Marketing Management Merged

KARNATAKA STATE OPEN UNIVERSITY
Mukthagangothri, Mysore - 570 006.
DEPARTMENT OF STUDIES AND RESEARCH IN MANAGEMENT

MBHC - 2.3
MARKETING MANAGEMENT
BLOCK -1
CONCEPTS OF MARKETING
UNIT - 1
INTRODUCTION TO MARKETING 01 - 12
UNIT - 2
MARKETING MANAGEMENT 13 - 22
UNIT - 3
MARKETING CONCEPTS 23 - 31
UNIT - 4
TRENDS IN MARKETING 32 - 64
BLOCK-2
MARKETING ANALYSIS AND CONSUMER BEHAVIOUR
UNIT - 5
MARKETING PLANNING 65 - 85
UNIT - 6
CONSUMER BEHAVIOUR 86 - 96
UNIT - 7
MARKETING RESEARCH 97 - 106
UNIT - 8
MARKET SEGMENTATION 107 - 121
1
BLOCK - 3
PRODUCT AND PRICING DECISION
UNIT - 9
CONCEPT OF A PRODUCT -MAJOR PRODUCT DECISION
- PRODUCT LINE AND PRODUCT MIX 122-136
UNIT - 10
BRANDING, PACKAGING AND LABELLING 137-151
UNIT - 11
PRODUCT LIFE CYCLE, NEW PRODUCT DEVELOPMENT 152-167
UNIT - 12
PRICING DECISIONS- FACTORS AFFECTING PRICE
DETERMINATION, PRICING METHODS AND TECHNIQUES,
PRICING POLICIES AND STRATEGIES 168-190
BLOCK - 4
DISTRIBUTION AND PROMOTIONAL STRATEGIES
UNIT - 13
DISTRIBUTION AND PROMOTIONAL STRATEGIES 191-202
UNIT - 14
DIRECT MARKETING - RETAIL MARKETING 203-212
UNIT - 15
WHOLESALING 213-223
UNIT - 16
PROMOTION DECISION 224-234
2
CREDIT PAGE
Programme Name : MBA Year/Semester : 1st Year, 2nd Semester Block No: 1 to 4
Course Name : Marketing Management Credit : 04 Units No: 1 to 16

Course Design Expert Committee
Prof. Vidya Shankar
Vice-Chancellor Chairman
Karnataka State Open University
Mukthagangothri, Mysore-06
Prof. Kamble Ashok

Dean (Academic) Member
Mukthagangothri, Mysore-06
Dr. Savitha P
Chairperson Member
Assistant Professor & Research Guide,
DOS & R in Management
KSOU, Mukthagangothri,
Mysore-06
Prof. C. Mahadevamurthy
Professor & Course Co-ordinator Member
Mysore-06
Dr. Rajeshwari H
BOS Chairperson Member
Mysore-06
Dr. Savitha P
Chairperson Member Convener
Mysore-06
3
Editorial Committee
Dr. Rajeshwari H BOS Prof. S. J. Manjunath External
BOS Chairperson Chairperson Professor Subject
DOS & R in Management & BIMS, University of Mysore Expert
KSOU, Mukthagangothri, Member Manasagangotri &
Mysore-06 Mysore Member
Prof. C. Mahadevamurthy Internal Dr. Savitha P Department

Professor, Expert Chairperson Chairperson
DOS & R in Management & Assistant Professor &
KSOU, Mukthagangothri, Member DOS & R in Management Member
Mysore-06 KSOU, Mukthagangothri, Convener
Mysore-06
Course Writers Course Editors
Sri. Siraj Basha R. Block - 1 Prof. Mahadevamurthy C.
Assistant Professor (Units 1 to 4) Professor
DOS & R in Management DOS & R in Management
Karanataka State Open University Karanataka State Open University
Mukthagangothri, Mysore - 570006 Mukthagangothri, Mysore - 570006
Prathibha Jenefier Block - 2 Sri. Siraj Basha R.

Assistant Professor (Units 5 to 8) Assistant Professor
Department of Management DOS & R in Management
Mahajan’s PG Center Karanataka State Open University
Mysore Mukthagangothri, Mysore - 570006
Prof. Mustrairy Begum Block - 3 Sri. Siraj Basha R.

Professor, (Units 9 to 12) Assistant Professor
Mangalore University Karanataka State Open University
Konaje, Mangalore Mukthagangothri, Mysore - 570006
Dr. P. Renuka Murthy Block - 4 Sri. Siraj Basha R.

Professor (Units 13 to 16) Assistant Professor
VTU, Regional Center Karanataka State Open University
Mysore Mukthagangothri, Mysore - 570006
4
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Registrar
Mukthagangothri, Mysuru - 570006
Developed by the Department of Studies and Research in Management, KSOU, under
the guidance of Dean (Academic), KSOU, Mysuru
Karnataka State Open University, January-2022
All rights reserved. No part of this work may be reproduced in any form, or any other means,
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5
BLOCK - 1 : CONCEPTS OF MARKETING
Marketing Management encompasses all factors that influence a company’s ability to deliver
value to customers. In the present scenario marketing has changed the world; marketing has
become an integral part of management. Marketing management guides and advices
management at every step. Marketing management not only increases efficiency of
management, but also increases the efficiency of an organization as a whole.
In this course, there are four blocks which consists of sixteen units. Each block has
been scheduled in a manner so as to enable the student to understand the content easily. Each
unit in a block having its own structure and begins with the learning objectives, so that learner
knows as to what he/she required to learn from the unit.
In this block we are going to study marketing management basis concepts and its
functions. This block explain different between marketing and selling and recent trends in
marketing management.
This block consists of four units. They are,
Unit 1: Introduction to Marketing
Unit 2: Marketing Management
Unit 3: Marketing Concepts
Unit 4: Trends in Marketing
BLOCK - 2 : MARKETING ANALYSIS AND CONSUMER BEHAVIOR
In the previous block, we have learned marketing management, its functions, objectives
and recent trends in marketing. In this block, we are going to learn marketing planning and its
process, concept of marketing environment and its factors. This block explains the concept
of consumer behavior, buying centric role, buyer behavior, models of buyer behavior.
This block also explains the marketing research, its objectives and scope of marketing
research. It also discusses steps in marketing research. This block also deals with market
segmentation and its bases.
This block is classified into four units. They are,
Unit 5: Marketing Planning
Unit 6: Consumer Behavior
Unit 7: Marketing Research
Unit 8: Market Segmentation
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BLOCK - 3 : PRODUCT AND PRICING DECISION
In the previous block, we have discussed marketing planning, its process and market-
ing environment. We have also discussed consumer behavior and its factors affecting con-
sumer behavior, marketing research and market segmentation. In this block, we speak on
concepts of product and product classes. We are also going to discuss brand, branding, im-
portance of branding, uses of branding, packaging and its uses. Packing details and role.
In this block, we are going to study labeling and its importance. We also discuss new
product development and its phases of new product development. This block will also speak
on product life cycle and its strategies, pricing, pricing decision and factors of pricing and
pricing strategies.
This block is divided into four units. They are,
Unit 9: Concept of product, product decision-line and mix
Unit 10: Branding, Packaging and Labeling
Unit 11: Product life cycle, New product development
Unit 12: Pricing Decision- Factors affecting Price determination, Pricing Methods and tech-
niques, Pricing Policies and Strategies.
BLOCK - 4 : DISTRIBUTION AND PROMOTIONAL STRATEGIES
In the previous block, we have learnt about product, product decision, product life
cycle, new product development, product diversification and pricing decision. In this block,
we are going to learn channel of distribution, its features and functions of channel of
distributions.
This block speaks on direct marketing, features and benefits. It also speaks on retail
classification, wholesaling and its functions. This block also speaks on promotion and
promotion decisions.
This block is comprises of four units. They are,

