Consumerism now-a-days includes many things within its compass. The term
has come to mean many things to different people. The most common
understanding of consumerism is in reference to protection of consumers privileges
against clear-cut abuses by the seller. This includes cheating and other
malpractices at the market place as well dangers to health and safety of life form
various types of products. What is interesting is that consumerism is also
considered to include protection of consumers against consumers. For example,
smoking is prohibited in auditorium, trains and public buses to avoid nuisance to
other persons from smokers. Now-a-days consumerism has become wide enough to
include protection against environmental pollution and declining quality of physical
environment. The people are greatly concerned maintenance of ecological balance
and conservation of national resources.
22.3.2. Need for Consumer Protection
In a country like India, there is a very great need for consumer protection for a
variety of reasons. Some of the important ones may be highlighted here.
a) A majority of the population is illiterate, ignorant and ill informed. In a vast
country like India, it is very difficult to organize the consumer. The people are not
only backward but also have linguistic, cultural and religious difference which
makes the problem still more intricate.
b) The consumer is economically weak if compared with the producer or the
seller. The producer is able to manipulate the price quality, size, weight, etc. of the
product. He has to depend upon the trade practice of the seller. If the seller
indulges in unfair trade practice, then the consumer needs protection against such
malpractices.
c) The advance of science and technology enables the manufacturers to
produce myriad types of goods. There are varieties of same type of goods produced
by different manufacturers. Though they provide a choice of selection to the buyer
still they have made the goods more complex and complicated making selection
difficult. In such a situation the consume needs guidance which can be provided by
consumer organizations.
d) Advertising is a potent device for sales promotion. But advertising to-day is
highly deceptive. A consumer does not know the real qualities of the advertised
goods. For example, he would not know how one processed butter is better than
another processed butter. He feels confused and hence needs to be guided and
protected.
Thus to prevent ruthless exploitation, we need a forceful, well-organised
consumerism of consumer movement coupled with Government support and
patronage in the form of special legislation. Of course, legislation can protect
consumers only when consumers themselves assert their rights and exert
necessary pressure on the producers, dealers and the Government. Only then the
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prevailing malpractices like profiteering, black-marketing, hoarding, adulteration,

short measures and weights, misleading advertisement, faulty packaging, mail-
order frauds, etc. can be cured or reduced to the minimum.
22.3.3. Consumer Movement – Abroad and in India
Consumerism or consumer movement is a social movement. In the past, all
movements, such as, Independence Movement, Civil Rights Movements, etc. were
the results of social conflicts. So also consumer movement which is likely to be with
us till the conflict facing the consumer is resolved. The social conflict, in the case is
largely owing to rising prices, poor product, shortage, deceptive advertising, etc.
In USA greater education and affluence of the buyers, better communication,
mass marketing and above all, the failure of business to implement the marketing
concept resulted in consumerism raising its head in the 1960’s. The Watchword for
this new militant mood among the American consumers, according to Mrs. Virginia
H. Knauer, special Assistant to the President for Consumer Affairs, was simply “Let
the seller beware, in comparison with the age-old caveat emptor” i.e. Let the buyer
beware. Government’s desire to protect the consumers and help them to arrive at
rational decisions in their selection resulted in excessive control and insistence on
adequate communication to the consumer such as the advertising pack the
statement indicating that smoking may cause cancer. Thus increasing education
and sophistication led to rising public standards of business conduct and social
responsibility through consumer unrest. This was augmented in 1966 by rising
prices. The influential writings by John Kenneth Galbraith, Vance Packard and
Rachel Carson accused big business of wasteful and manipulative prices. John
Kennedy’s Presidential Message of 1962 declared that consumers had the right to
safety, to be informed, to choose and to be heard. Congressional investigations of
certain industries proved embarrassing and finally, Ralph Nader appeared on the
scene to crystallize many of the issues. In course of time, many private consumer
organizations have emerged and several pieces of consumer legislation have been
passed.
In the West, consumerism has emerged after the countries concerned, reached
a level of affluence which is the characteristic of what may be called the post-
industrial society. There was adequate production and distribution of essential as
well as luxury products. The objectives of consumerism under these circumstances
were to seek more information about the merits of competing products and services
and to represent the collective views of consumers in order to influence the
producers.
The movement by now has acquired an international character, with much
strength in Scandinavia, France, Germany and Japan. It has also got underway in
India.
The consumer movement in India is in its infancy and is largely confined to
metropolitan cities like Bombay, Ahmedabad, Hyderabad, etc. The shortages of
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essential consumer products and the inflation of early 1973-74 gave a fillip to the
consumer movement.
As regards the origin of the movement in India, it was in April 1966, that nine
housewives and social workers got together and formed the Consumer Guidance
Society of India (CGSI) to protect the consumer’s interest, To-day the CGSI has over
2,500 members and five branches at Hyderabad, Dandeli, Pune, Kottayam and
Trichur. It is gratifying to note that over the years, CGSI has excelled itself in
publicizing of tests conducted by it on various products edible and electric. There is
also the Consumer Education and Research Centre (CERC) at Ahmedabad. Among
other such organisation Voluntary Organisation in Interest of Consumer Education
(VOICE), Indian Federation of Consumer Organisations (IFCO) and the Society for
Civic Rights are the most notable ones.
22.3.4. The Problems of Consumer Protection
The idea that the consumer is the king in the market place has in reality been
largely discarded and in its place the idea that he is a pawn in the hands of the
business man is a major driving force of consumer movement. Some of the
problems of consumerism are;
First, rising prices of goods have created in customers an attitude to expect
better quality and if it is not forthcoming creates dissatisfaction among them.
Further, inflation in recent times has made purchasing more difficult.
Secondly, there is a large variety of products with increasing element of
complexity because of new and changing technology. This naturally makes the
consumer to expect a perfect product.
In the third place, the spread of education, especially higher education and
rising incomes have tended to intensify consumer movement.
The language of advertising making exaggerated claims about the products
creates an expectation of better products.
There are three agencies for ensuring consumer protection
Self-help., i.e. consumer organisation itself,
Business, by self-regulation and by giving a fair deal to the resellers ad
consumers,
Government, having special Acts and implementing those laws strictly.
The consumer interest in the market place is the focus, rather the heart of
enlightened marketing mix. The business and consumerism both aim at the
protection of consumer business through self-regulation and consumer through
self-help. Consumerism invokes Government assistance when business misbehaves
and fails to fulfill social responsibilities. The problem of consumer protection in the
market can be seen from Fig.1
215
Statutory
Regulation
Consumer
Legislation
Consumer
Protection in the
Market Place
Business Consumerism
Self-Regulation Self-help
Fig. 1: Problem of Consumer Protection in the Market