Unit 13: Distribution and Promotional Strategies
Unit 14: Direct Marketing, Retail Marketing
Unit 15: Wholesaling
Unit 16: Promotion Decisions
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BLOCK 1: CONCEPTS OF MARKETING
UNIT-1: INTRODUCTION TO MARKETING
STRUCTURE
1.0 Objectives
1.1 Introduction
1.2 Meaning/Definition of Marketing
1.3 Origin of Marketing
1.4 Nature and Scope of Marketing
1.5 Functions of Marketing
1.6 Objectives of Marketing
1.7 Summary
1.8 Key Words
1.9 Self Assessment Questions
1.10 References
1
1.0 OBJECTIVES
After studying this unit, you should be able to:
• Define Marketing
• Explain the origin of Marketing
• Discuss the nature and scope of Marketing
• Explain the functions of Marketing
• Bring out the objectives of Marketing
1.1 INTRODUCTION
In today’s world of marketing, everywhere you go you are being marketed to in
one form or another. Marketing is with you each second of your walking life. From
morning to night you are exposed to thousands of marketing messages everyday.
Marketing is something that affects you even though you may not necessarily be
conscious of it.
Many thinking firms deliberate, from time to time, about what marketing actually
means to them. Firms have been known to be very successful without having a complex
marketing organization. On the other hand, some companies have been known to possess
a comprehensive marketing department, supported by a myriad of sub activities belonging
to the marketing function, and yet fail to achieve excellence.
Marketing is one of the concepts in management studies that is often difficult to
define. Marketing is the management process responsible for identifying, anticipating
and satisfying customer requirement profitably. Marketing deals with customer. Creating
customer value and satisfaction are the heart of modern marketing thinking and practice.
Sound marketing is critical to the success of any organization- large or small, profit or
non profit, domestic or global. Today marketing must be understood not in the old sense
of making a sale- “telling and selling” but in the new sense of satisfying customer needs.
If the marketer does a good job of understanding consumer needs, develops products
that provide superior value, and price, distributes and promotes them effectively, these
products will sell very easily. Marketing occurs when people decide to satisfy needs and
wants through exchange. ‘The concept of exchange and relationship lead to the concept
of a market. The concept of markets finally brings us to the concepts of marketing.
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1.2 MEANING AND DEFINITION OF MARKETING
Marketing means managing market to bring about exchanges and relationships
for the purpose of creating value and satisfying needs and wants. In other words marketing
is a process by which individuals and groups obtain what they need and want by creating
and exchanging products and value with others.
Marketing is the process of communicating the value of a product or service to
customers, for the purpose of selling that product or service.
Marketing can be looked at as an organizational function and a set of processes
for creating, delivering and communicating value to customers, and customer relationship
management that also benefits the organization. Marketing is the science of choosing
target markets through market analysis and market segmentation, as well as understanding
consumer behavior and providing superior customer value. From a societal point of view,
marketing is the link between a society’s material requirements and its economic patterns
of response. Marketing satisfies these needs and wants through exchange processes and
building long term relationships.
According to American Marketing Association (2004) - “Marketing is an
organizational function and set of processes for creating, communicating and delivering
value to customers and for managing relationships in a way that benefits both the
organization and the stakeholder.”
AMA (1960) - “Marketing is the performance of business activities that direct
the flow of goods and services from producer to consumer or user.”
Cundiff and still
“Marketing is the business process by which products are matched with market
and through which transfers of ownership are affected.”
According to Eldridge (1970) - “Marketing is the combination of activities de-
signed to produce profit through ascertaining, creating, stimulating, and satisfying the
needs and/or wants of a selected segment of the market.”
According to Kotler (2000) - “A societal process by which individuals and groups
obtain what they need and want through creating, offering, and freely exchanging prod-
ucts and services of value with others.”
H.L Hansen
“Marketing is the process of discovering and translating consumer wants into
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products and services and then in turn making it possible for more and more people to
enjoy more and more of these products and services.”
William J Stanton
“Marketing is a total system of interacting business activities designed to plan,
price, promotes and distribute want satisfying products to target market to achieve orga-
nizational objectives.”
 Business activities should be market oriented or customer oriented
 Customer wants to be recognized and satisfied effectively.
 Marketing is a dynamic business process.
 Marketing activities start with the generation of a product idea and end only
after the customer’s wants are completely satisfied.
 Marketing must maximize profitable sales over the long run in order to be
successful business
1.3 ORIGIN OF MARKETING
Hundred years ago, most firm were production-oriented, i.e... The manufactures
focused on production of quality products and then looked for people to purchase them.
With technology transformation, the emphasis shifted to an effective sales force to find
customer for their growing output. After 1950, the shift to marketing was so emphatic
that the manufacturers first took into consideration the customer’s wants and then
manufactured their goods accordingly.
Marketing has come a long way being recognized as a function of an organization
in India. Marketing is such a type of function which is used by all types of organizations.
Marketing is used for customer satisfaction and customer service plays a vital role in
the economy.
The origins of the concept of marketing have their roots with the Italian economist
Giancarlo Pallavicini in 1959. These roots are accompanied by the initial in-depth market
research, constituting the first instruments of what became the modern marketing,
resumed and developed at a later time by Philip Kotler. Giancarlo Pallavicini introduces
the following definitions: Marketing is defined as a social and managerial process
designed to meet the needs and requirements of consumers through the processes of
creating and exchanging products and values. It is the art and science of identifying,
creating and delivering value to meet the needs of a target market, making a profit:
delivery of satisfaction at a price.
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1.4 NATURE AND SCOPE OF MARKETING
Nature of Marketing:
1. Marketing is an Economic Function
Marketing embraces all the business activities involved in getting goods and ser-
vices, from the hands of producers into the hands of final consumers. The business steps
through which goods progress on their way to final consumers is the concern of market-
ing.
2. Marketing is a Legal Process by which Ownership Transfers
In the process of marketing the ownership of goods transfers from seller to the
purchaser or from roducer to the end user.
3. Marketing is a System of Interacting Business Activities
Marketing is that process through which a business enterprise, institution, or
organization interacts with the customers and stakeholders with the objective to earn
profit, satisfy customers, and manage relationship. It is the performance of business
activities that direct the flow of goods and services from producer to consumer or user.
4. Marketing is a Managerial function
According to managerial or systems approach - “Marketing is the combination of
activities designed to produce profit through ascertaining, creating, stimulating, and sat-
isfying the needs and/or wants of a selected segment of the market.”
According to this approach the emphasis is on how the individual organization
processes marketing and develops the strategic dimensions of marketing activities.
5. Marketing is a social process
Marketing is the delivery of a standard of living to society. According to
Cunningham and Cunningham (1981) societal marketing performs three essential func-
tions:-
• Knowing and understanding the consumer’s changing needs and wants;
• Efficiently and effectively managing the supply and demand of products and ser-
vices; and
• Efficient provision of distribution and payment processing systems.
6. Marketing is a philosophy based on consumer orientation and satisfaction
7. Marketing had dual objectives - profit making and consumer satisfaction
5
Nature of Marketing evolves from its multidisciplinary coverage of
activities which is as follow:
1. Dynamic Process: Marketing is an ongoing activity which does not stop at any step.
After finding customer’s needs and wants it needs to develop such products or services
which can satisfy these needs and after this there is need to advertising, promotion,
distribution, etc the process goes on.
2. Customer Oriented: Marketing is customer oriented. Marketing is the process of
finding needs and wants of customers and satisfying those needs profitably.
3. All Encompassing: Marketing is all encompassing, it is not a single process it in-
cludes production planning, research, advertising, financial management, budgeting, sell-
ing, etc.
4. Integrating: It integrates all the departments of an enterprise be it production, fi-
nance, IT, HR, etc.
5. Creative: Marketing is creative in nature; it looks out for new ideas, views and ac-
tivities and solves problems or en cash opportunities in a creative way.
Scope of Marketing:
1. Study of Consumer Wants and Needs
Goods are produced to satisfy consumer wants. Therefore study is done to iden-
tify consumer needs and wants. These needs and wants motivates consumer to purchase.
2. Study of Consumer behavior
Marketers perform study of consumer behavior. Analysis of buyer behavior helps
marketer in market segmentation and targeting.
3. Production planning and development
Product planning and development starts with the generation of product idea and
ends with the product development and commercialization. Product planning includes
everything from branding and packaging to product line expansion and contraction.
4. Pricing Policies
Marketer has to determine pricing policies for their products. Pricing policies
differs form product to product. It depends on the level of competition, product life
cycle, marketing goals and objectives, etc.
5. Distribution
Study of distribution channel is important in marketing. For maximum sales and
profit goods are required to be distributed to the maximum consumers at minimum cost.
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6. Promotion
Promotion includes personal selling, sales promotion, and advertising. Right pro-
motion mix is crucial in accomplishment of marketing goals.
7. Consumer Satisfaction
The product or service offered must satisfy consumer. Consumer satisfaction is
the major objective of marketing.
8. Marketing Control
Marketing audit is done to control the marketing activities.
9. Branding
Branding of products is adopted by many reputed enterprises to make their prod-
ucts popular among their customer and for many other benefits. Marketing manager has
to take decision regarding the branding policy, procedures and implementation programs.
10. Packaging
Packaging is to provide a container or wrapper to the product for safety, attrac-
tion and ease of use and transportation of the product.
1.5 FUNCTIONS OF MARKETING
To achieve success in your marketing effort you need to have glimpse of the big
pictures and the activities you need to perform in achieving your set marketing objec-
tives, these activities is referred to as marketing function.
It refers to those specialize activities that you as a marketer must perform in order to
achieve your set marketing objectives.
They are:
1. Researching
2. Buying
3. Product development and management
4. Production
5. Promotion
6. Standardization and grading
7. Pricing
8. Distribution
9. Risk bearing
10.Financing
11. After sales-service
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(1)Research Function: The research function of marketing is that function of marketing
that enables you to generate adequate information regarding your particular market of
target. You must carry out adequate research to identify the size, behavior, culture, believe,
genders etc. of your target market segment, their needs and want, and then develop
effective product that can meet and satisfy these market needs and want.
(2)Buying Function: The function of buying is performed in order to acquire quality
materials for production. When you design a good product concept, you should also
ensure you’re buying the essential materials for the product. This function is carried out
by the purchase and supply department, but your specifications of materials goes a long
way in assisting the purchasing department to acquire the necessary materials needed
for production.
(3)Product Development and Management: Product development is an essential
function of marketing since it was the duties of the marketing department to identify
what the market need or want and then design effective product based on the identified
need and want of the market. Product development passes through some basic stages
carried out by the marketers to develop a targeted market specified product. And you
can also manage your product by evaluating it performance and changing them to fit the
current market trend.
(4)Production Function: Production is the function performs by the production de-
partment. Though, this is interrelated to the department of marketing, because your prod-
uct must possess the essential characteristics that can meet the target market needs and
want as identified during your market research, such characteristics as in your product
Test, Form, Packaging etc.
(5)Promotion Function: Promotion is one of the core functions of marketing since
your finish product must not remain in the place of production, hence, you as a marketer
must design effective communication strategies to informing the availability of your
product to your target market.
You must be able to design effective strategies to communicate your product
availability and features to your target market, such strategies as in; advertisement,
personal selling, public relation etc.
(6)Standardization and Grading: The function of standardization is to establish
specified characteristics that your product must conform to, such standard as in having a
specify test, ingredient etc. That makes your product brand so unique.
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Grading comes in when you sort and classify your product into deferent sizes or
quantities for different market segment while maintaining your product standard.
(7) Pricing Function: The function of pricing on your product offerings by designing
effective pricing systems base on your product stage and performance in the product
life cycle. Price is the actual value consumers perceive on your product, so you as a
marketer should ensure that your value of your product is not too high or too low to that
of your costumers.
(8) Distribution Function: The function of distribution is to ensure that your product
is easily and effectively moved from the point of production to the target market, the
kind of transportation system to employ e.g. Road, rail, water or air, and ensures that the
product can be easily accessed by customers. You as a Marketer should also design the
kind of middlemen to engage in the channel of distribution, their incentives and
motivations etc.
(9) Risk Bearing Function: The process of moving a finished product from the point
of production to the point of consumptions is characterized with lots of risks, such risks
as in product damaging, pilferage and defaults etc. So you must provide effective packaging
system to protect your product, good warehouse for the storage of your product until
they are needed, effective transportation system to speedily deliver your product on
time.
(10) Financing Function: Financing deals with the part of marketing to providing
incomes for your business. It refers to how you can raise capital to start operation and
remain in business. It refers to your modes of payment for the goods and services
transferred to your costumers.
(11) After sales-service: In a more complex and technical product, you as a marketer
should make provision in order to assist your customers after they have purchased your
product. In terms of machines or heavy equipment product that requires installation or
maintenance, most marketing organization renders such services like installing the
machine or maintaining it for stipulated periods on time for free or by a little service
charge.
After sales services is an effective marketing strategy to building a long lasting
customer relationship, staying ahead of your competitors while making profit for your
organization.
Adequate understanding of these functions enables you as a marketer to know
what is required to be done to having an effective transfer of ownership between you and
9
your costumers, creating a big picture of your business, while also making profit for
your organization.
1.6 OBJECTIVES OF MARKETING
The major objectives of marketing are as follows:
1. To satisfy the customers: The marketing manager must scientifically study
the demands of customers before offering them any goods or services. Selling the goods
or services is not that important, as the satisfaction of the customer’s needs. Modern
marketing thus always begins and ends with the needs of customers.
2. To increase profits for the growth of the business: The marketing department
is the only department which generates revenue for the business. Sufficient profits must
be earned as a result of sale of want-satisfying products. If the firm is not earning profits,
it will not be able to survive in the market. Moreover, profits are also needed for the
growth and diversification of the firm.
3. To generate customer base for the business: The Marketing manager must
attract more and more customers to buy the firm’s products and services. This will also
result into increased sales.
4. To determine marketing-mix that will satisfy the needs of the customers.
Product, pricing, promotion and physical distribution should be so planned as to meet
the requirements of different kinds of customers.
5. To increase the quality of life of people: Marketing Management attempts to
increase the quality of life of the people by providing them better products at reasonable
prices. It facilitates production and distribution of a wide variety of goods and services
for use by the customer.
6. To create good image: To build up the public image of firm over a period is
another objective of marketing. The marketing department provides quality products to
customers at reasonable prices and thus creates its impact on the customers. The mar-
keting manager attempts to increase the goodwill of its business by initiating image
building activities. If a firm enjoys goodwill in a market, it will increase the morale of
its sales-force. They will show greater loyalty and will develop a sense of service to the
customers. This will further enhance the reputation of the business.
When setting marketing objectives for your micro-business, you should follow
the SMART approach.
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1.7 SUMMARY
Marketing is regarded as an activity involving the buying and selling of products
and services. The entire effort in managing the function is aimed at attaining the marketing
objectives of satisfying the needs of customer, business and society. The consumer must
get value satisfaction out of the products and services delivered to him by company and
who in the process must earn profits sufficient to ensure its survival, growth and stability.
The scope of the area called marketing has been shown to be exceptionally broad.
Marketing has micro/macro dimensions. Profit sector/nonprofit sector dimensions and
positive/normative dimensions. Reasonable people may disagree as to which combination
of these dimensions represents the appropriate total scope of marketing.
1.8. KEY WORDS
 Specific – Determine exactly what needs to be achieved.
 Measurable – Express objectives in measurable terms such as key performance in-
dicators, outcomes, numbers, percentage, dollars, etc.
 Action-oriented – State which actions need to be taken and who will take them.
 Realistic – Objectives should be achievable with the resources available.
 Time Specific – Specify time frames and schedules for achievement or completion.
1.9 SELF ASSESSMENT QUESTIONS

1. What is marketing?
2. Briefly discuss the evolution of marketing.
3. Explain the nature and scope of marketing.
4. Discuss the various functions of marketing
5. Explain the objectives of marketing
6. Differentiate between customer and consumer
7. Bring out the difference between goods and services
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1.10 REFERENCES
1. Philip Kotler. Marketing Management, New Delhi: Prentice Hall of India Pvt. Ltd.
New Delhi, 2013.
2. RajanSaxena - Marketing Management, Bengaluru: Tata McGraw Hill, 2009.
3. McCarthy, E.J. Basic Marketing: A Managerial approach, New York: R.D.
Irwin,2009.
4. William. J. Stanton. Fundamentals of marketing, USA: McGraw-Hill Inc.,1987
5. Srinivas R. Case studies in marketing- Indian context New Delhi: Prentice-Hall
India, 2014.
6. Chetan Bajaj, RajnishTuli and Nidhi V Srivastava. Retail Management, New Delhi
– Oxford University Press, 2010
7. Dale M. Lewison. Retailing, USA: Prentice Hall, 1997.
8. J. Taylor Sims J. Robert Foster, Arch G, Woodside. Systems and Strategies
Marketing Channels, New York: Harper ansdRow, 2003.
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UNIT - 2 : MARKETING MANAGEMENT
STRUCTURE:
2.0 Objectives
2.1 Introduction
2.2 Meaning/Definition of Marketing Management
2.3 Importance of Marketing Management
2.4 Nature and Scope of Marketing Management
2.5 Difference between Marketing and Selling
2.6 Marketing Management Responsibility
2.6.1 Role and Responsibilities of Marketing Manager
2.7 Summary
2.8 Key Words
2.9 Self Assessments Questions
2.10 References
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2.0 OBJECTIVES
After studying this unit, you should be able to;
• Define Marketing Management
• Explain the importance of Marketing Management
• Differentiate between marketing and selling
• Explain the role of marketing management
2.1 INTRODUCTION
Marketing Management represents an important functional area of business
management efforts for the flow of goods and services from the producer to the
consumers. It looks after the marketing system of the enterprise. It has to plan and develop
the product on the basis of known consumer demand. It has to build up appropriate
marketing plan or marketing mix to filfil the set goals of the business. It has to formulate
sound marketing policies and programmes.
Marketing management has to implement marketing strategies, programmes and
campaigns. Finally it must evaluate the effectiveness of each part of marketing mix and
introduce necessary modification to remove discrepancies in the actual execution of
plans, policies, strategies, procedures and programmes.
Marketing management is a business discipline which focuses on the practical
application of marketing techniques and the management of a firm’s marketing resources
and activities. Globalization has led firms to market beyond the borders of their home
countries, making international marketing highly significant and an integral part of a
firm’s marketing strategy. Marketing managers are often responsible for influencing the
level, timing, and composition of customer demand accepted definition of the term. In
part, this is because the role of a marketing manager can vary significantly based on a
business’s size, corporate culture, and industry context. For example, in a large consumer
products company, the marketing manager may act as the overall general manager of his
or her assigned product. To create an effective, cost-efficient marketing management
strategy, firms must possess a detailed, objective understanding of their own business
and the market in which they operate. In analyzing these issues, the discipline of marketing
management often overlaps with the related discipline of strategic planning.
Marketing management usually represents all managerial efforts and function to
operate the marketing concepts not only in letter but also in spirit. The survival and
14
growth of any business depends upon profitability and when marketing management
becomes a good practitioner of marketing concepts, profitability and growth are duly
assured.
2.2 MEANING/DEFINITION OF MARKETING MANAGEMENT