It is rightly said that self-policing is far more effective and superior or
advantageous than State-policing in the field of distribution. The business
community must take appropriate steps to regulate its conduct and cultivate self-
discipline and self-regulation in the larger national interests. Enduring and positive
improvements in business practices can be brought about by the businessmen
themselves and these changes should be based on the inner will or desire rather
than from external force or discipline.
More and more companies are now creating a consumer affairs department in
charge of consumer adviser directly responsible to the head of the organisation. The
department deals with the consumer problems. It also contributes to the
development of corporate social objectives, programmes to implement or carry out
these objectives and measures to evaluate the programmes. It can also publish
instructional booklets on the use and care of the company products. Further, it can
provide consumer education.
22.3.5. Consumer Protection the Legal Frame Work
In order to protect the consumer interest Government in the recent past have
enacted several statutory legislations (Exhibit–1). These legislations are related to
standardization, grading, packaging and branding, food adulteration, weight and
measure, false advertisement, boarding, profiteering, unfair trade practices, etc. In
fact, to cover-u the consumers problems, the Government passed a comprehensive
legislation i.e. Consumer Protection Act, 1986.
216
Exhibit – 1
1. The Sale of Goods Acts, 1930
2. The Agricultural Produce (Grading and Marking) Act, 1937
3. The Drugs Act, 1940
4. The Drugs and Cosmetic Act, 1946.
The Drugs Control Act, 1950
5. The Prevention of Food Adulteration Act, 1954
6. The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954
7. The Drugs Control Act, 1954
8. The Essential Commodities Act, 1955
9. The Standard Weights and Measures Act, 1956
10. The Display of Prices Order, 1963
11. The Monopolies and Restrictive Trade Practices Act, 1969
12. The Patent Act, 1970
13. The Cigarette (Regulation of Production, Supply and Distribution) Act, 1975
14. The Packaged Commodities Order, 1975
15. The Standards of Weights and Measures Act, 1976. The MRTP (Amendment)
Act. 1984
16. The Environment (Protection) Act, 1986
17. The Consumer Protection Act, 1986
18. The Monopolies and Restrictive Trade Practices (Recognition of Consumer
Association) Rules, 1987
Salient Features of Major Legislations
The Prevention of Food Adulteration Act, 1954: This is a consumer-oriented
legislation designed to protect the health of the public by prohibiting adulteration of
food. An adulterated food article is one is injurious to public health. In the area of
marketing the provisions of this Act influence the product and advertising decision
of companies manufacturing food products. According to this Act manufacturing to
sell, storing, selling, or distributed of adulterated and misbranded food article is
considered to be in injurious to public health.
It is deemed injurious when
 The product quality is not as demanded or claimed.
 It contains an injurious substance.
 Its quality or purity falls below the prescribed standards.
A food product is misbranded when
 It is a deceptive imitation of or resembles an existing product.
 It is falsely stated to be a product of another place or country.
 It makes false claims.
 Its package contains false or misleading information about its contents.
The Act provides elaborate rules about the quality of different food articles and
imposes both civil and criminal liabilities for violation of its provisions.
The Essential Commodities Act, 1955: It is one of the major consumer-oriented
legislations of the country whose object is to control in the interest of the general
public, the production, supply and distribution of trade and commerce in certain
217
commodities declared essential. The Act defines essential commodities and lists a
large number of products included under it. Whenever a company markets these
commodities, the provisions of this Act apply to it and influence its product,
distribution, and pricing decisions.
In 1974, the Act was amended with provision against hoarders, black-
marketers and profiteers. It is made compulsory to display the prices of essential
commodities. The Act imposes both civil and criminal liability on the person for the
contravention of the orders made under it.
The Trade and Merchandise Markets Act, 1958: It is also an important
commercial legislation which influences company’s products and advertising
decision particularly with regard to the use of trade and merchandise marks
registered under this Act. The registration of trade-mark under this Act endows on
its owner the right to its exclusive use and provides legal protection against
infringement of his right on the person(s) infringing the rights of trademark the
owner invites prosecution.
The Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954: It is
an equally important piece of consumer-oriented legislation the provisions of which
influence the advertising decisions of companies marketing drugs for certain
ailments specified in it. It aims to prevent advertisement tending to cause and
ignorant and unwary consumer to resort to self-medication with harmful drugs and
appliances. The Act prohibits advertisements making false claims for the drug.
According to this Act advertisements are prohibited in respect of certain drugs
marketed for the treatment of certain diseases and disorders like prevention of
conception, sexual importance, epilepsy, fits, etc. and others given in the schedule.
As other consumer-oriented legislations, this Act also imposes both civil and
criminal liabilities for the contravention of its provisions.
The Consumer Protection Act, 1986: This Act is the latest development in
safeguarding the economic rights of citizens as consumers. It is based on the
principle of self-help i.e. a citizen must help himself to protect his rights as a
consumer. This is a welcome legislation and redefines the legal relations between
consumers of goods and services and their manufacturers or sellers. The month of
December 1986 can legitimately be considered as the Parliament’s session for
consumer protection when marathon race of legislative activity was undertaken to
protect the interests of consumers.
The most important features of the Act, which is certainly an improvement
over other consumer protection legislations, are that it is applicable even to public
sector enterprise, financial institutions and co-operative societies. Secondly, the Act
applies to all types of goods and services and it extends to Government services like
railway, postal, telephone, telegram, radio, doordarshan, electricity, banks,
insurance, etc. Thus the scope of this piece of legislation is much broader compared
to the earlier ones.
218
The Act establishes two councils viz. the Central Consumer Protection Council
and the State Consumer Protection Councils comprising official and non-official
members to provide a platform for discussing consumer problems and to advise the
concerned Central or State Government on policies and programmes to safeguard
consumers’ interest. They have an advisory role to promote and protect the rights of
consumers which interalia consists of (a) the right to be informed about the quality,
quantity, potency, purity, standard and price of goods, (b) right to be assured
access to a variety of goods at competitive prices; (c) right to be heard at
appropriate forums; (d) right to seek redressal against unfair trade practices; and
(e) right to consumer education.
The Act provides for the establishment of adjudicator bodies at three different
levels – district, state and national. At the bottom, there is the consumer disputes
redressal forum (district forum) in each district to be established by the state
government with prior approval of the Central Government. The orders of the
district forum and state and national commissions are enforceable by them in the
same manner as a decree or order of a court; in case of their failure to enforce the
order, the same may be sent to the court of competent jurisdiction for enforcement.
An order of the national commission, in exercise of its original jurisdiction, is
appealable to the Supreme Court within 30 days of its passing.
The whole objective of the Consumer Protection Act is to speedily redress the
grievances of the consumer and not through long drawn legal practices. The
Redressal Forum may give orders for removal of defects from goods, replacement of
the goods, refund of the price, award of compensation for injury suffered.
The redressal machinery under the Consumer Protection Act, 1986 has been
set in Bihar, Delhi, U.P., Rajasthan, A.P., Orissa, Pondicherry, etc. As said earlier it
is a welcome legislation. However, the Act seems to have been enacted in a great
hurry. Perhaps because of this, some significant aspects could not be covered. For
example, there is no provision for giving interim relief or issuing interim injunction
which may be necessary in some cases.
Again, a large number of administrative and quasi-judicial bodies have been
established under a large number of consumer protection legislation s to exercise
powers in many areas which would also fall within the purview of he present Act.
Efforts should be made to harmonise the functioning of all these courts and
authorities so that one does not hinder the functioning of the other so as to harm
the consume instead of protecting them
The Act acknowledges only six rights of the consumers as pointed out a little
earlier. It completely ignores the right of consumes to a healthy environment. This
is very important in case of pollution control: hence, the right of healthy
environment must be included for better environment.
Whatever may be the lacunae in the Act, it is expected to ensure consumerism
in the country, of course, with the support of the Government and the consumer’s
organisations.
219

1. Need for consumer protection
2. Advertising is a potent device for sales promotion.
1. What do you mean by ‘Consumerism’? Examine its scope.
2. Define Consumerism. Do you feel a need for consumer protection in India?
Why?
3. Write notes on:
a) The Essential Commodities Act.
b) The Prevention of Food Adulteration Act.
4. a) Point out the rights guaranteed under the Consumer Protection Act, 1986.
b) Point out the salient features of C.P. Act, ,1986.
5. Describe the problems that you face ion the market place as a consumer and
suggest how can you protect your interest?
22.6. SUMMARY
Consumer is said to be the king in the market place. Unfortunately, the Indian
consumer suffers from various dishonest practices of the traders and marketers.
Poverty, illiteracy and lack of awareness necessitate for his protection. What is
needed at present is a forceful, well-organized consumer movement coupled with
Government support and patronage in the form of special legislation. The
movement in India is in its infancy.
There are three agencies for ensuring consumer protection viz. Self- help by
consumer organisations themselves, self-regulation by business and the
Government. In order to protect the consumer interest, the Government has
enacted a number of legislations. All these legislations govern standardization,
grading, packaging and branding, and to regulate food adulteration, weights and
measures, unfair trade practices, etc. In 1986 the Government has passed a
comprehensive legislation viz., Consumer Protection Act. This is the latest Act
meant to safeguard the economic rights of citizens as consumers. The principal
feature of the Act is that it is an improvement over the earlier consumer
legislations. It is applicable even to public sector enterprises, financial institutions
and co-operative societies. Secondly, the Act extends to Government services like
railways, postal, telephone, telegram, radio, electricity, insurance, etc. The Act
establishes two council’s viz. The Central Consumer Protection Council and the
State Consumer Protection Councils comprising official and non-official members to
provide a plat-form for discussing consumer problems and to advise the concerned
Central or State Government on policies and programmes to safeguard consumer’s
interest. The whole objective of the C.P. Act, 1986 is to speedily redress the
grievances of the consumer.
220

1. Define consumer
2. Define consumerism
2. International journal of marketing.
22.9. ASSIGNMENTS
1. Trace the origin and development of consumer movement in India and other
countries.
1. Gandhi, J.C. Marketing – A Managerial Introduction, TMH, New Delhi, 1990,
(Chapter – 15).
2. Sahoo, S.C. & P.K. Sinha (Eds), Emerging Trends in Indian Marketing in the
1990s, Academic Foundation, New Delhi, 1991 (Chapter – 4).
3. Sherlekar, S.A. Marketing Management Himalaya, New Delhi, 1993 (Chapter
10 & 11).
As a president of consumer protection council of your town you have decided
to organize a conference on consumer protection, prepare agenda for the meeting
mentioning the speakers and the beneficiaries. Mention the sources of funding this
conference.
22.12. KEYWORDS
Consumerism, Central Consumer Protection council, SCPC, Consumer
redressal, Drugs and magic remedies, Consumer protection act.