The application, tracking and review of a company’s marketing resources and ac-
tivities. The scope of a business’ marketing management depends on the size of the busi-
ness and the industry in which the business operates. Effective marketing management
will use a company’s resources to increase its customer base, improve customer opin-
ions of the company’s products and services, and increase the company’s perceived value.
“Management is the processes of planning, organizing directing motivating and
coordinating and controlling of various activities of a firm. Marketing is the process of
satisfying the needs and wants of the consumers.”
Management Guru Philip Kotler defines as “Marketing Management is the
analysis, planning, implementation and control of programmes designed to bring about
the desired exchanges with target audiences for the purpose of personal and mutual gain.
It relies heavily on adoption and coordination of the product, price, promotion and place
for achieving response”.
In other words, a business discipline, which is focused on the practical application
of marketing techniques and the management of a firm’s marketing resources and
activities, is Marketing Management.
2.3 IMPORATNCE OF MARKETING MANAGEMENT
Marketing Management is an integral part of any business venture. It is therefore
very vital for all managers to master all essential skills in this field in order to realize
the goal of their businesses. The sole role of studying this discipline is to enable the
market managers to know the ideal customers, the appropriate time to market a product,
the ideal price, the right place and the most appropriate product to market.
Ways of Boosting Marketing Management Skills
 Selecting the right market – It is essential to learn how to choose the best
market so as to get new consumers and even retain the old ones. A good marketing manager
should therefore understand the forces of demand and supply in the market. This helps
in meeting the consumers demand at different times. This is also very essential in
boosting the volume of sales for a given period of time. When choosing the right market
they are various factors that must be considered such as the location and size of the
business.
15
 Gains and losses assessment – Understanding the market dynamics is also
essential in analyzing possibilities of making a gain or incurring a loss in any business.
 Investing a lot of money in promoting a product that is not in high demand can at
times result to huge losses. Marketing a product that is in high demand is very easy and
cost effective. This therefore maximizes the chances of making huge gains.
 Effective means of communication – Good communication between the
marketer and customers is also very important in business. This helps in attracting more
potential customers and therefore increasing the volume of sales. It is important to ensure
that the business has an effective customer service support team. This ensures that the
consumers review on the product is considered.
 If they are not satisfied with the product it is the duty of the marketing manager to
come up with ideal strategies to improve the brand. Other potential consumers mostly
refer to the consumers review about a certain product before buying it. This is common
particularly in online marketing.
 Proper management of all marketing departments – Succeeding in market-
ing management involves proper running of marketing departments namely: sales, pric-
ing, operations and finance.
 Research on business and the market – Studying in depth details about the
business assists in strategizing on the most appropriate ways to market a product. Stra-
tegic planning and marketing management should therefore go hand in hand. The most
important approaches used in strategic planning include: competitor analysis, company
analysis and customer analysis. Competitor analysis involves analyzing the prices of the
competitor products and their nature. This helps the company to prospect the profit. The
company is also able to note the weaknesses and strength in order to come up with ideal
ways of making more sales. The most popular approaches used when doing market re-
search include: general observation skills, experimental skills, quantitative marketing
research and qualitative marketing research.
 Making strategic decisions – After in depth study and research on business and
other market dynamics, it is easy to design viable marketing strategies.
Major Benefits of Good Marketing Management
• Helps in cutting production cost.
• Helps in cutting promotion cost.
• Assists in budgeting within a short time frame.
• Equips market managers with ideal skills to meet the customer’s tastes and de mand.
16
• Helps in identification of marketing trends with demographic and psycho-graphical
information on business prospects.
• Equips marketers with work flow management skills.
• Assists marketers to make vital marketing decisions based on reliable data.
• Assists marketers to prepare marketing budget based on empirical data.
• Helps marketers in assessment of marketing progress, cost and effectiveness of
various marketing strategies.
• Helps marketing managers to quantify new customers from various sources of mar-
keting.
• Equips marketers with ideal techniques to track and measure the business prospects.
• This the most convenient and cost effective way to strategize on how to beat other
competitors in the market.
• This helps the marketer to come up with viable product promotion techniques.
• Equips marketers with reliable strategic planning techniques to boost volume of
sales so as to realize the specified business goal.
2.4 NATURE AND SCOPE OF MARKETING MANAGEMENT
It Combines the Fields of Marketing and Management:
As the name implies, marketing management combines the fields of marketing
and management. Marketing consists of discovering consumer needs and wants, creating
the goods and services that meet those needs and wants; and pricing, promoting, and
delivering those goods and services. Doing so requires attention to six major areas -
markets, products, prices, places, promotion, and people.
Management is getting things done through other people. Managers engage in
five key activities - planning, organizing, staffing, directing, and controlling. Marketing
management implies the integration of these concepts.
Marketing Management is a Business Process:
Marketing management is a business process, to manage marketing activities in
profit seeking and non profit organizations at different levels of management, i.e.
supervisory, middle-management, and executive levels. Marketing management decisions
are based on strong knowledge of marketing functions and clear understanding and
application of supervisory and managerial techniques. Marketing managers and product
managers are there to execute the processes of marketing management. We, as customers,
see the results of such process in the form of products, prices, advertisements,
promotions, etc.
17
Marketing Management is Both Science and Art:
“Marketing management is art and science of choosing target markets and get-
ting, keeping and growing customers through creating, delivering and communicating
superior customer value.” (Kotler, 2006). Marketing management is a science because
it follows a general principle that guides the marketing managers in decision making.
The Art of Marketing management consists in tackling every situation in a creative and
effective manner. Marketing Management is thus a science as well as an art.
2.5 DIFFERENCE BETWEEN MARKETING AND SELLING
Marketing:
 Identifies appropriate prospects
 Effectively communicates image and capabilities of the firm
 Creates awareness of, and emphasizes an appeal—a differentiation factor—about
the firm
 Perfects customer service
 Requests feedback from clients on a regular basis
 Anticipates and meets needs Marketing often necessitates cultural changes at every
level in the firm
 Emphasis on consumer needs wants
 Company first determines customers needs and wants and then decides out how to
deliver a product to satisfy these wants
 Management is profit oriented
 Planning is long-run-oriented in today’s products and terms of new products,
tomorrow’s markets and future growth
 Stresses needs and wants of buyers
 Views business as consumer producing process satisfying process
 Emphasis on innovation on every existing technology and reducing every sphere, on
providing better costs value to the customer by adopting a superior technology
 All departments of the business integrated manner, the sole purpose being genera-
tion of consumer satisfaction
 Consumer determine price, price determines cost
 Marketing views the customer last link in business as the very purpose of the busi-
ness
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Selling :
• Proactive seeking of prospects
• Interacting to qualify prospects
• Effective acknowledgment of the prospect’s concerns
• Closing the sale-getting hired
• Following up and staying in contact when not hired
• Emphasis is on the product
• Company Manufactures the product first
• Management is sales volume oriented
• Planning is short-run-oriented in terms of today’s products and markets
• Stresses needs of seller
• Views business as a good producing process
• Emphasis on staying with existing technology and reducing costs
• Different departments work as in a highly separate water tight compartments
• Cost determines Price
• Selling views customer as a last link in business
2.6 MARKETING MANAGEMENT RESPONSIBILITY
Marketing management has to assure the marketing effectiveness of a company
and its product line. Marketing effectiveness depends on a combination of five activi-
ties.
1. Customer Philosophy: Management accepts the importance of the market place and
unsatisfied and potential customer needs and wants in formulating company plans and
shaping company operation around customers.
2. Integrated Marketing Organization: An organization has the staff to carry out
marketing analysis, planning, implementation and control effectively. Proper
coordination and integration can give us harmony and teamwork in marketing.
3. Adequate Marketing Information: the marketing management has efficient
marketing information system to receive the relevant information necessary to conduct
effective marketing planning and control.
4. Strategic Orientation: the marketing management is able to generate innovative
strategies and plan for long term growth and profitability.
5. Operational Efficiency: Marketing plans are implemented in cost effective manner,
and result are monitored for rapid corrective action.
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Marketing management has to fulfill the following responsibilities in particular.
 Sales and market analysis
 Determination of marketing goals
 Sales forecasting
 Marketing budgeting
 Formulation of marketing strategies, policies and procedures.
 Appropriate marketing mix
 Management of distribution channel and physical distribution
 Effective communication system
 Post sales service
2.6.1 ROLE AND RESPONSIBILITIES OF MARKETING MANAGER
For most businesses, there are several different organizational approaches to mar-
keting. The duty may lie with a single member of the team, or it could be a group respon-
sibility. The great thing about a small team is the ability to quickly instill a marketing led
ethos which can become the operational soul of your business. Larger companies may
require more work!
Depending on budget availability and the skills of the team, you may choose to
outsource certain elements of the marketing process (such as market research) or de-
cide to do these jobs in-house. Key responsibilities of the marketing manager / director
vary according to the business but can include:
• Instilling a marketing led ethos throughout the business
• Researching and reporting on external opportunities
• Understanding current and potential customers
• Managing the customer journey (customer relationship management)
• Developing the marketing strategy and plan
• Management of the marketing mix
• Managing agencies
• Measuring success
• Managing budgets
• Ensuring timely delivery
• Writing copy
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• Approving images
• Developing guidelines
• Making customer focused decisions
The marketing role can be diverse or focused but now we’ll elaborate further on
some key aspects which should be at the heart of the job.
2.7 SUMMARY
Marketing Management is the function of planning, organizing, implementing and
coordinating of marketing programme. Marketing Management plays an important role
in building long term relationship between customers and consumers. Marketing
Management helps you to manage your business in a way that allows you to understand
what is going on a daily basis, the direction it is taking, how well it is following the path
you set for it and finally how well the risks and complexities of conducting business are
being managed. The marketing Management concepts help to highlight areas you can
focus on to ensure you understand how to minimize avoidable errors. By understanding
the various concepts highlighted you can ensure you know which management aspects
are your strengths and which are your weaknesses. This helps you focus on the problems
areas and over time ensures your business is growing in a balanced way. By understanding
which management areas to focus on helps to ensure when your company hits critical
mass it does not fail because you did not factor in a business management area.
When top management adopts the societal marketing concepts and recognizes
marketing management as an open adaptive system with ever changing environment, the
entire enterprise becomes a marketing company and the marketing management becomes
synonymous with business management.
2.8 KEY WORDS

• Marketing
• Selling

1. What is marketing management?
2. Discuss the nature and scope of marketing management
3. Explain the functions of marketing manger
4. Explain the market information system.
5. Differentiate between marketing and selling
21
2.10 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
22
UNIT-3 : MARKETING CONCEPTS
STRUCTURE:
3.0 Objectives
3.1 Introduction
3.2 Marketing Concepts
3.2.1 Production Concept
3.2.2 Product Concept
3.2.3 Selling Concept
3.2.4 Marketing Concept
3.2.5Societal Concept
3.2.6 Service Concept
3.2.7 Experience Concept
3.3 Components of Marketing Concept
3.3.1 Customer Satisfaction
3.3.2 Custamer Relationship Management (CRM)
3.3.3 Integrated Marketing
3.3.4 Profitability Sales Volume
3.3.5 Customer Delight
3.4 Benefits of Marketing Concepts
3.5 Summary
3.6 Self Assesnment Questions
3.7 References
23
3.0 OBJECTIVES
After studying this unit, you should able to;
• Define the term Marketing
• Explain the various Concepts of Marketing
• Explain the Concept of CRM
• Discuss the Components of Marketing Concepts
3.1 INTRODUCTION
Many thinking firms deliberate, from time to time, about what marketing actually
means to them. Firms have been known to be very successful without having a complex
marketing organization. On the other hand, some companies have been known to possess
a comprehensive marketing department, supported by a myriad of sub activities belonging
to the marketing function, and yet fail to achieve excellence. Marketing is one of the
concepts in management studies that is often difficult to define. Marketing is the
management process responsible for identifying, anticipating and satisfying customer
requirement profitably. Marketing deals with customer. Creating customer value and
satisfaction are the heart of modern marketing thinking and practice. Marketing
management is a business process, to manage marketing activities in profit seeking and
non profit organizations at different levels of management. Marketing management
decisions are based on strong knowledge of marketing functions and clear understanding
and application of supervisory and managerial techniques.
3.2 MARKETING CONCEPTS

Modern concepts of marketing are broad concepts. It means finding out the con-
sumer and make the goods as per their needs rather than to provide them what the seller
has made. Thus it is very essential for the seller to get the answer of the question what
are the things which the consumer want? And how these things can be made available to
them? Only then he can survive in the market and earn profit. There are 6 modern con-
cepts of marketing which are very important from the point of view of marketer.
3.2.1 Production Concept:
The companies which use the production concept generally focus too narrowly
on their own activities because according to this concept the companies think that con-
sumer will buy the product which comes in the market. The focus of the business is not
the needs of the customer, but of reducing costs by mass production. By reaching econo-
mies of scale the business will maximize profits by reducing costs. Under this concept,
more importance given to production manager in order to produce more product.
24
3.2.2 Product concept:
As per this concept companies give importance to the features or the quality of
the product because in long run the product exists only with the quality it is giving to the
consumer. In this concepts, it assumes that if the product is good and reasonably priced,
it does not require promotional strategies.
3.2.3 Selling Concept:
It is not sufficient for the manufacturer to make the goods and wait for the cus-
tomers. Thus, according to this concept it is very important to inform the consumer
about the product which can be done through different ways of promotion. The focus
here is to make the product, and then try to sell it to the target market. It is basically a
push concept of marketing concerned with selling the produced products and making
profits, without caring what the customer needs. Under the concept, the more impor-
tance given to sales manager in order to wipe out the stock lying in warehouse. In this
method, more training and development programme are conducted to increase the effi-
ciency of sales manager.
3.2.4 Marketing Concept:
Consumer now a day is treated as “GOD”. So it is very important for the manufac-
turer to produce the product which the consumer wants, so that consumer get satisfac-
tion and manufacturer earns profit. Puts the customer first and at the heart of the busi-
ness. The organization tries to understand the needs of the customers by using appropri-
ate research methods, processes and developing products to satisfy their needs. In es-
sence all activities in the organization are based around the customer. The customer is
the truly king. In today’s competitive world putting the customer at the heart of the op-
eration is strategically important. Whilst some organizations in certain industries may
follow anything other then the market orientation concept, those that follow the market
orientation concept have a greater chance of being successful.
3.2.5 Societal Concept:
This concept means that company should not only work for the consumer but also
for the society. So the company should make balance between company’s profits, con-
sumer wants and society welfare. The societal marketing concept holds that tile organi-
zation should determine the needs, wants and interest of target markets. It should there
deliver superior value to customers in a way that maintains or improves the consumers
and the society’s well being. It questions whether tile pure marketing concept is ad-
equate in an age of environmental problems resource shortage, rapid population growth,
25
worldwide economic problems and neglected social services. The societal marketing
concept calls on marketers to balance three considerations in setting, their marketing
policies and company profits.
3.2.6 Service Concept:
Customer buy services, not product. So the company should adopt a service model
of marketing instead of selling the title to the products. Customers buy products fro the
service of transportation. When another customer buys an and conditioner. He is essen-
tially buying cool atmosphere. So the customer may buy a car or an air conditioner for
the prestige that the ownership of these products provide, but for most products the
main reason for the customer buying them is the service that these products provide.
3.2.7 Experience Concept:
The market: the marketer should create an experience around the product to make
it immovable, and movable it Cues at every customer interaction point. An experience
occurs when a company intentionally uses services as tile stair, aid goods as props to
engage individual customers in a way that creates an immovable event. While product
and services are external to the customer. Experiences are inherently personal, existing
only in the mind of an individual who has been engaged on an emotional, physical,
intellectual or even spiritual level. No two people can have same experience, because
each experience derives from the interaction between the staged event and the individual’s
state of mind.
3.3 COMPONENTS OF MARKETING CONCEPT