221
LESSON – 23
GOVERNMENT AND MARKETING

23.1. INTRODUCTION
India lives in villages and more than 75% of their population lives in villages.
They are mostly poor and illiterate. They lack bargaining power. The Government
has to play its role to protect their interest in the market place. Absence of
collective unity among consumers, excessive presence of middleman, adulteration,
inadequate storage facilities and so on are the major reasons, which warrant
intervention of Government.
23.2. OBJECTIVES
After studying this lesson you will be able to understand.
 The need for government intervention in marketing.
 Important aspects of ISI and AGMARK.
 Salient features of public distribution of essential commodities.
23.3. CONTENT
23.3.1. Need for Government Intervention in Marketing.
23.3.2. Public distribution system
23.3.1. Need for Government Intervention
Marketing decisions are influenced and shaped by a variety of organisational
and environmental factors. This section attempts to study the role played by the
state and law in relation to marketing in India. It describes the nature and causes
of State’s intervention in marketing operation of companies and brings out the
relevant features of major legislations currently in vogue and having an influence in
the marketing decisions. The whole idea of this section is to highlight the role-
played by law as a marketing decision input and to examine to what extent it can
promote consumer movement by protecting the interest of the consumers.
The broad reasons for the influence of state on the marketing decisions of
companies may be put under three categories, viz.
 Commitment to national economic priorities and development strategy.
 Concern for and sympathy with emerging consumerism, and
 The need for regulation of commercial relations amongst citizens of our
country.
The planned development of Indian economy envisaged lying down of economic
priorities in the successive five-year plans. Priorities as laid down in these plans
entailed development of heavy industry and manufacture of capital goods,
development of public sector and regulation of manufacturing operations through a
licensing mechanism. In order to pursue this development strategy, government to
determine what is to be manufactured, how much is to be manufactured and who
will manufacture. In fact, the power of these options is wide enough to shape
business decisions.
222
The influence of government of the marketing decisions may also be attributed

to its concern for and sympathy with the emerging consumerism in India which has
been discussed in the preceding section.
Lastly, Individuals, though powerful, are incapable of forging enforceable
commercial relationships unless there are laws to help them out. If the
businessman earlier shown as the necessary foresight on their own account had
taken with effective and organised steps to build up through voluntary regulation
fair trade norms and practices into the everyday process of industry and trade and
into the exchange relationship between traders and consumers, the need for
enacting consumer legislations would not have arisen. But what’s the real picture?
Just reverse. Government being the representative of this citizen entrusted with
thus task of governing the affairs of the country by legislation and enforcing
relevant laws has enacted certain laws to protect the well being of the consumer
and to safeguard them. A few are dealt with here.
ISI certification
The common has no means to determine the quality of products but to depend
upon the assurances of manufactures. Increasing technical complexities of
consumer goods makes it difficult for the consumers to know the detail of such
goods. In order to protect the consumers against exploitation by trade and industry
the government has taken a number of measures. The ISI mark certification
scheme operated since 1947 by the Indian standards institution (ISI) established by
the government of India aims to protect the consumers against impure, bogus and
sub-standard products, commodities and processes. Industrials units producing
goods conforming to the standards specified by the institution are licensed to use
ISI mark of quality. BIS is the creature of parliament under bureau of Indian
standards Act, 1986 which is another Act of considerable significance to the
consumer movement .one of the major objectives of this Act was to make BIS
another instrument of state to protect and promote consumer interest.
ISI certification mark scheme confers certain benefits to consumers:
1. ISI-marked goods are subject to quality control.
2. ISI mark helps the consumers to choose a standard product.
3. Free replacement of ISI marked products in case they are found to be sub-
standard quality.
4. Protection from the explosion and deception.
5. Assurance of safety against hazards to life and property.
Main Activities of BIS: The bureau of Indian standards, the national standards
body is looking after the consumer’s interest through its two major activities,
namely, standards formulation and certification marketing.
Standards Formulation: BIS is entrusted with the task of formulation and
promotion of standards in all sectors of economy. The product standards prescribes
223
optimum levels of quality, safety and performance of relevant products and

methods of their practical evaluation.
Certification Marketing: the BIS certification marks schemes, operated under
the provision of the BIS Act 1986, and is basically a voluntary scheme wherein
manufacturer are permitted to use the standard mark (ISI) on their product after
ascertaining there conformity to the relevant Indian standards under a well defined
scheme of testing and inspection. The presence of standard mark on product
provides a third party guaranty to the common consumer about its quality .to
provide greater trust to consumer protection and ensure better consumer
satisfaction .the government of India has made BIS certification mandatory for term
of mass consumption and those affecting the health and safety of consumers.
These two major activities of BIS- standardization and certification encompass
all the elements essential for promoting the rights of the common consumer as
enshrined in the consumer protection act, 1986.
The BIS has prepared over 13,000 standards relating to products, process, test
methods, code of practices etc., in variety of fields of fields ranging from agriculture
and food products to electronics and communication. Since its inception the institute
has given 6000 licenses covering 1000 products such as dairy products, food products,
glassware, rubber products, plywood, steel products, cables, motor, fans, cooker,
mixer, gas stove, refrigerator, vests and briefs, safety matches, cement, biscuits, etc.
BIS has established a full-fledged consumer affairs Department to ensure
intensive interaction with and provide service to common consumers and their
organisations.
BIS is also publishing a special feature entitled ‘Consumer News’ in the
‘Standard India’, a monthly journal of BIS. The feature contains write-ups on the
contents or International standard of interest to the consumer and reports the
activities of conferences, seminars and workshops of consumer importance. A reprint
of ‘Consumer News’ is being distributed to about 400 consumer organisations all over
the country so as to achieve as large a readership among the consumer as possible.
This feature is also carried in BIS, Hindi journal ‘manakdoot’.
To create awareness among consumers, regarding Indian Standards and the
certification marks scheme, BIS is carrying out publicity advertisement in
newspaper, radio, television, etc, to the extent possible. Popularization of
certification Marks Scheme with the help of BIS licenses is also being carried out.
BIS participates in seminars, exhibitions and the other programs organised by
consumer, associations and organisations like Directorate of Marketing and
Inspection professional bodies like Institute of standards Engineer (SEI), National
Institute for Reliability, etc.
Agmark
“Agmark” has been derived from the words Agricultural Marketing. According
to the Agricultural produce (Grading and Marketing) Act, 1937 the equality
standards of agricultural-based and animal based produce are determined. Atta,
224
honey, refined ground nut oil, mustard oil, Ghee, spices etc. have been given
AGMARK. Prior to the conferment of AGMARK Certification the Directorate of Sales
and Inspection enquires about the history and status of the organisation,
popularity and experience, etc. While issuing AGMARK label the Directorate or the
officials of State Government remain present. They collect samples and study their
physical and chemical properties. They look-after the processing, packing, etc.
Because of increasing use of AGMARK the exports of agricultural product are
increasing year after year, as a mark of purity and standard quality. Many traders
and manufactures now-a-days used to obtain AGMARK for their saleable produce.
This mark implies that the produce/product is free from adulteration.
The Directorate of Sales and Inspection, Government of India has set up 21
scientific Laboratories and 50 sub-centres all over the country. The Central Agmark
Laboratory is located at Nagpur. If any complaint is received about substandard
product, detail inquiry is taken into hand immediately. And if the consumer has
any complaint about the product bearing AGMARK he can lodge the same with the
nearest Government office or with the directorate of Sale and Inspection. We should
remember that Cy or Bx is prefixed to the number of AGMARK on a product.
23.3.2. Public Distribution System
PDS is concerned with marketing of food grains, sugar, kerosene, i.e. essential
commodities. In each State, a Department of Civil Supplies exists in addition to a
State Civil Supplies Corporation. Other agencies concerned with PDS are Food
Corporation of India and Cooperative Sector. For effective distribution, Distribution,
District Civil Supplies Office at the district level manned with Civil Supplies Officer,
Inspectors and Supervisors operates. Essential commodities are being distributed
through open market as well as controlled retail outlets. The Consumer Card
Holders of different categories get their commodities like wheat, sugar etc. through
these retail outlets.
But a number of problems are witnessed in effective functioning of the PDS. It
is observed except in certain pockets of the country, the public distribution of food
grains has failed to have any impact on rural hunger (Economic Times, 19 May,
1993). The subsidy paid to F.C.I. has been continually increasing. The Commission
on Agricultural Costs and Prices (CACP) has repeatedly reported the failures of
support operations. The cheap food grain policy has resulted in increasingly
adverse term of trade for farmers, sharp decline in capital formation in the farm
sector and reduced growth rate of food grain production. Again, so long as paddy is
required to be converted into rice only by licensed rice mills, more than half of the
cereal production remains shackled, because paddy accounts for nearly 60% of the
cereal production in the country (Economic Times, 19 May, 1993). In the process,
in case of paddy, the benefit of support prices, if any, accrues to the rice millers
and not to farmers, because most of the rice is procured by the government from
rice milling and not from farmers.
225
There are better alternatives to our public distribution system of food grains.
The genuinely poor deserve sympathy and help. The producer in India is suffering,
not because consumers and the taxpayers (in the form of subsidy) are paying less,
but because nearly half of what they are paying is being expropriated by middlemen
official as well as no-official. However, the need for effective intervention by the
state in times of scarcity cannot be minimized. Therefore, reduction in the cost of
food grains distribution and effective interventionary powers in the hands of the
government in times of need, are the two essential features. For better distribution
of food grains of the following steps may be taken.
1. All sorts of controls should be withdrawn.
2. A chain of rural godowns with Warehousing facilities be established and at
least one godown be located in a cluster of 10 to 12 villages.
3. It should be obligatory on the part of all stockiest who which to stock more
than 15 tonnes of food grains, to do so only in specified godowns under
the control of the Central Warehousing Corporation (CWC).
1. Marketing decisions are influenced and shaped by a variety of organizational
and environments factors.
2. Public distribution system with marketing of food grains, sugar, kerosene
i.e. essential commodities.
1. State the need for Government intervention in marketing in India.
2. What is ISI Certification mark? Who confers it and why?
a) AGMARK b) Activities of the BIS.
23.6. SUMMARY
India is a poor country. About 70-75% of its population lives on agriculture.
Per capita income is very low. To protect the interest of the people in a welfare state
like it is vital for the Government to intervene in marketing especially in public
distribution of essential commodities. For quality control the Government has
passed the Bureau of Indian Standards Act, 1986 under which ISI Certification is
conferred on quality products. ISI mark and AGMARK (for agricultural produce)
testify quality. BIS is concerned with standards formulation, certification marking,
and a host of other activities.
The public distribution system for essential commodities has failed to deliver
the results. In case of paddy, the benefit of support prices, if any, is accruing to the
rice millers and not to farmers. Reduction in the cost of food grains distribution and
effective interventionary powers in the hands of the Government in times of need
226
shall go a long way to help and aid the poor. A chain of rural godowns with
warehousing facilities be established for effective distribution.
1. What is ISI certification?
2. Define Agmark.
23.9. ASSIGNMENTS
1. What is the importance of Public Distribution System? What major problems
exist in the present system? What measures do you suggest for better
implementation of the PDs?
1. Gandhi J.C. Marketing Management – A Managerial Introduction, THM, New
Delhi, 1990.
2. Ramaswamy, V.S. and Namakumari, Marketing Management Mcmillan, New
Delhi, 1991.
3. Sahoo, S.C. & P.K. Sinha, Emerging Trends in Indian Marketing in the 90s,
Academic Foundation, New Delhi, 1991.
Comment on the influence of State Government on the marketing decisions of
companies.
23.12. KEYWORDS
ISI, Agmark, PDS