3.3.1 Customer Satisfaction
3.3.2 Customer Reletionship Management (CRM)
3.3.3 Integrated Marketing
3.3.4 Profitability Sales Volume
3.3.5 Customer Delight
3.3.1 Customer Satisfaction:
‘Customer satisfaction is a term frequently used in marketing. It is a measure of
how products and services supplied by a company meet or surpass customer expecta-
tion. Customer satisfaction is defined as “the number of customers, or percentage of
total customers, whose reported experience with a firm, its products, or its services
(ratings) exceeds specified satisfaction goals.” In a survey of nearly 200 senior market-
26
ing managers, 71 percent responded that they found a customer satisfaction metric very
useful in managing and monitoring their businesses.
It is seen as a key performance indicator within business and is often part of a
Balanced Scorecard. In a competitive marketplace where businesses compete for cus-
tomers, customer satisfaction is seen as a key differentiator and increasingly has be-
come a key element of business strategy.
“Customer satisfaction provides a leading indicator of consumer purchase
intentions and loyalty.” “Customer satisfaction data are among the most frequently
collected indicators of market perceptions. Their principal use is twofold:”
1. “Within organizations, the collection, analysis and dissemination of these data send
a message about the importance of tending to customers and ensuring that they have
a positive experience with the company’s goods and services.”
2. “Although sales or market share can indicate how well a firm is performing currently,
satisfaction is perhaps the best indicator of how likely it is that the firm’s customers
will make further purchases in the future. Much research has focused on the
relationship between customer satisfaction and retention. Studies indicate that the
ramifications of satisfaction are most strongly realized at the extremes.” On a five-
point scale, “individuals who rate their satisfaction level as ‘5’ are likely to become
return customers and might even evangelize for the firm. (A second important metric
related to satisfaction is willingness to recommend. This metric is defined as “The
percentage of surveyed customers who indicate that they would recommend a brand
to friends.” When a customer is satisfied with a product, he or she might recommend
it to friends, relatives and colleagues. This can be a powerful marketing advantage.)
“Individuals who rate their satisfaction level as ‘1,’ by contrast, are unlikely to return.
Further, they can hurt the firm by making negative comments about it to prospective
customers.
3.3.2 Customer Relationship Management (CRM):
Customer Relationship Management (CRM) is a system for managing a
company’s interactions with current and future customers. It involves using technology
to organize, automate and synchronize sales, marketing, customer service, and technical
support.
Customer relationship management systems track and measure marketing cam-
paigns over multiple networks. These systems can track customer analysis by customer
clicks and sales. Places where CRM is used include call centers, social media, direct
mail, data storage files, banks, and customer data queries. It helps you to find customer’s
profile as well. 27
3.3.3 Integrated Marketing:
Integrated Marketing Communication (IMC) is the application of consistent
brand messaging across both traditional and non-traditional marketing channels and using
different promotional methods to reinforce each other.
Components of Integrated Marketing Communications
IMC weaves diverse aspects of business and marketing together. These include:
 Organizational culture
The organization’s vision and mission
Attitudes and behaviors of employees & partners
Communication within the company
 Four P’s
Price, pricing plans, bundled offerings
Product (product design, accessibility, usability)
Promotion
Place (point of purchase, in-store/shopper experience)
 Advertising
Broadcasting/mass advertising: broadcasts, print, internet advertising, radio, televi-
sion commercials
Outdoor advertising: billboards, street furniture, stadiums, rest areas, subway adver-
tising, taxis, transit
Online advertising: mobile advertising, email ads, banner ads, search engine result
pages, blogs, newsletters, online classified ads, media ads
 Direct marketing: direct mail, telemarketing, catalogs, shopping channels, internet
sales, emails, text messaging, websites, online display ads, fliers, catalog distribu-
tion, promotional letters, outdoor advertising, telemarketing, coupons, direct mail,
direct selling, grassroots/community marketing, mobile
• Online/internet marketing
E-commerce
Search engine optimization (SEO)
Search engine marketing (SEM)
Mobile Marketing
Email marketing
Content marketing
28
Social Media (Facebook, Twitter, LinkedIn, Google +, Foursquare, Pinterest,
YouTube, Wikipedia, Instagram)
 Sales & customer service
Sales materials (sell sheets, brochures, presentations)
Installation, customer help, returns & repairs, billing
 Public Relations
Special events, interviews, conference speeches, industry awards, press conferences,
testimonials, news releases, publicity stunts, community involvement, charity
involvement & events
• Promotions
Contests, coupons, product samples (freebies), premiums, prizes, rebates, special
events
 Trade shows
Booths, product demonstrations
 Corporate philanthropy
Donations, volunteering, charitable actions
When these diverse aspects of business and marketing are weaved together
properly an effective campaign can be achieved. Effective campaigns are demonstrated
on the Integrated Brands showcase which recognizes brands that are innovative, strategic
and successfully growing their sales. By effectively leveraging each communication
channel greater impact can be achieved together than achieved individually.
3.3.4 Profitability Sales Volume:
Marketing starts with generation of product idea and continues until the customer’s
wants are completely satisfied. Marketing is successful only when it is capable of maxi-
mizing profitable sales and achieves the long run customer satisfaction.
Thus the modern marketing concept is a course of business thinking, while mar-
keting is a process or course of business action.
3.3.5 Customer Delight:
Customer delight is surprising a customer by exceeding his/her expectations and
thus creating a positive emotional reaction. This emotional reaction leads to Word of
Mouth. Customer Delight directly affects sales and profitability of a company as it helps
to distinguish the company and its products and services from the competition. In the
past customer satisfaction has been seen as a key performance indicator. Customer
29
satisfaction measures the extent to which the expectations of a customer are met
(compared to expectations being exceeded). However, it has been discovered that mere
customer satisfaction does not create brand loyalty nor does it encourage positive word
of mouth. Customer Delight can be created by the product itself, by accompanied standard
services and by interaction with people at the front line. The interaction is the greatest
source of opportunities to create delight as it can be personalized and tailored to the
specific needs and wishes of the customer. During contacts with touch points in the
company, more than just customer service can be delivered. The person at the front line
can surprise by showing a sincere personal interest in the customer, offer small attentions
that might please or find a solution specific to particular needs. Those front line
employees are able to develop a relationship between the customer and the brand.
Elements in creating motivated staff are: recruiting the right people, motivating them
continuously and leading them in a clear way.
3.4 BENEFITS OF MARKETING CONCEPTS
1. Marketing concept has philosophical and strategic implications as it allows the busi-
ness firm to direct its activities towards the broader and long range objectives like
sustained interaction with the customer, and stability and growth of the business.
2. Marketing concepts leads to fallow an integrated and coordinated approach to
marketing. By concentrating on consumer’s wants, marketing management can
evaluate contribution made by different departments of the firm in a better way.
3. Concern about market or customer needs rather than product reduces the changes
of a business firm becoming a sick unit.
4. A customer orientated company would track its customer satisfaction level and set
improvements goals. Customer satisfaction is the best indicator of the company’s
future profits.
5. A satisfied customer pays less attention to competing brands and gives repeat or-
ders.
3.5 SUMMARY
Marketing is regarded as an activity involving the buying and selling of products
and services. The entire effort in managing the function is aimed at attaining the marketing
objectives of satisfying the needs of customer, business and society. Broadly there are
four types of managerial orientations namely, production, sales, promotion and consumer.
The consumer orientation of management is best reflected in the adoption of the
marketing concept, which focuses on the consumer needs and wants. There are
30
organizational problems, but problems can be overcome by a planned and systematic,
implementation of the marketing concept.

1. Define marketing concept.
2. What do you mean by customer satisfaction?
3. Define customer delight.
4. Explain the various concepts of marketing management
5. Discuss the components of marketing concepts
6. Write a short note on Experience concept
3.7 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
31
UNIT - 4 : TRENDS IN MARKETING
STRUCTURE:
4.0 Objectives
4.1 Introduction
4.2 Marketing Myopia
4.3 Digitalization of Marketing
4.4 Emerging trends in Marketing
4.5 Social Marketing
4.6 Ethical and Legal Aspects of Marketing
4.7 Meaning of Green Marketing
4.8 Importance of Green Marketing
4.9 Cyber Marketing/ Internet Marketing
4.10 Inbound Versus Outbound Marketing
4.11 Types of Areas in Internet Marketing
4.12 Introduction to Viral Marketing
4.13 Guerrilla Marketing
4.14 Neuro Maketing
4.15 Introduction to Customer Relationship Marketing (CRM)
4.16 Summary
4.18 References
32
4.0 OBJECTIVES
• Define Marketing Myopia
• Explain the concept of Digitalization
• Discuss the emerging trends in Marketing
4.1 INTRODUCTION
Everyone knows that the Internet age has changed the way we all experience, store,
and share information. For marketing professionals, this opens up many new options for
putting together communications strategies. It also means that keeping a constant ear to
both domestic and global change can only be good for business. Just as buyers can access
more facts and figures, they also have more control over their relationship to producers.
Emerging trends, such as big data, social media, social CRM, augmented reality and
context-aware computing, create new opportunities to acquire and retain customers,
fueling growth and taking market share. Emerging trends in marketing strategy there
will the inevitable mention of Mobile Computing, Social Media Presence and perhaps
the increased power of analytics through such things as Big Data.
4.2 MARKETING MYOPIA

The term marketing myopia coined by Theodore Levitt. It refers to the short
sightedness. The marketer wants to sell the product and services, without much focusing
on the customer demands and needs. Marketing Myopia suggests that businesses will do
better in the end if they concentrate on meeting customers’ needs rather than on selling
products.
The customer’s lifetime value can rise above myopia to a certain extent. This can
entail the use of long-term profit objectives (sometimes at the risk of sacrificing short
term objectives).
4.3 DIGITALIZATION OF MARKETING

Digital marketing is marketing that makes use of electronic devices (computers)
such as personal computers, smart phones, cell phones, tablets and game consoles to
engage with stakeholders. Digital marketing applies technologies or platforms such as
websites, e-mail, apps (classic and mobile) and social networks. Social Media Marketing
is a component of digital marketing. Many organizations use a combination of traditional
and digital marketing channels.
33
In pull digital marketing, the consumer actively seeks the marketing content, often
via web searches or opening an email, text message or web feed Websites, blogs and
streaming media (audio and video) are examples of pull digital marketing. In each of
these, users have to navigate to the website to view the content. Only current web browser
technology is required to maintain static content. Search engine optimization is one
tactic used to increase activity.
In push digital marketing the marketer sends a message without the recipient
actively seeking the content, such as display advertising on websites and news blogs.
Email, text messaging and web feeds can also be classed as push digital marketing when
the recipient has not actively sought the marketing message.
Some of the latest developments include: 1. Segmentation: More focus has been
placed on segmentation within digital marketing, in order to target specific markets in
both business to business and business to consumer sectors. 2. Influencer Marketing:
Important nodes are identified within related communities, known as influencers. This
is becoming an important concept in digital targeting. It is possible to reach influencers
via paid advertising, such as Face book or Google Ad sense campaigns, or through
sophisticated SCRM (social customer relationship management) software, such as
Microsoft Dynamics and Sales force CRM. Many universities now focus, at Masters
Level, on engagement strategies for influencers.
A digital marketing system (DMS) is a method of centralized channel
distribution used primarily by SaaS products. It combines a content management system
(CMS) with syndication across web, mobile, scan able surface, and social channels.
4.4 EMERGING TRENDS IN MARKETING

The existence it seems that each is chatting about gathering media. Networking
platforms like Twitter and Face book have exploded in the gone two time, but the billions
of users they have aren’t just restricted to brood high instruct kids that want to assign
photos with one another. More and more subject professionals and even complete brands
are creating profiles and collecting followers through these emerging media outlets.
The invention of this phenomenon has been termed communal marketing or more
specifically community media marketing and the implications it has for how business
will soak and profit in the next decade are massive. Strictly defined, known marketing is
the ritual of with shared influential media outlets, like networking sites and other online
communities, for the intent of marketing an artifact or conducting consumer relations
and public outreach. In recent existence, the addict bases of these types of sites have
34
adult exponentially, creating these load markets of demographically diverse people all
able to be reached through the same forum, the networking location itself. Now the
businesses have wedged onto the verity that, when handled suitably, they too can craft
personalities that survive to communicate Emerging Trends in Marketing with their
audience solely via the group media groove, marketing through these media has grown
as well. Commerce can gain from party marketing in a surfeit of different behavior, but
one of the most important is the truth that it is a great place to disclose relatives to your
website and, hence prize up a huge quantity of expected transfer. Bloggers and
informational website owners have been using networking sites to share their significance
for years, why shouldn’t the same awareness raising techniques work for businesses
with something to plug? While common marketing activity can indeed help you make
sales, memorize to use a more delicate approach than you would in a natural marketing
atmosphere. Users of shared media are very precision to infiltration by salesclerks that
want to dishonest the very organic life of the connections you can make there. Focus
instead on shop credibility and relationships with your stream and ability Emerging Trends
in marketing buyer origin. When the time comes they will be great assets for diffusion
the word about a new product or partnership. Another thing to recollect is that it is almost
forever a good idea to develop break private and industry accounts. Even if your personal
account lists you as the CEO of the company, it is better to have different outlets for
your classify and your personality to nonstop themselves.
Green marketing: Marketing products and services based on environmental
factors or awareness.
Social media: Websites and applications that enable users to create and share
content or to participate in social networking.
Online marketing: Advertising and marketing efforts that use the Web and
email to drive direct sales via electronic commerce
Direct marketing: The business of selling products or services directly to the
public.
4.5 SOCIAL MARKETING

The term Social Marketing was first coined by Kotler and Zaltman in 1971 to
refer to the application of marketing to the solution of social and health problems.
Marketing has been remarkably successful in encouraging people to buy products such
as Coca Cola and Nike trainers, so, the argument runs; it can also encourage people to
adopt behaviours that will enhance their own - and their fellow citizens’ lives.
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Many social and health problems have behavioural causes: the spread of AIDS,
traffic accidents and unwanted pregnancies are all the result of everyday, voluntary human
activity. The most dramatic example of this is tobacco use, which kills one in two smokers
an estimated 6 million people in the UK alone since the health consequences were first
established in the early 1950’s. Social marketing provides a mechanism for tackling
such problems by encouraging people to adopt healthier lifestyles.
However, health problems have a social, as well as an individual, dimension. This
phenomenon is most clearly demonstrated by the epidemiological data which shows that
poverty is one of the most consistent and basic predictors of ill-health in the UK the
USA and the southern hemisphere. The lack of opportunity, choice and empowerment it
generates prevents people from adopting healthy lifestyles. Social marketing also has a
great deal to offer here by influencing the behaviour, not just of the individual citizen,
but also of policy makers and influential interest groups. Social marketers might target
the media, organisations and policy and law makers.
Social Marketing, like generic marketing, is not a theory in itself. Rather, it is a
framework or structure that draws from many other bodies of knowledge such as
psychology, sociology, anthropology and communications theory to understand how to
influence people’s behaviour. Like generic marketing, social marketing offers a logical
planning process involving consumer oriented research, marketing analysis, market
segmentation, objective setting and the identification of strategies and tactics. It is based
on the voluntary exchange of costs and benefits between two or more parties. However,
social marketing is more difficult than generic marketing. It involves changing intractable
behaviours, in complex economic, social and political climates with often very limited
resources. Furthermore, while, for generic marketing the ultimate goal is to meet
shareholder objectives, for the social marketer the bottom line is to meet society’s desire
to improve its citizens’ quality of life. This is a much more ambitious - and more blurred
- bottom line.
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THE DEVELOPMENT OF SOCIAL MARKETING
Social Marketing evolved in parallel with commercial marketing. During the late
1950s and early 1960s, marketing academics considered the potential and limitations
of applying marketing to new arenas such as the political or social. For example, in
1951, Wiebe asked the question, “Can brotherhood be sold like soap?”, and suggested
that the more a social change campaign mimicked that of a commercial marketing
campaign, the greater the likelihood of its success.
To many, however, the idea of expanding the application of marketing to social
causes was abhorrent. Luck objected on the grounds that replacing a tangible product
with an idea or bundle of values threatened the economic exchange concept. Others feared
the power of the marketing, misconceiving its potential for social control and propaganda.
Despite these concerns, the marketing concept was redefined to include the marketing
of ideas and the consideration of its ethical implications.
DEFINITIONS OF SOCIAL MARKETING