227
LESSON – 24
THE INDIAN MARKETING ENVIRONMENT

24.1. INTRODUCTION
Environment comprises two aspects viz., internal and external. External
environment is influenced by uncontrollable forces, viz., demography, economic,
political, legal, technological, demand and competitive scenario. A customer-
oriented organization has twin objectives - economic performance i.e. profitability
and social performance i.e. satisfaction of all interested parties, such as customer,
citizen, employees and the government with this background let us examine the
marketing environment prevailing in India and also the changes that are likely to
take place in the next few years.
24.2. OBJECTIVES
After studying this lesson you would be able to understand the following
 The salient features of the marketing environment and
 Ethics in marketing
24.3 CONTENT
24.3.1. Marketing Environment
24.3.2. Ethics in Marketing
24.3.1. Marketing Environment
Demographics
India is the World’s second largest customer base and adding to the
population, majority of them are in the age bracket of 25-50, the spending years,
this bracket has a maximum discretionary income and hence the target of all
produces creation in nuclear family is changing the spending habits and its adding
to the spending. Multi-income households are increasing. The population is looking
upward and is better educated, better informed and quality conscious. The mobility
toward urban area has been trend. The Nagars are becoming Mahanagars (like
Colus becoming Mahacolos). A middle class with an enhanced purchasing power
might be through different easy purchase schemes and support from the banks is
growing in its size. This is the segment marketers are vying for.
Traditionally, India is a rural-based country. About 75% of the population lives
in villages. They account for only 35% of the total spending. The change in media
scene has changed their spending and producers are looking form ward them their
ideal consumption basket is changing. They are no more as inclined to buy land
and gold as they two-wheelers, etc. With better facilities through Green and White
Revolutions and now with the new economic policy of the Government to channelise
50% investment into rural areas the number of developing and urban analogous
villages will rises rapidly and there is going to be an insurage of their purchasing
power.
228
Psychographics
The change to nuclear family has led to democratic purchase decisions with
housewife exerting greater influence. The importance of working women is leading
to a more prosperous and hedonist like style (Sahoo and Sinha, Emerging Trends in
Indian Marketing in the 90’s Academic Foundation, New Delhi, 1991, p.31). The
increasing literacy rate and exposure to the World around have given the
population a multi-culture orientation. The household is now made of electronic
gadgets that were once dreams in Indian homes.
The middle class is a typical phenomenon. Its life style has been changed by
the convenient payment alternative and increased discretionary income that help
realize its dreams. The fact that even the entrepreneurs are young and dynamic has
changed the industry scene and the market is proliferated with product, which
have takers. The children want ice creams and chocolates and that too only Kwality
and Cadbury’s. Such discretion was never seen before. The child is tending to be
the influencer, if not the decider. Even the villages are affected by the process of
change. Hero Honda and ONIDA have become household names.
The population is no more homogenous. Every individual is being treated as a
segment. The benefit segmentation will give way to occasion segmentation, as seen
in readymade garments being offered as casual or formal wear.
Products
The liberalization of the Indian economy with regard to technology transfer
gave an impetus to the World’s best technology flowing into the country. One of the
main reasons for the change in the life style of the Indian population is the
proliferation of products generated by the technology inflow. Indian products are in
on way less those available outside. In fact, the outflow of such products is
increasing day by day.
An upsurge is seen in the consumer products markets i.e. durables and
consumables/non-durables. The market that was characterised by a handful of
brands and one main brand is a scene of the post. Electronic gadgets have become
a part of our life. Personal transport is a necessity. Dependence on public transport
will increase due to the distance between work place and home, but a private
transport is a necessity. Cycle will still be the maximum selling vehicle. The number
of two wheelers and car owners will also increase.
On the organisational front, the office automation drive will be faster and
surer. A major shift in the product policies has been the emergence of services as a
separate, and perhaps a major sector. The technological advancement has given the
customers better quality products, but, in the process, the products have become
complex in nature requiring expert knowledge to maintain and repair.
The strategy is moving from Product Posting to Brand Positioning. The brand
image is gaining primacy. Family brand is not likely to be popular but each brand
will have a shelter of a Corporate Image. Due to the fast spread of technology the
229
distinctiveness of the product will be short-lived. However, the products which are
meant for prestige only will be on the rise as the market for the riches is growing.
Role of price
The Indian market is experiencing a peculiar phenomenon now-a-days. The
consumer durables have good image when priced higher, as in the case of TVs. on
the other hand. PCs marketers are cutting prices like anything and if the response
to the price cut by electronic corporation is any indication of the things come. PCs
are going to be still cheaper. These are clear indication that price is no longer a
cost-related decision .the companies which look to price as a cost-related
determination well have to change to the non-related factors. Comparatively the
new products are expected to be offered at much less price than to-day.
Distribution
Distribution calls for making available the product in every corner of the
market this is especially true with low involvement products (lips). Where there is a
lot of impulse buying .customers are more likely to go for conveniently available
brands .in such a situation. Distribution plays a vital role.
The retail marketing scenario is changing it is no more a dull exercise .the
shops are no having good get ups .the salesmen are becoming professional. The
personal service shops will make way for the departmental stores where consumers
will find it convenient and feel more free to look, pick and choose. They will be
selling at a premium, customized and specialty product only one can observe a
whole lot of addition to the service rendered at the retail outlets, viz., credit cards,
home deliveries, asserted services etc.
The dealer motivation will take a turn towards non-monetary incentive.
Commission will stay as important as it is, but services like shop displays, contests,
awards, co-operative advertising will form more important parts of motivation. The
younger generation is taking over the business at the retail/wholesale outlets. They
are dynamic, professional and highly forward looking. The marketing principles,
which are restricted to the corporate level, will also come down to retailers. The
trend shows an increase in the retailer’s advertisements of the product than it was
a decade ago. This will be on the rise. In short, retail outlet will be another profit
centre of the company and the concept of vertical marketing system (VSM) will
catch on. What is seen is that the manufacturer has started to make the
middlemen a partner in its marketing efforts.
Promotion
The 1980s have been regarded by many as a watershed decade .They saw the
beginning of the positioning Era, comparative advertising, political advertising, the
growing importance of shelf space at retail outlets, the importance of rural markets
and the beginning of Direct Marketing. The nineties now see the crystallization of
many of these changes and the beginnings of new trends.
Comparative advertising is the natural manifestation of a highly competitive
environment. It has become a recent phenomenon in India. The first real
230
comparative advertising in India was released more than a decade ago by Nutramul
when it compared prices of competing brands. That was an isolated case then.
Today, the cases of HCL copiers Vs. Modi Xerox, TVS Suzuki Vs. Hero Honda,
Nirma Vs. Surf, Nirma Vs. Rin, and BPL Vs. Videocon are clear indications that
comparative advertising is here to stay.
One of the most important objectives of any Marketing Manager during the
recent years was the procurement of a spot on the retailer’s shelf so that the
consumer can see if easily and getting the retailer to push it just in case the
consumer dose not spot it. Thus, incentives and margins for retailers and dealers
become an important variable to be tackled. Thus dealer display contests,
aggressive merchandising and efficient retailing have become the fulcrum around
which marketing plans revolve. This is going to be more basic in the year to come.
Companies like HLL P & G, Nestle, etc. go for regular booking, whereas a few
Godrej, etc. use the space only in the case of a launch or when there has been an
unforeseen change in sales. The rates of the display depend on the location of the
shop, the place of display in the shop and the size of the display.
It is observed that roughly 40% of the consumers buy on impulse. This
phenomenon can be strategically exploited through point-of-purchase (POP)
displays. POP promotion consists of three major tasks viz,
 Preparing the display materials, like tangles, danglers, stickers, etc.
 Retailer motivation through citation, cash incentives etc.
 Asquiring shelf space for the company’s products.
Budget outlays in various media and sales promotion in particular have shown
increases. The advertisers no longer blindly pump in major portions of their
advertising budget into television.
In the rural areas, hoardings and wall paintings will continue to be the leading
media, TV exhibitions and fairs are acquiring more popularity in rural areas. Of
course, these have already become a common scene in urban areas particularly for
industrial and household goods.
Industrial advertising is becoming more corporate Image Building through
social and ecological concerns shown by the companies.
The Hindustani Advertisements (Vernaculars written in English) is now-a-days
proving effective (Binnines, Co-Cool, Vicks, etc.)
24.3.2. Ethics in Marketing
Modern business is regarded as an integral component of society. Today
society is expecting much more from business than in the past. It demands what is
quality of life management.
In addition to economic performance, modern business must demonstrate
social awareness or sensitivity and social performance. Ethics in marketing means
an objective concern for the consumers or users of products and services i.e. for the
231
welfare of society that prevent or limits individuals and corporate behavior from
unethical practices, such as unfair trade practices, restrictive trade practices,
pollution of environment and so on.
Following the principle of societal marketing, an enlightened company makes
marketing decisions by considering consumers’ wants the company’s requirements
consumer’s long-run interest, and society long-run interest. Alert companies view
societal problems as opportunities modern management is faced by critical public,
challenging customers, powerful labour, exacting shareholders; hence modern
business to demonstrate not only economic efficiency but also consumer Sensitivity
and social awareness.
Criticism against marketing
Many types of criticism have been leveled against marketing. These are in
general in relation to inefficiencies or unethical marketing practices. It is alleged
that marketing misallocates scarce economic resources. In an economy of scarcity
like that of ours, this assumes special significance. The production of lakhs of cars,
TVs, two-wheelers, refrigerators music system and only hundreds of new class
rooms, a few public hospital, a few road and such other socially desirable goods
and services can be noting but a serious misallocation.
Secondly, marketing also involves too much competitive promotion. For
example, if HLL spends lakhs of rupees in promoting its soaps and detergents TATA
spends more than HLL’S investment in promotion to promoting its brands .in the
process the prices charged for both the rival brands would have to be higher than
necessary. As a result the consumer purchasing power is diverted from more
worthwhile expenditure.
In the third place marketing is also considered wasteful. it is felt that there are
too many middlemen especially in retail trade.
Again, marketing is said to create too much materialistic and artificial values.
Most consumer wants are acquired or imposed. Advertising and sales promotion
encourages consumers to place too much emphasis on the satisfaction of material
wants and to substitute material values for moral values. Fraudulent and deceptive
means to promotion exploit innocent consumers and always create after-sale
doubts and frustration.
Principles of Public Policy towards Marketing
Marketing executives of the 1990s and beyond 2000 AD will face many
challenges. Companies that are able to create new values and practice socially
responsible marketing will have a world to conquer (Kotlet, P. 642). Each company
has to develop corporate marketing ethics policies – broad guidelines that everyone
in the organization must follow. These polices should cover distributor relations,
advertising standards, customer service, pricing, product development and general
ethical standards. But the question is what principle should guide companies and
marketing managers on issue of ethics and social responsibility?
232
One philosophy is that such issues are decided by the free market and legal
system. Under this principle, companies and their managers are not responsible for
making moral judgments. Companies can in good conscience do whatever the
system allows.
A second philosophy puts responsibility not on the system but in the hands of
individual companies and managers. This means that a company should have a
‘social conscience’. Companies and marketing managers should apply high
standards of ethics and morality when making corporate decisions. Each company
must work out a philosophy of socially responsible and ethical behaviour. It should
adopt its own code of ethics. A model is portrayed below in Exhibit-1.
The General Dynamics ethics program is considered the most comprehensive in
the industry. And little wonder it was put together as general from the Pentagon looked
on. The program came about after charged that the company had deliberately over
billed the government on defense contracts.
Now at General Dynamics, a committee of board members reviews its ethics
policies, and a corporate ethics director and steering group execute the program. The
company has set up hot lines that let any employee get instant advice on job-related
ethical issues and has given each employee a wallet card listing a toll-free number to
report suspected wrongdoing. Nearly all employees have attended workshops; those for
sales people cover such topics as expense accounts and supplier relations.
The company also has a 20 page code of ethics that tells employees in detail how
to conduct themselves. Here are some examples of rules for sales people:
 If it becomes clear that the company must engage in unethical or illegal
activity to win a contract, it will not pursue that business further.
 To prevent hidden interpretations or understandings, all information provided
relating to products and services should be clear and concise.
 Receiving or soliciting gifts, entertainment, or anything else of value is
prohibited.
 In countries where common practices, indicate acceptance of conduct lower
than that to which General Dynamics aspires, sales people will follow the
company’s standards.
 Under no circumstances may an employee offer or give anything to customers
or their representatives in an effort to influence them.
Exhibit–1: The General Dynamics Ethics Program
Source: Kotler, Philip, and G.Armstrong Principle of Marketing, PHI, New
Delhi, 1992, p.643.
A number of principles that might guide the formulation of public policy
toward marketing may be adopted. The important ones may be enumerated in brief.
1. The Principle of Consumer and Procedure Freedom
As far as practicable marketing, decisions should be made by consumers and
producers under freedom. Marketing freedom is essential to enable the marketing
system to deliver a high standard of living. Freedom for producers and consumers
233
is the foundation of a dynamic marketing programme. This leads to greater