A social marketing campaign or programme contains the following elements: a
consumer orientation, an exchange and a long-term planning outlook .
1. A Consumer Orientation
Consumer orientation is probably the key element of all forms of marketing,
distinguishing it from selling - and product - and expert-driven approaches. In social
marketing, the consumer is assumed to be an active participant in the change process.
The social marketer seeks to build a relationship with target consumers over time and
their input is sought at all stages in the development of a programme through formative,
process and evaluative research.
2. An Exchange
Social marketing not only shares generic marketing’s underlying philosophy of
consumer orientation, but it also its key mechanism, exchange. While marketing principles
can be applied to a new and diverse range of issues - services, education, high technology,
political parties, social change - each with their own definitions and theories, the basic
principle of exchange is at the core of each. According to Kotler: “marketing does not
occur unless there are two or more parties, each with something to exchange, and both
able to carry out communications and distribution”.
Exchange is defined as an exchange of resources or values between two or more
parties with the expectation of some benefits. The motivation to become involved in an
exchange is to satisfy need. Exchange is easily understood as the exchange of goods for
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money, but can also be conceived in a variety of other ways: further education in return
for fees; a vote in return for lower taxes; or immunisation in return for the peace of
mind that one’s child is protected from rubella.
3. Long-term Planning Approach
Like generic marketing, social marketing should have a long term outlook based
on continuing programmes rather than one-off campaigns. It should be strategic rather
than tactical. This is why the marketing planning function has been a consistent theme in
social marketing definitions, from Kotler in 1971 to Andreasen in 1996.
The social marketing planning process is the same as in generic marketing. It
starts and finishes with research, and research is conducted throughout to inform the
development of the strategy. A situational analysis of the internal and external environment
and of the consumer is conducted first. This assists in the segmentation of the market
and the targeting strategy. Further research is needed to define the problem, to set
objectives for the programme and to inform the formulation of the marketing strategy.
The elements of the social marketing mix are then developed and pre-tested, before
being implemented. Finally , the relative success of the plan is monitored and the outcome
evaluated.
4. Moving Beyond the Individual Consumer
Social marketing seeks to influence the behaviour not only of individuals but also of
groups, organisations and societies. Levy and Zaltman suggest a sixfold classification
of the types of change sought in social marketing, incorporating two dimensions of time
(short term and long term) and three dimensions of level in society (micro, group, macro).
In this way social marketing can influence not just individual consumers, but also the
environment in which they operate.
4.6 ETHICAL AND LEGAL ASPECTS OF MARKETING

In a rapidly evolving marketing environment, the demarcation of legal and ethical
issues have a thin line at the base that ultimately turns out be ambiguous to a marketer
since he is more interested in the functional side of the routine activities of the business.
The legal and ethical issues turn to be very important for any marketer due to abundant
choices, while facing fierce competition in the existing business environment and
therefore it becomes crucial for a marketer to adhere to the corporate values solidly
based on a moral judgment.
Ethical and legal matters for a marketer are always both simple and complex
because it always has a bearing on the way one approach’s towards a frame of reference.
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A good marketing executive always attempts to strike out differences between
legal and ethical issues and tries to his best to bring out an early solution in case of any
confusions arising. The diverse nature of organizations and differences in personal values
makes it mandatory to maintain a code of conduct which would prevent wrong doings.
The strategic decisions taken by a marketer has an effect on all the stakeholders which
would warrant maintaining integrity through uncomplicated legal and ethical decisions.
As a result of this, compliance programs are a must for developing relationship with
stakeholders based on trust.
The marketing functions include persuasion and influencing the consumer behavior
which is underlined by moral values. Marketing campaigns is one of the areas which is
most discussed when it comes to the legal and ethical issues in marketing. One of the
functions of marketing is the process of communicating the products or services to the
prospective customers. Every organization tries to market their products, service in an
efficient and effective way. Advertising is an area which would require stricter laws and
code of conduct when it comes to the style, content and delivery aspects. There is liberty
with the large organizations to spend billions of rupees on marketing campaigns whereas
small & medium organizations fail to market their products/services in an effective
manner due to various issues like budgetary constraints. Although it is legal to spend on
campaigns with huge advertising budgets but the question of the hour would be if it is an
ethical practice to actually do it. There is a close relationship between ethics and the law
and it is the existence of law which crafts the ethics or values enforceable. The fulfillment
of the legal obligation by the marketing companies in no way means that the ethical
justice has been accomplished. The practices adopted by the organizations as a whole or
a marketer as an individual might be legal but again it might be ethically questionable.
(i) Ethical Issues in Marketing
When a legal approach does not provide a viable solution, the next question that
arises is whether it would be an ethical choice to move forward. Ethical behavior is
mandatory if a free market is to function efficiently and effectively. Ethics are regarded
as moral guidelines which govern good behaviour. Being ethical in business is majorly
regarded as the best business practices. An ethical decision on one hand is both legal and
on other hand meets the shared ethical standards of the community from the broader
perspective. The unethical practices of the company damage the company’s brand name
. for example : Nike’s case of employment of children in the company under bad work
conditions.
Hence, a de-marketing exercise can have devastating effects from the long term
perspective. That is the justification behind the fact that True Marketing is considered as
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much more than just sorting out the mistakes in marketing area. True Marketing is the
moral platform on which the company is based and it should apply to everyone and in
everything one does. When a company markets a product it is expected that the truth be
stated about the product and consequently false promises are soon discovered and many
consumer groups have destroyed those firms who have misrepresented their product.
Today we witness cut throat competition between various brands existing in the
Indian market. It becomes all more crucial for any company to follow the ethical practices
because brands stand as symbols for the total quality of a company and to the viewpoint
of many customers, become the company, or embody the relationship with the company
as such .The goals of the marketing department are to target an audience, appeal to that
audience, and get the audience to purchase that particular product or service. In doing
this, a company must make sure that they are first abiding by all laws and regulations, but
they should also strive to be sure that they are acting ethically and honestly. Social
responsibility in marketing ethics refers to an organization’s obligation to maximize its
positive impact and minimize its negative impact on society. By contrast, ethics relates
to the marketing decisions made primarily by individuals; ‘‘social responsibility concerns
the impact of an organization’s decisions on society’’
Ethical issues in marketing have received substantial discussion in the past decade.
The ethical principles has been utilized exclusively by marketing practitioners but when
it comes to actual decision making we see very less evidence in regards to the adoption
of ethical principles. One of the areas where it applies to a larger extent is Ambush
marketing which is an effort by a company to relate its own brand to a sponsored activity
without acquiring official rights.
There would always be gray areas existing in the business environment but it would
be the companies call to take the right course of action which would be as per the inter-
est of the consumers and maintain the integrity of the business.
(ii) Legal Issues in Marketing
When we discuss legal issues in marketing, it becomes very important to
understand that for many issues in the marketing arena there are no readily available
solutions emerging from the legal domain although there is a general mandate to exist
within the legal framework. It means that company has to follow laws, regulations and
ethics simultaneously not one part only. No company can exist out of the legal framework
of the country. They have to operate within the legal framework within the respective
country. Sometimes they also have to follow international standards and norms to comply
international treaties and conventions. In India, there are Government and private bodies
to govern when it comes to marketing campaigns in India. There are recent instances in
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which these bodies have become to a certain extent active and followed strict measures.
We would have a look at some instances as follows:
I. Ministry of Information and Broadcasting, Govt. of India
It was in May 2011 when the Ministry of Information and Broadcasting banned
certain television commercial for men’s deodorants while claiming that it wanted to
curb ads targeted at tickling the libidinous male instincts and portraying women “as lustily
hankering after men under the influence of such deodorants.
II.Food and Standard Authority of India
The Food Safety and Standards Authority of India (FSSAI) had directed the state
food safety commissioner to scrutinize and initiate stringent actions against those
advertisements which raised misleading claims on the quality of food and beverages. As
per the directions companies were not allowed to use edible oil named ‘Super Refined’,
‘Extra Refined’, ‘Micro Refined’, ‘Double Refined’, ‘Ultra Refined’ and ‘Cholesterol
Friendly’. FSSAI had been created for laying down science based standards for articles
of food and to regulate their manufacture, storage, distribution, sale and import to ensure
availability of safe and wholesome food for human consumption and these advertisements
allegedly try to deceive the customers. The cases will be registered under Food Safety
and Standard Act, 2006 and if proved guilty, it will invite penalty of Rs. 10 lacs (Section
53 of FSS Act). The labeling of packaged food are proposed to be made more stringent
as the Food Safety and Standards Authority of India (FSSAI) and once these new labeling
provisions are introduced, packed food manufacturers will not be able to get away with
any claim they make on the products as they have to be substantiated by a research report.
The research findings will either have to be published in a respected international journal
or should be verifiable by the FSSAI.
III. Telecom Regulatory Authority of India
The Telecom Regulatory Authority of India which was established in 1997 issued
notification in May 2012 limiting television advertisement duration to 12 minutes in an
hour taking note of viewer irritation and has come up with a proposal to regulate the
duration, frequency and timings and audio level of advertisement. The industry estimates
showed that this could impact advertising revenues of broadcaster by 15% to 40%. The
Telecom Regulatory Authority of India has also pointed out that news and current affair
channels cannot run more than two scrolls at the bottom of the screen, occupying a
maximum of 10 per cent screen space. It also says that ads should not in any manner
interfere with the programme use of lower part of screen to carry captions, static or
moving alongside the programme.
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IV. Cable Television Networks (Regulation) Act, 1995
As per the regulation 6 of Cable TV Regulation Act, No person shall transmit or
re-transmit through a cable service any advertisement unless such advertisement is in
conformity with the prescribed advertisement code.
V. Advertising Standards Council of India
The Advertising Standards Council of India (ASCI), established in 1985, is com-
mitted to the cause of Self-Regulation in Advertising, ensuring the protection of the
interests of consumers. ASCI’s Code for Self-Regulation in Advertising is now part of
ad code under Cable TV Act’s Rules. Violation of ASCI’s Code is now violation of Govt.
rules. Advertising Industry Watchdog ASCI upheld 9 complaints against Brooke Bond
Red Label Natural Care, Tata sky, Nikon Camera etc. ASCI further said its Consumer
Complaints Council found that complaints against five TV ads were unsubstantiated. In
case of Tata Sky, ASCI said it had received a complaint against the company stating that
“Cable is just a Dabba” in a print advertisement. Similarly, it had also upheld a complaint
against Nikon camera’s TV commercial for violation of The Performing Animals Regis-
tration Rules 2001.
However, other than these instances mentioned above, one of most crucial areas
to discuss would be social marketing practices. The people share their stories by way of
blogs on the Internet and its becoming quite popular information open to general public
.The sharing of stories is pleasurable because both authors and readers can be relived to
sharing their experiences in form of anger and happiness. With the advent of community
brandings, website advertising, blog writings, tweeter groups and instant messaging, it
has given rise to multitude of issues in the Indian context. The legal and ethical practices
in this zone have still to be defined clearly and code of conduct still needed to be devel-
oped explicitly clearly defining the level of control over privacy and sensitivity.
The setting of legal and ethical practices over the geographical boundaries of the
world would be the biggest challenge faced in this area.
4.7 MEANING OF GREEN MARKETING

Unfortunately, a majority of people believe that green marketing refers solely to
the promotion or advertising of products with environmental characteristics. Terms like
Phosphate Free, Recyclable, Refillable, Ozone Friendly, and Environmentally Friendly
are some of the things consumers most often associate with green marketing. While
these terms are green marketing claims, in general green marketing is a much broader
concept, one that can be applied to consumer goods, industrial goods and even services.
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For example, around the world there are resorts that are beginning to promote themselves
as “ecotourist” facilities, i.e., facilities that “specialize” in experiencing nature or
operating in a fashion that minimizes their environmental impact.
Thus green marketing incorporates a broad range of activities, including product
modification, changes to the production process, packaging changes, as well as modifying
advertising. Yet defining green marketing is not a simple task. Indeed the terminology
used in this area has varied, it includes: Green Marketing, Environmental Marketing and
Ecological Marketing. While green marketing came into prominence in the late 1980s
and early 1990s, it was first discussed much earlier. The American Marketing Association
(AMA) held the first workshop on “Ecological Marketing” in 1975. The proceedings of
this workshop resulted in one of the first books on green marketing entitled “Ecological
Marketing”. Since that time a number of other books on the topic have been published.
4.8 IMPORTANCE OF GREEN MARKETING
The question of why green marketing has increased in importance is quite simple
and relies on the basic definition of Economics: Economics is the study of how people
use their limited resources to try to satisfy unlimited wants. Thus mankind has limited
resources on the earth, with which she/he must attempt to provide for the worlds’
unlimited wants. In market societies where there is “freedom of choice”, it has generally
been accepted that individuals and organizations have the right to attempt to have their
wants satisfied. As firms face limited natural resources, they must develop new or
alternative ways of satisfying these unlimited wants. Ultimately green marketing looks
at how marketing activities utilize these limited resources, while satisfying consumers
wants, both of individuals and industry, as well as achieving the selling organization’s
objectives.
4.9 CYBER MARKETING/INTERNET MARKETING