fulfillment through a closer matching of products to desires.
2. The Principle of Meeting Basic Needs
Marketing should serve both affluent as well as disadvantaged ones. Certain
people may lack purchasing power and may to without needed goods and services,
which ultimately cause harm to their physical and psychological well-being. Hence,
it should endeavour to meet the basic needs of all people and all people should
share to some extent in the standard of living it creates.
3. The principle of Economic Efficiency
Marketing must strive to supply goods and services efficiently and at low
prices.
The other principles of public policy which go to shape marketing ethics are (a)
the principle of innovation, (b) the principle of consumer education and information
and the principle of consumer protection.
Marketing environment
1. Examine the recent changes in the Indian Marketing environment.
2. a) What changes
3. do you observe in the demographics and psychographics of the India
Consumers?
b) Distinguish between Product Positioning and Brand Positioning.
4. a) What changes do you witness in the Indian Market so far as products are
concerned?
b) Write a note on the promotional scenario in the Indian Market.
5. What is ethics in Marketing? What criticisms are leveled against it?
6. State the important principles of public policy in relation to marketing.
24.6. SUMMARY
Over 3/4th of the country’s population are in their spending years and the
emergence of nuclear family has changed the spending habits. The customer-
population is becoming educated, better informed and quality conscious. They will
have greater purchasing power. The Indian market witnesses the proliferation of
products service sector is emerging as a major sector. Product positioning is taking
a backseat. Brand positioning is coming up. A whole lot of addition to the services
at the retail outlets such as Credit Cards, Home Deliveries, etc. has become
common. POP displays and personalized marketing are being emphasized. Shop
displays, contests, cooperative advertisements etc. are forming an important part of
dealer promotion. In rural areas, hoardings and wall paintings are becoming a
leading media. Exhibitions and fairs are common in urban areas for promoting the
234
products. Marketing is expected to become more consumer-based with an added