Internet/Cyber Marketing is marketing of business online. How to market to
people has radically changed over the last few years and it can be very confusing to
businesses. Social media in particular is an area that has radically changed marketing of
business. Consumers are much smarter and are not as interested in messages being
broadcast to them and are therefore engaging more with social networks. Through these
they are finding out what products to buy, services to use, and so on, based on trusted
recommendations from their friends and family. It is estimated that 78% of the time
people trust the online recommendations from the family and friends.
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4.10 INBOUND VERSUS OUTBOUND MARKETING
Outbound marketing was typically the traditional approach to market business
and this was known as interruption based marketing. This is where to broadcast the message
through advertising and other mediums and try to grab the attention of the user. When
consumers are bombarded with on average 3,000 messages a day , can understand why
this form of marketing is becoming increasingly difficult. It certainly still works in
some cases (for example, it can be very effective with Google advertising) but there are
now other ways that can be more effective.
Inbound marketing is where business provide something of value that attracts
customer. After attracting the customers to know more about the business it is build the
relationship with the customer. After building the relationship and trust then to sell the
products or services to the customers. This form of marketing although difficult to grasp
is becoming increasingly effective.
4.11 TYPE OF AREAS IN INTERNET MARKETING
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Diagram giving an overview of the type of areas in Internet Marketing
Before deciding which methods of online marketing tools to be used by the com-
pany , more effort need to be put on the following to understand the objectives.
 Research – The initial research is to figure out what other competitors are doing
and what is working or not working. Copying the competitor can be easier, still
need to come with the unique plan for the company.
 Strategy – Marketer need to define a clear effective strategy. It’s very easy to waste
time and money on internet marketing, a clear strategy will help with this. How to
attract potential customers, how to engage them, how to keep in touch with them
and how to convert them.
 Branding – Branding is becoming increasingly important in the online world. What
message giving out online? Is the company approachable? Is information clear and
compelling? What’s unique about the offering? Branding consistency is extremely
important in to communicate, what to communicate and how it looks. For example,
always ensure the tools used online to communicate with customers have the same
look and feel as the website.
 Content – Marketer need to have a clear content strategy. Content need to provide
value to the potential customers.
Search Engine Optimisation
Search engines such as Google and Bing (Microsoft’s competing search engine
to Google) index content and try to display the most relevant information to users when
they perform a search. The search engine optimisation process is about ensuring that the
search engines give priority to web pages over other competing pages and there are
many techniques for doing this.
On Page Optimisation
On page optimisation is the process of optimising the content within the web
page to ensure that Google indexes it according to how company want to be indexed.
Google goes through the page to see what is outlined what this page is about and then it
goes through all the content to figure out if it agrees with this. It’s important for Google
to index content in a way that makes the most sense.
For example, If there is a restaurant in Dublin and wanted it to appear high on
rankings within Google when someone typed in ‘restaurant Dublin’ then restaurant would
optimise at least one page on these keywords. This means the name of the optimised
page would contain the words ‘restaurant Dublin’, the title of the post could include this
and any details displayed could display information related to restaurants around Dublin.
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Off page optimisation
When somebody links to the company website, that is like someone giving a vote
for an election. The more relevant votes website get the better. So Google checks to see
who is linking to website and what words they are using to link to website. company need
to get important web pages to link to company using the keywords company want to get
indexed on. It is much better to get 10 links from 10 important and relevant websites
rather than links from 1,000 poor quality sites.
Social Media
Social media is very simple. It’s really about people networking online and how
to communicate with people online. People are networking online with a range of dif-
ferent tools such as LinkedIn, Face book,Orkut and Twitter. As people spend more time
on social networks they are starting to recommend products and services, share out
information on their holidays, trips, products purchased and much more. Following are
the most popularly used social media sites to generate sales or to create awareness
about the products.
1. Twitter
Twitter is the answer to the question ‘what are you doing now’. It allows people to
create a text like message of up to 140 characters through a PC or on phone and send it
to followers. It’s a mix of business and social. People could be at home communicating
what they are doing or in work.
It can be a very useful tool to market company’s message to a lot of people at the
same time very quickly. It can also be used to find out if people are actively looking for
companys services. For example, recently I searched for ‘recommend restaurant dublin’
and within 1 hour of me submitting this somebody was looking for a restaurant in Dublin.
So it can be very useful, however, until you master the tool it can be very time consum-
ing to use.
2. LinkedIn
LinkedIn is a business networking tool with over 150 million users worldwide
and over 66% of them are considered influencers or decision makers. User need to
create personal profile on the site and then network with other people. One big advantage
with LinkedIn is that when user connect with someone through the site they become part
of user network and members are made aware of who is in their network. This can be a
very powerful way of getting warm leads.
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3. Face book
Face book is a social network with over 800 million users and is ideal for
companies in the services industry to promote their business. User can create a personal
profile to connect with friends and a business page to connect with the customers. By
marketing through business page user can communicate directly to the fans of that page.
E-mail marketing
Although there is a lot of talk about social media, e-mail is still the primary form
of online communication for a lot of people. This may change in years to come as social
media becomes more important but at the moment e-mail marketing is still quite effective
at keeping in touch. For items such as newsletters there are many cost effective tools
available that will help manage this process and most of these tools will allow marketer
to customise the look of the newsletter so that it is consistent with brand. For example,
Mail Chimp allows marketer to fully customise the look and feel of the newsletter. It
also lets marketer to monitor statistics such as who is opening the newsletter, who deleted
it, who clicked on a link and browsed the website.
This is extremely important information to monitor as company want to
continuously tweak company’s newsletter to make it more effective. If marketer find
that people are more engaged with any particular type of information they provide then
provide a lot more of it.
Online Advertising
Although permission based marketing (e.g. social media) is growing and
advertisements are not as appealing as they were, targeted online advertising can still be
very effective. The following gives an outline of some of the most popular ways of
advertising products online.
Google Ad words
When people search on Google, generally see advertisements to the right hand
side of the search and sponsored advertisements across the top.
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Companies are paying for these advertisements based on a cost per click or cost
per impression basis.
 Cost per click — This means that company pay when somebody clicks on the
advertisement but don’t pay for it to be displayed.
 Cost per impression —This means company pay an amount every time the adver-
tisement is displayed 1,000 times irrespective of whether someone clicks on the adver-
tisement or not.
When company create an advertisement, it decide when the advertisement will
appear and this is based on matching up with keywords that people use for searching. So
if company sell boating tours on the Shannon it wants advertisement to appear when
somebody searches ‘boating tour shannon’. The price of this advertisement is based on
an auction so it is more expensive if there are a lot of companies that are also interested
in these keywords and want advertisements based on this.
There are many other factors that Google also take into account when pricing the
advertisement. For example, It assigns a quality score to advertisement. If quality score
is high then advertisement cost could be lower compared to another competitor with a
similar ad with a lower quality score. The quality score is calculated using a variety of
factors and probably the most important is the click through rate. If ad is displayed and
nobody clicks on it then click through rate is 0%. Google now thinks ad is not relevant
so penalises for this.
Banner Advertisements
A banner advertisement is an advertisement that appears on the website that is
clickable. When user click on the advertisement ,users are brought to the website for
the company that is paying for the advertisement. Here is an example of a banner adver-
tisement on the RTE website.
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Typically the banner advertisement would be graphical and user pay on a pay per
click or pay per impression basis.
Facebook Advertising
In Face book marketer can run targeted advertising based on a cost per click or
cost per impression basis. The big advantage with Face book is that marketer can target
in on exactly who want to see the advertisements. For example, if company ran an adven-
ture centre and the typical profile of a customer is a male between 30 and 45 that live in
Dublin it could just advertise to them. When they login to Face book they see these
advertisements on the right hand part of the screen.
Affiliate Marketing
Affiliate marketing is using the other websites to help drive traffic to our website.
The source of the traffic is called the affiliate. The affiliate then gets payment for driving
this traffic depending on the result. For example, the affiliate may only get paid if they
drive traffic to our website and this ends up in a sale.
There are many forms of affiliate marketing and sometimes these cross over with other
forms of advertising. Here are some examples:
• User write a blog post about a hotel where he or she stayed in and the link to the
hotel is an affiliate link. So if user go to the hotel and book a room then the source of
this traffic will get paid an amount.
• Company send an e-mail newsletter and include an affiliate link in this content.
Website
Website is a key internet marketing tool where company can promote its busi-
ness and sell products and services. When company does all the forms of online promo-
tion and drive traffic back the website. If this is not a sale then at a minimum company
need to capture their details so that it can continue to market to them.
So the design of the website is very important. It should look professional to
follow all the appropriate usability guidelines to produce business. A key term on a website
is a “call to action”. For example ‘Book Now’ is a call to action to make a booking. If
they are not ready to book now maybe to provide another call to action to sign up to a
newsletter or become a fan on Facebook. At least then to have another opportunity to
market to them.
There are many websites out there that are just brochure websites. They tell how
good the company is and all the great services they provide but that is not enough any
more. company need to provide some value to people arriving at their website. The in-
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formation should help the customer to make a booking at hotel, a table at restaurant, or
an activity at adventure centre. If user is making a booking at hotel let them know what
other people have said about the hotel, let them know all the facilities nearby and pro-
vide them with a video where they really get a feel for what the place is like. Recommen-
dations from other people are extremely important online.
Online PR
PR is a very effective tool for promoting business and there are many ways of
achieving this.
The following gives some examples:
 Irishpressreleases.com – This is a site that the press monitor for any Irish press
releases .
 Guest Blog Post – Instead of writing a blog post (article online) on own website,
why not find another popular blog that is related to the business and write a post
for them. That is good PR for which also provide a link back to website that helps
with rankings on the search engines.
 Article writing – There are many sites online that allows to write articles and these
articles are read and distributed by many people.
Other Forms of Internet Marketing
Internet Marketing contains a lot of different areas and it is continuously chang-
ing. The following are some newer forms of internet marketing which are practiced in
today’s business.
Location Based Check-ins
There are many sites (e.g. Foursquare, Face book places) that are providing the
ability for people to check in to any location they are. When they check in they see who
else is checked in, what there is to do in an area, and much more.
Mobile Marketing
The mobile device has become increasingly popular over the last few years and
with a mobile being with customers 24 /7 and 365 days it is not something to ignore.
There are lots of new and innovative ways of using the mobile to promote products and
services. For example:
• Mobile Applications – marketer can develop mobile specific applications (e.g.
iPhone Applications) that can run on the mobile and can be used to promote service.
For example if a hotel in Bangalore wants to promote maybe it will have an applica-
tion for tourists which shows where to go and what do to.
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• Mobile website –Making the websites to work on mobile platform is also very es-
sential.
• Mobile location based services – Increasingly people will use their mobile device
to see what’s going on in the area, what activities are running to-day etc. It will be
important to be part of this conversation.
14.12 INTRODUCTION TO VIRAL MARKETING

“Viral marketing” is an advertising strategy in which people pass on a marketing
message to others. For example, when Hotmail ?rst began to offer free email addresses,
the following was included at the bottom of every message: When people received emails
from their friends and family that were already using Hotmail, many of them would sign
up for their own accounts. Later on, these new Hotmail users would send out their own
emails, thereby continuing the cycle.
NEED FOR VIRAL MARKETING
The proliferation of marketing and advertising, coupled with the blitz of millions
of media channels in today’s world, has given cause for consumers to tune out and
effectively avoid a great deal of traditional supplier driven messaging. The creation of
technologies such as PVRs, satellite radio and Internet ad blocking software are driving
a fundamental shift in the way the public consumes media and the advertising often tied
to it. Television ads, radio spots, online ads and even emails are facing increasing
competition for effectively capturing the viewer’s attention and provide positive ROI
for the marketer.
This competition, coupled with the rising cost of media buys, has caused marketers
to search for an alternative means to reach the customer. Viral marketing is an attractive
solution because it utilizes the free endorsement of the individual rather than purchase
of mass media to spread the word. Because the distribution model is free, viral can
potentially be lower cost and more effective than traditional media.
ADVANTAGES OF VIRAL MARKETING
 Cuts through the clutter of traditional advertising, allowing marketers to effectively
reach the audience.
 Doesn’t require a product with a popularity in order to raise awareness, generate
buzz, and kick-start peer-to-peer spread. Instead, the viral campaign’s communication
agent is the element that needs a element of interest.
 Unlike traditional advertising viral is not an interruptive technique. Instead, viral
campaigns work the Internet to deliver exposure via peer-to-peer endorsement. Viral
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campaigns, whether ultimately liked or disliked, are often welcomed by the receiver.
The focus is on campaigns with material that consumers want to spend time interacting
with and spreading proactively.
DISADVANTAGES OF VIRAL MARKETING
Viral marketing, like all marketing is hit or miss. However, viral marketing by
nature is often more risky or controversial than traditional marketing. If done improp-
erly viral marketing can backfire and create negative buzz.
4.13 GUERRILLA MARKETING
Guerrilla Marketing is an advertising strategy that focuses on low-cost uncon-
ventional marketing tactics that yield maximum results. The original term was coined
by Jay Conrad Levinson in 1984 in the book ‘Guerrilla Advertising’. The term guerrilla
marketing was inspired by guerrilla warfare which is a form of irregular warfare and
relates to the small tactic strategies used by armed civilians. Many of these tactics in-
cludes ambushes, sabotage, raids and elements of surprise. Much like guerrilla
warfare, guerrilla marketing uses the same sort of tactics in the marketing industry.
This alternative advertising style relies heavily on unconventional marketing strat-
egy, high energy and imagination. Guerrilla Marketing is about taking the consumer by
surprise, make an indelible impression and create copious amounts of social
buzz. Guerrilla marketing is said to make a far more valuable impression with consum-
ers in comparison to more traditional forms of advertising and marketing. This is due to
the fact that most guerrilla marketing campaigns aim to strike the consumer at a more
personal and memorable level.
Guerrilla marketing is often ideal for small businesses that need to reach a large
audience without breaking the bank. It also is used by big companies in grassroots cam-
paigns to compliment on-going mass media campaigns. Individuals have also adopted
this marketing style as a way to find a job or more work.
MEANING OF GUERRILLA MARKETING

A marketing tactic in which a company uses surprise and/or unconventional inter-
actions in order to promote a product or service. Guerrilla marketing is different than
traditional marketing in that it often relies on personal interaction and has a smaller
budget, and it focuses on smaller groups of promoters that are responsible for getting
the word out in a particular location rather than on wide-spread media campaigns. An
unconventional way of performing marketing activities on a very low budget.
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Guerrilla marketing is quite different from traditional marketing efforts. Guer-
rilla marketing means going after the conventional goals of profits, sales and growth but
doing it by using unconventional means, such as expanding offerings during gloomy eco-
nomic days to inspire customers to increase the size of each purchase.
Instead of asking to invest money, guerrilla marketing suggests to invest time,
energy, imagination and knowledge instead. It puts profits, not sales, as the main yardstick.
It urges that grow geometrically by enlarging the size of each transaction, having more
transactions per year with each customer, and tapping the enormous referral power of
current customers. And, it does it through one of the most powerful marketing weapons
around—the telephone.
The telephone is a remarkably effective follow-up weapon. Don’t use the phone
to follow up all business mailings to customers, but research has proved that it will
always boost sales and profits. Sure, telephone follow-up is a tough task. But it works.
E-mail ranks up there with the telephone, possibly even out outranking it. It’s
inexpensive. It’s fast. It helps strengthens relationship.
Instead of telling whole story with other marketing, use that other marketing to
direct people to companys site. Then, use the site to give a lot of information and advance
the sale to consummation. A key to online success is creating a brief and enticing e-mail
that directs readers to a website that give enough information for a person to make an
intelligent purchase decision.
Guerrilla marketing preaches fervent follow-up, cooperation instead of
competition, “you” marketing rather than “me” marketing, dialogues instead of
monologues, counting relationships instead of counting sales, and aiming at individuals
instead of groups.
All guerrillas realize that the process of marketing is very much akin to the pro-
cess of agriculture. Their marketing plans are the seeds they plant. Their marketing ac-
tivities are the nourishment they give to each plant. Their profits are the harvest they
reap. They know those profits don’t come in a short time. But come they do start with a
plan and commit to it.
Guerrillas know they must seek profits from their current customers. They wor-
ship at the shrine of customer follow-up. They are world-class experts at getting their
customers to expand the size of their purchases. Because the cost of selling to a brand-
new customer is six times higher than selling to an existing customer, guerrilla market-
ers turn their gaze from strangers to friends. This reduces the cost of marketing while
reinforcing the customer relationship.
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When customers are confronted with their daily blizzard of junk mail and un-
wanted e-mail, mailing piece won’t be scrapped with the others and e-mail won’t be
instantly deleted. After all, these customers knows their company emails and identifies
and trust those emails. So they’ll be delighted to purchase—or at least check out—that
new product or service offering. They’ll always be inclined to buy from a company they’ve
patronized.
Guerrillas are able to think of additional products and services that can establish
new sources of profits to them. They’re constantly on the alert for strategic alliances—
fusing marketing efforts with others in order to market aggressively while reducing
marketing investment.
The internet and bookstore are teeming with a treasure trove of marketing tactics
that can help to discover smart guerrilla marketing tactics. But learning about them is
only half the battle. So practicing is required to get more out of this strategy.
What Is Guerrilla Marketing?
Business competition is at an all-time high these days. Businesses want consum-
ers to spend their money on their products, so consumers receive a lot of junk mail,
spam email and unwanted phone calls. Consumers are so used to these traditional tactics
that businesses sometimes have to think of other ways to get their attention.
Guerrilla marketing is the act of executing an unusual or unexpected marketing activ-
ity in a common, everyday place in order to generate a buzz for products or services. The
main point of guerrilla marketing is to get the business’s name in front of as many people
as possible in an unexpected way. Guerrilla marketing is usually a low or no-cost form
of marketing that can reap substantial profits if implemented correctly.
Guerrilla marketing campaigns demonstrate original ideas in places that are not
publicly accepted to be suitable and traditionally appropriate for advertisements, places
where ads would appear to be unexpected. For instance, instead of using an escalator,
Volkswagen created a “fast lane” slide that gets the traveller to the bottom of the stairs
quickly in the central metro station of Brussels. The slide was a reflection of Volkswagen
cars’ quality and safety. The more customers are fascinated, excited or even entertained
by the advertisement, the longer it will remain in their memory. This is dominantly what
Guerrilla’s strategy aims at - surprise effect. Like in every other form of marketing, it is
important to know the customer, thus marketing idea and human nature should work to-
gether.
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GUERRILLA MARKETING STRATEGIES
1. PRICE DISCOUNT STRATEGY
The challenger can sell a comparable product at lower price. It is apparent in
price wars in airlines, tariff wars in telecom industry.
2. CHEAPER GOODS STRATEGY
The idea is to offer an average or low quality product at much lower price. This
works when the buyer is interested only in price.
3. PRESTIGE GOODS STRATEGY
The challenger can launch a higher quality product and charge a higher price than
the leader.
4. PRODUCT PROLIFERATION STRATEGY
Challenger can attack the leader by launching a larger product variety, thus offer-
ing more choice to the buyer.
5. PRODUCT INNOVATION
6. IMPROVED SERVICE STRATEGY
7. DISTRIBUTION INNOVATION STRATEGY
Developing new channels of distribution. Like direct selling to customers.
8. MANUFACTURING COST REDUCTION STRATEGY
Employing lower manufacturing cost through more efficient purchasing.
9. INTENSIVE ADVERTISING PROMOTION
The challenger engages in a rigorous advising program.
ELEMENTS OF GUERRILLA MARKETING/GUERRILLA MARKETING
WEAPONS
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OUT-OF-HOME WEAPONS
As the name “out-of-home” suggests, these weapons refer to marketing activities
that are actually realized at public locations. At best it does not only catch the interest of
people who pass by, but media interest as well. Newspaper reports about the action can
create extra publicity for the advertised company and stimulates that people talk about
the product. The most successful weapons in the category out-of home are Guerilla
Sensation, Ambient Media, and Ambush Marketing.
1. AMBIENT MARKETING
The term became well-known in the 1990s. Ambient Media refers to non-traditional
out-of home advertising. While other out-of-home Marketers advertise on large-scale
billboards, ambient advertisements are posted on manhole covers, cranes, pizza cartons,
free postcards in bars and so on. They are all a little more unusual displays.
2. GUERILLA SENSATION
Guerilla Sensation is very similar to Ambient Marketing. Therefore it is easier to
show the difference. Ambient Marketing positions advertising at unusual places. Hereby
the main focus is not necessarily on the idea, but on the advertising space itself. People
are confronted with advertisements where and when they do not expect it. In general
Guerilla Sensation works with the same principle, but it is only used on a very limited
number of events and activities.
3. AMBUSH MARKETING
It stands for a sneaky out-of-home marketing method, which promotes a brand at
huge events without paying a sponsorship fee. At many major events one brand of a par-
ticular category pays a high price to be the exclusive sponsor, whom leaves their com-
petitors be left in the dark.
Ambush Marketers then still find a way to make notice of their brand in connec-
tion with the event, since it attracts the attention of thousands of visitors and even view-
ers on TV.
NEW MEDIA WEAPONS
New technologies change our lives and they often make it easier due to mobile
phones, internet, unlimited information, and shopping possibilities that enable customers
to access the resources of the world with a click on the computer mouse. Of course this
also gives businesses the possibility to use the advantages that technology provides.
Two very strong instruments that use the modern possibilities are described below: Viral
Marketing and Guerilla Mobile.
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1. VIRAL MARKETING
On the Internet, viral marketing is any marketing technique that induces Web sites
or users to pass on a marketing message to other sites or users, creating a potentially
exponential growth in the message’s visibility and effect. One example of successful
viral marketing is Hotmail, a company, now owned by Microsoft that promotes its service
and its own advertisers’ messages in every user’s e-mail notes.
2. GUERILLA MOBILE
Not only has the PC offered unlimited possibilities to marketers. Since the number
of mobile phones exceeds the number of inhabitants in many countries, the cell phone is
a permanent companion of prospects. Therefore it was only a matter of time until
marketers took the opportunity to reach customers and prospects at any place at any
time. The wireless connection provides the possibility to present marketing messages
in different ways via SMS, MMS, Bluetooth, or Infrared.
LOW BUDGET WEAPONS
This Weapon refers to Guerilla Marketing for new, small, and medium-sized
companies, who only possess a small marketing budget. Like Levinson already pointed
out in the 1980’s that does not necessarily mean that those companies have a disadvantage
compared to financially strong competitors. But since their capital is low, the top priority
is to use it as efficiently as possible.
Guerilla Marketing should put this into practice by focusing on the local culture
with its geographical, sportive, social network, its rituals, needs, habits, norms, traditions,
and values. Clever ideas appear through unconventional methods which are supposed to
catch the attention of the target group.
4.14 NEURO MARKETING

Neuro Marketing is founded by Gerry Zaltman in 1999 as a marketing tool. There
has been a real explosion of abilities of neuroscientists to directly study brain activities
related to frequency, time and the space where these activities take place. Psychologists
and psychiatrists were quick to apply the new technology in order to better understand
human brain, emotions and insights of individuals.
Soon the marketing experts realised the potential of such technologies and,
associated with neuroscientists, created “neuromarketing”. Neuromarketing can be
defined as a marketing branch using neuroscientific methods and techniques for analysing
and understanding human behaviour with regard to market and important marketing issues.
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The fact that the marketing balances between the products/services the marketing
experts want to sell and the consumers’ desires and needs, it is of paramount importance
for marketing experts to know and understand consumers. In the “traditional” marketing
these attempts would use the form of interviews, focus groups, research, observations…
Even though these methods are very useful and usable, they have a pronounced
shortcoming: they are not enough precise and accurate. The most frequent reason for
their insufficient accuracy lies in respondents and their inaccurate/untrue responses.
The reason of their insufficient accuracy was discovered by neuroscientists who
found out that “what people say is often contradictory to the activities of the human
brain”. To put it more straightforwardly, what we say and what our brain says are two
different things. Ariely and Berns assume that the brain scanning techniques can provide
indications regarding the basic preferences of an individual, which are more accurate
than the data gathered by standard market research as these data are subject to prejudice
due to a subjective approach to values. If this is true, the concepts and prototypes of the
products could be quickly tested and the products which are not “promising” could be
eliminated. This would result in a more efficient allocation of resources that could be
used only for “promising” products.
TECHNIQUES AND METHODS OF NEURO MARKETING
There are a number of techniques and methods that neuromarketing uses for
detecting hidden information. Lewis (2004) affirms two most important techniques of
analysing human brain activities that are used in neuromarketing - fMRI and EEG:
fMRI - Functional magnetic resonance imaging is the most frequent technique of
scanning human brain in neuromarketing. The functional magnetic resonance is a technique
using powerful magnetic and radio waves to create high-quality brain images.
Ariely and Berns (2010) state that this technique uses MRI scanner to measure
the level of oxygen in blood in certain brain areas. Changes in the oxygen level correlate
with brain activity. The more active is a brain area, the more oxygen it requires, and this
is recorded in minute detail by the scanner. The result is most frequently a fragmented
brain area shown in colours. But Lewis says that, regardless the undoubtedly “seducing”
colourful brain images produced by the scanner and displayed in high resolution by the
computer, we must not be tempted to interpret them without thorough understanding of
the analytic methods through which these images are generated.
According to Ariely and Berns, the second most frequently used method is EEG -
electroencephalography. The method uses electrodes placed on the skull to assess the
electrical activity of the neurons. Owing to a very high temporal resolution (millisecond),
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EEG can detect a very short neuronal “spike”. As Lewis points out, EEG technique is the
most practical among the currently developed method of brain scanning; it is the most
cost-effective and the most suitable, due to the simplicity of use and compactness of
the apparatus which is able to make a quantitative assessment of brain activities through
the high level of sensitivity and temporal resolution.
4.15 INTRODUCTION TO CUSTOMER RELATIONSHIP MARKETING

(CRM)
Customer Relationship Marketing is the fourth significant post-war wave. While
marketers have long viewed brands as assets, the real asset is brand loyalty. A brand is
not an asset. Brand loyalty is the asset. Without the loyalty of its customers, a brand is
merely a trademark, an own able, identifiable symbol with little value. With the loyalty
of its customers, a brand is more than a trademark. A trademark identifies a product, a
service, a corporation. A brand identifies a promise. A strong brand is a trustworthy,
relevant, distinctive promise. It is more than a trademark. It is a trust mark of enormous
value. Creating and increasing brand loyalty results in a corresponding increase in the
value of the trust mark.
The new emphasis on building brand loyalty is encouraged by the fact that it costs
four-to-six times more to convert a customer than it does to retain one. One study,
conducted by Jagdish N. Sheth, specifically concluded that it “costs five times as much
to replace a typical customer as it does to take actions that would have kept the customer
in the first place.”
Customer Relationship Marketing recognizes that it is not enough to attract buyers. The
CRM goal is to convert buyers into loyalists and loyalists into enthusiasts/evangelists.
For brands whose bad reputations result not in loyalty but in rejection or worse, the
challenge is to neutralize brand terrorists, a disloyal group defined by Heskett, et al, in
“Putting the Service-Profit Chain to Work” as “customers so unhappy that they speak out
against a poorly delivered service (or product) at every opportunity.” Brand terrorists so
relish their mission that their fervour often outlives the source of their enmity.
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This loyalty ladder is the heart of CRM. Customer Relationship Marketers focus
their resources on moving their customers up the loyalty ladder. This new view of mar-
keting is not merely a better way to practice marketing; it will require fundamental changes
in marketing practice.
THE FOUR PILLARS OF CRM
These are the Four Pillars of Customer Relationship Marketing: Knowing how to
identify, attract, defend and strengthen brand loyalty is the new marketing imperative.
According to William Moran, “Loyalty is the key ingredient of brand equity and to the
brand’s future marketing profitability.” He also points out that, “ core customers are key
target.” Furthermore, while advertising can change non-user attitudes, “The most important
task of advertising is to affirm and reinforce its core customers’ existing convictions
about the brand. Non-users will be tempted more by price incentives than by advertising.
Then, the brand experience itself will be the most effective attitude-changer for them.
After that, it is advertising’s job to articulate for them the reasons why they find the
brand attractive.” Finally, he concludes that, “The job of advertising is to build and harden
the core.” The heart of CRM is customer loyalty, then its brain is VOAC (value of a
customer).
Campbell has segmented customers into four groups most profitable, profitable,
and borderline and avoid. Thus, the company learned that only 4 percent of brand users
fell into the most profitable group, which in turn accounted for only 15 percent of sales
volume. No matter, for Campbell’s also learned its most profitable group delivered three
times the profit of the breakeven borderline group. The second-most profitable group
accounted for another 6 percent of the user total and only 9 percent of the volume.
Customer Relationship Marketing has many implications for market planning,
employee training, advertising, promotion, public relations, direct marketing, package
design, and so on. Customer Relationship Marketing requires us to refocus our attention
on the economic value of brands. CRM demands that we consider the price of brand
exploitation versus the benefits of brand building. The Customer Relationship Marketer’s
goal is to win and keep brand loyal customers. Building enduring, profitable, growing
brands is all about creating, nurturing, defending and strengthening loyal brand
relationships. Conquest, acquisition, and trial are important for growth. But, when studies
show that it costs four to six times as much to get a new customer as it does to keep a
customer loyal, we must focus on the new marketing imperative.
The goal is not merely to attract customers. It is to attract and retain customer
loyalty. The loyal customer is the most profitable customer, yet the focus is still often
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only on attracting new customers. Focusing on customer acquisition without paying
sufficient attention to strengthening customer loyalty is one way to grow sales, but it is
not the way to grow sales profitably. The Brand Loyalty Marketer knows that the real
goal must be to increase sales volume and brand value at the same time.
CRM PROCESS
Several scholars studying buyer-seller relationships have proposed relationship
development process models . Building on that work we develop a four-stage CRM process
framework comprised of the following four sub-processes: a customer relationship
formation process; a relationship management and governance process; a relational
performance evaluation process, and a CRM evolution or enhancement process. Figure
1 depicts the important components of the process model.
Figure 1, CRM process