social concern.
It is alleged that marketing misallocates resources. It involves too much of
competitive promotion. The marketers at times forget their social responsibilities.
Promotional efforts often are offensive, misleading and untruthful. It is high time
that the companies and marketers must follow a code of ethics guided by certain
principles of public policy.
1. Define environment.
2. What is promotion?
24.9. ASSIGNMENTS
1. What factors would influence the willingness and ability of consumers to buy
each of the following products
a) Mobile phone
b) DVD player
c) Air cooler
1. Kotler, P & Gary Armstrong, Principles of Marketing, PHI, New Delhi, 1992.
2. Mishra M.N. Sales Promotion and Advertising Management, Himalaya, New
Delhi, 1994.
3. Sharlekar S.A. Marketing Management, Himalaya, New Delhi, 1993.
If you were the marketer for a new brand of cool drink to be introduced in
India. What information on competition will you collect and how will you go about
searching for this information?
24.12. KEYWORDS
Impact of price, Psychographics

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023E1140

Master of Commerce (M.Com.)

Dr. K. Govindarajan Dr. R. Elangovan

UNIT - I : Introduciton To Marketing

Marketing – Definition -Importance – Concepts I Marketing –Marketing

UNITS - II : Product Planning and Development

Product – Meaning –Classification of Goods –Products Planning and

UNITS - III : Pricing and Promotion

Meaning and Objectives of Pricing – Pricing Policies and Strategies –Pricing

UNITS - IV : Channels Of Distribution

Distribution –Selection of Channel of distribution – Wholesalers and retailers

Consumerism –Problems of consumer protection – Government and

Lesson Title Page

1 Marketing Definition and Importance 01

6 Market Segmentation, Market Targeting and Product

MARKETING: DEFINITION AND IMPORTANCE

the point of consumption. Physical movement of goods is the point of consumption.

It must be considered a principal reason for corporate existence. The modern

performed by a large number of individuals or institutions. It is said that roughly

not firm, but fluctuating or changing. Hence, in order to run a business

2.3.1.2. Production Concept

counteracts the temptations of short-sighted management attitudes, by its

2.5. INTEXT QUESTIONS

MARKETING MANAGEMENT TASKS

11. Post-sales servicing during the warranty period.

qualitative aspects of consumer demand such as personality, attitudes, motivation,

product planning, price fixing, and promotion policies of a business enterprise.

aimed at accelerating the country’s economic development, as a fall-out effect, the

6. Competition: Although price competition is still present particularly in the

3. Many organisations make conscious change in their objectives; and when

3. Horizontal integration: Horizontal integration consists of a company’s

To the extent possible, objectives should be stated in quantitative or

1. Market segmentation: Market segmentation is the basic recognition the every

REFERENCE BOOKS (UNIT 1)

MARKET SEGMENTATION, MARKET TARGETING AND

6.3.2. Benefits of Segmentation

Stage of Readiness: At any point of time, there is a distribution of people in

In addition to the segmentation on the basis of premium vs. popular groups,

Limca is positioned as a thirst-quenching soft drink. Rasna is positioned on

BUYER (CONSUMER) BEHAVIOUR

Every organism has innate physiological drives connected with survival.

Reference group influences consumption behaviour most strongly in those

3. Group Influence on Buyer Behaviour: Actually group influence on buyer

through a small number of outlets in potential markets. They have a selective

8.3.1. Uses of Sales Forecast

perspective planning targets in the different sectors of the national economy.

techniques range from uninformed guesses of the executives to highly sophisticated

into company sales forecast enquires considerable expertise. By a detailed

Next year's sales 

10. Time-series Analysis: It is a common device of mathematical projections of

4. Market share of each firm in the industry with break-up of sales by

8.7. TERIMAL EXERCISES

9.3.1. Product Variables

9.3.9. Management of Marketing Mix

9.4. REVISION POINTS

10.3.1. Importance of the Product

The Customised Product

3. Societal Dimensions: To the society salutary products (having good effect in

It is to be understood that product policies do not provide readymade answers