The CRM Formation Process
The formation process of CRM refers to the decisions regarding initiation of
relational activities for a firm with respect to a specific group of customers or to an
individual customer with whom the company wishes to engage in a cooperative or
collaborative relationship. Hence, it is important that a company be able to identify and
differentiate individual customers. In the formation process, there are three important
decision areas: defining the purpose (or objectives) of engaging in CRM; selecting parties
(or customer partners) for appropriate CRM programs; and developing programs (or
relational activity schemes) for relationship engagement with the customer.
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The Purpose of CRM and Its Operational Goals. The overall purpose of CRM is
to improve marketing productivity and to enhance mutual value for the parties involved
in the relationship. Improving marketing productivity and creating mutual values can be
achieved by increasing marketing efficiencies and/or enhancing marketing effectiveness.
By seeking and achieving such operational goals as lower distribution costs, streamlining
order processing and inventory management, reducing the burden of excessive customer
acquisition costs, and by considering the economics of customer retention, firms can
achieve greater marketing efficiencies. They can also enhance marketing effectiveness
by carefully selecting customers for their various programs, by individualizing and
personalizing their market offerings to anticipate and serve the emerging needs of
individual customers, by building customer loyalty and commitment; by partnering to
enter new markets and develop new products, and by redefining the competitive playing
field for their company. Thus, stating the objectives and defining the purpose of CRM in
a company helps clarify the nature of the CRM programs and activities that ought to be
performed by the partners.
The purpose of CRM is to identify the relationship partners with the necessary
expectations and capabilities to fulfill mutual goals an easier task. Furthermore, it helps
in the evaluation of the CRM performance. The results achieved can be compared to the
objectives. These objectives can be specified as financial goals, marketing goals, strategic
goals, operational goals, and organizational goals.
Similarly, in the mass-market context, consumers expect to fulfill their goals
related to efficiencies and effectiveness in their purchase and consumption behavior.
Sheth and Parvatiyar contend that consumers are motivated to engage in relational behavior
because of the psychological and sociological benefits associated with reduction in
choice decisions. In addition, to their natural inclination to reduce choices, consumers
are motivated to seek the rewards and associated benefits offered by CRM programs.
Customer partner selection (or parties with whom to engage in cooperative or
collaborative relationships) is another important decision in the relationship formation
stage. Even though a company may serve all customer types, few have the necessary
resources and commitment to establish CRM programs for all. Therefore, in the initial
phase, companies have to decide on which customer types and specific customers or
customer groups to focus their CRM efforts on. Subsequently, when a company gains
experience and achieves successful results, the scope of CRM activities can be expanded
to include other customers in the program or to include additional programs.
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Although partner selection is an important decision in achieving CRM goals, not
all companies have a formalized process of selecting customer partners. Some select
customer partners by following the intuitive judgments of their senior managers and
select other partners from those customers who demand to be selected. On the other
hand, other companies do have formalized processes of selecting relational partners
through the use of extensive research and the evaluation of chosen criteria. The criteria
for partner selection vary according to company goals and policies. They can range from
a single criterion such as the revenue potential of the customer to multiple criteria that
include variables such as customer commitment, resourcefulness, management values,
technological and market leadership, national and global presence, strategic value, and
complementary business processes. When several criteria are applied and a complex
model developed, it is necessary to test its validity based on strategic fit and the
distinctive competitive advantage to the firm.
4.16 SUMMARY
Today market has become more competitive and competitive due to adoption of
technology and innovation techniques. Most of the companies facing tuff competition.
Those who are able to strategic advantage such companies are able to withstand in the
market. Marketing has made tremendous changes in field because of marketing trends
like online marketing, direct marketing, digitalization, social media etc; this has made
marketing towards upper trend.

1. What is Marketing Myopia ?
2. Explain the Emerging Trends in Marketing.
3. Discuss the Ethical and Legal Aspects of Marketing.
4. Write a note on Green Marketing.
5. Describe the importance of CRM.
4.18 REFERENCES
New Delhi, 2013.
Irwin,2009.
63
India, 2014.
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UNIT - 5 : MARKETING PLANNING
Structure:
5.0 Objectives
5.1 Introduction
5.2 Meaning and Definitions of Strategic Marketing Planning
5.3 Characteristics of Marketing Planning
5.4 Importance of marketing Planning
5.5 Marketing planning process
5.6 Concept of Marketing environment
5.7 Environmental Factors affecting marketing firm
5.8 Summary
5.10 References
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5.0 OBJECTIVES
• Define the meaning of marketing planning
• Explain the concept of strategic marketing
• Describe the process of marketing planning
• Highlight the factors of environment
5.1 INTRODUCTION
Marketing planning is a part of total business planning of the company. Marketing
planning has a vital role in formulating overall objectives and goals. With the help of
marketing planning a company can design suitable policies, programmers and strategies
for the effective achievement of pre-determined objectives and goals. Use of planning
in marketing can be of immense help to management. Marketing planning is a managerial
task of determining the future course of marketing operations and activities by analyzing
the past and projecting the future goals and objectives. Marketing plans broadly may be
divided into two main categories: time horizon-based marketing plans and organization
structure-based marketing plans. Marketing plan is a comprehensive blueprint which
outlines an organization’s overall marketing efforts. A marketing process can be realized
by the marketing mix, which is outlined in step 4. The last step in the process is the
marketing controlling.
The marketing plan can function from two points: strategy and tactics (P. Kotler,
K.L. Keller). In most organizations, “strategic planning” is an annual process, typically
covering just the year ahead. Occasionally, a few organizations may look at a practical
plan which stretches three or more years ahead. Marketing Planning involves setting
objectives and targets, and communicating these targets to people responsible to achieve
them. It also involves careful examination of all strategic issues, including the business
environment, the market itself, the corporate mission statement, competitors, and
organisational capabilities.
5.2 MEANING AND DEFINITIONS OF STRATEGIC MARKETING PLANNING
Marketing Planning is the process of developing marketing plan incorporating
overall marketing objectives, strategies, and programs of actions designed to achieve
these objectives.”
According to Newman, “Planning is deciding in advance what is to be done; that
is a plan is a projected course of action.
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Haiman has described it as “Planning is deciding in advance what lobe is done.”
In the words of Terry, “Planning is the selection and relating of facts and the
making and using of assumptions regarding the future in the visualization and formulation
of proposed activities believed necessary to achieve desired results.
The American Marketing Association has described marketing planning as, “The
work of setting up objectives for marketing activities and of determining and scheduling
the steps necessary to achieve such objectives.
5.3 CHARACTERISTICS OF MARKETING PLANNING

The main following characteristics of marketing planning are:
 Marketing planning is a managerial function.
 Planning is in essence the exercise of foresight.
 It involves an analysis of past events and projection of future events.
 Marketing planning is determination of the future course of marketing
operations and activities.
 Marketing planning is a goal-directed activity.
 Marketing planning has a specific dimension of time.
 Marketing planning is a continuous process.
 Marketing planning is optimum use of company Resources to achieve better results.
 Marketing planning is to facilitate executive actions.
 A marketing plan contains various elements. These elements are objectives, goals and
targets; policies; programmes; strategies; methods; rules; procedure and budget.
5.4 IMPORTANCE OF MARKETING PLANNING

A marketing company can obtain enormous benefits by planning its marketing
operations. In view of the increasing competition and decreasing profit margins the role
of marketing planning is becoming indispensable. The importance of marketing planning
may be discussed under the following headings:
1. Customer-Oriented Marketing
In the situation of buyers’ markets a marketing company has to keep ‘customers’
in the focal point of entire marketing operations. Whether it is product, price of product,
physical distribution of promotional activities, are designed with the help of planning to
provide maximum customer satisfaction. Thus, marketing planning is an effective tool
to implement customer-oriented marketing.
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2. Identification of Opportunities and Problems
In the process of planning efforts are made to identify the existing market
opportunities and problems. This exercise may help to formulate and evolve best possible
solutions for taking full advantage of opportunities and an effective way to deal with
problems.
3. Way to Goal-directed Activities
The purpose of marketing planning is to formulate goals, objectives and targets
with regard to sales, market share, profit margin etc. With the setting of goals and ob-
jectives, entire activities and operations of a marketing company become goal-oriented.
It minimises the wastage of efforts and duplication of efforts.
4. Full Exposure to Management and Employees
Goals and targets fixed in the planning process provide full exposure to
management and employees. Though the targets are set keeping in view the average
performance level, they are made challenging. Thus, everybody has to make some exfra
efforts to fulfil the goals and targets. This exposure is also helpful in the further
development of management and employees.
5. Increases Productivity and Profitability
Marketing planning integrates the resources of a firm and its marketing
opportunities. The purpose of planning is to make maximum use of each resource of the
company, in order to capture maximum market coverage. Optimum use of various
resources leads to higher profitability through marketing operations.
6. Boosts Internal Communication
Preparation of a marketing plan is a joint activity. Every department of the company
communicates desired and relevant information for the purpose of the preparation of
plans. In the inter-departmental meetings the different departments marketing company,
7. Facilitates Co-ordination
Marketing planning facilitates co-ordination in a company both horizontally and
vertically. Persons located at different organisational levels in the marketing company
know very well through the market plan as to what the others will be doing during the
coming plan period, and what is desired of him. This facilitates greater coordination in
the company’s activities.
8. Designing of Suitable Policies and Strategies
In the process of marketing planning, basic guidelines are provided in the form of
policies for the performance of marketing activities. Marketing plan also designs suit-
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able strategies in ihe form of action plans to achieve goals and targets in an effective
manner.
9. Cost Reduction
Due to integrated functioning, optimum use of the resources of the company is
made possible by marketing planning and the cost of marketing operations can be con-
siderably reduced. Concentrating on achieving the best at minimum cost, the marketing
planning tends to bring economy in operation.
10. Provides Long-term Vision to the Company
In the marketing planning master plans are prepared keeping in view the longtime
marketing objectives and goals. In this exercise a company takes into consideration the
prospective marketing scenario in the coming ten to twenty years. It evaluates marketing
prospects and challenges with the help of long vision. A company can design suitable
policies and strategies in advance to deal with new situations.
11. Essential Prerequisite of Control
A marketing plan sets standards of performance against which the management mea-
sures and evaluates organizational performance. Thus, marketing planning is an essen-
tial prerequisite of control.
5.5 MARKETING PLANNING PROCESS

Marketing planning process is a series of stages that are usually followed in a
sequence. Organisations can adapt their marketing plan to suit the circumstances and
their requirements. Marketing planning process involves both the development of
objectives and specifications for how to achieve the objectives. Following are the steps
involved in a marketing plan.
1. Mission
Mission is the reason for which an organisation exists. Mission statement is a
straightforward statement that shows why an organisation is in business, provides basic
guidelines for further planning, and establishes broad parameters for the future. Many
of the useful mission statements motivate staff and customers.
2. Corporate Objectives
Objectives are the set of goals to be achieved within a specified period of time.
Corporate objectives are most important goals the organisation as a whole wishes to
achieve within a specified period of time, say oneorfiveyears.
All the departments of an organisation including marketing department works in
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harmony to achieve the corporate objectives of the organisation. Marketing department
must appreciate the corporate objectives and ensure its actions and decisions support
the overall objectives of the organisation.
Mission statement and corporate objectives are determined by the top level
management (including Board of Directors) of the organisation. The rest of the steps of
marketing planning process are performed by marketing department. All the actions
and decisions of the marketing department must be directed to achieve organisation
mission and its corporate objectives.
3. Marketing Audit
Marketing audit helps in analysing and evaluating the marketing strategies,
activities, problems, goals, and results. Marketing audit is done to check all the aspects
of business directly related to marketing department. It is done not only at the beginning
of the marketing planning process but, also at a series of points during the implementation
of plan. The marketing audit clarifies opportunities and threats, so that required alterations
can be done to the plan if necessary.
4. SWOT Analysis
The information gathered through the marketing audit process is used in develop-
ment of SWOT Analysis. It is a look at organisation’s marketing efforts, and its strengths,
weaknesses, opportunities, and threats related to marketing functions.
 Strengths and Weaknesses are factors inside the organisation that can be controlled
by the organisation. USP of a product can be the example of strength, whereas lack of
innovation can be the example of weakness.
 Opportunities and Threats are factors outside the organisation which are beyond
the direct control of an organisation. Festive season can be an example of opportu-
nity to make maximum sales, whereas increasing FDI in a nation can be the example
of threat to domestic players of that nation.
5. Marketing Assumptions
A good marketing plan is based on deep customer understanding and knowledge,
but it is not possible to know everything about the customer, so lot of different things
are assumed about customer.
For example :
Target Buyer Assumptions - assumptions about who the target buyers are.
Messaging/Offering Assumptions - assumptions about what customers think are the
most important features of product to be offered.
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6. Marketing Objectives and Strategies
After identification of opportunities and challenges, the next step is to develop
marketing objectives that indicate the end state to achieve. Marketing objective reflects
what an organisation can accomplish through marketing in the coming years.
Objective identifies the end point to achieve. Marketing strategies are formed to
achieve the marketing objectives. Marketing strategies are formed to determine how to
achieve those end points. Strategies are broad statements of activities to be performed
to achieve those end points.
7. Forecast the Expected Results
Marketing managers have to forecast the expected results. They have to project
the future numbers, characteristics, and trends in the target market. Without proper fore-
casting, the marketing plan could have unrealistic goals or fall short on what is promised
to deliver.
 Forecasting Customer Response - Marketing managers have to forecast the
response that the average customers will have to marketing efforts. Without some
idea how the marketing will be received, managers can’t accurately plan the
promotions.
 Forecasting Marketing cost - To make the marketing plan stronger, accurate
forecast of marketing cost is required to be done.
 Forecasting the Market - To accurately forecast the market, marketing managers
have to gain an intimate understanding of customers, their buying behaviour, and
tendencies.
 Forecasting the Competition - Forecast of competition like - what they market,
how they market, what incentives they use in their marketing can help to counter
what they are doing.
8. Create Alternative Plan
A alternate marketing plan is created and kept ready to be implement at the place
of primary marketing plan if the whole or some part of the primary marketing plan is
dropped.
9. Marketing Budget
The marketing budget is the process of documenting the expected costs of the
proposed marketing plan. One common method to allocate marketing budgeting is based
on a percentage of revenue. Other methods are - comparative, all you can afford, and
task method.
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10. Implementation and Evaluation
At this stage the marketing team is ready to actually start putting their plans into
action. This may involve spending money on advertising, launching new products,
interacting with potential new customers, opening new retail outlets etc.
The marketing planning process is required to be evaluated and updated regular.
Regular evaluation of marketing efforts helps in achieving marketing goals.
5.6 CONCEPT OF MARKETING ENVIRONMENT
Marketing environment refers to those factors and forces which influence a
company. Marketing companies operate in number of countries and every country has
its own marketing environment. Therefore, marketing companies have to understand and
manage these differences through country specific strategies for the success. Many
companies fail to see change as opportunity. They ignore or resist changes until it is too
late. Their strategies, structures, systems and organizational culture grow increasingly
obsolete and dysfunctional Corporations as mighty as General Motors, IBM and Sears
have passed through difficult times because they ignored macro environmental changes.
Above statement is an eye-opener for the top management of the marketing
Companies. It is in the interest of marketing companies themselves to scan the changes
taking place in macro environmental scenario and adjust their operations and strategies
accordingly. Otherwise, they should be prepared to pay heavy cost. Paramount objective
of each marketing firm is to provide maximum customer satisfaction in the present era
of globalization. Marketing company may provide maximum customer satisfaction when
it is fully aware about the changing marketing environment. In this direction, marketing
environment scanning may be a useful tool.
Marketing environment scanning is a continuing process of gathering information
regarding company’s internal and external environment, analyzing it, forecasting its trend
and impact on the operations arid performance of the company. On the basis of
environment scanning, company may design appropriate strategies to cope itself
effectively with changes taking place in the marketing scenario. With the help of effective
environment scanning marketing company may take full advantages of prevailing
opportunities and minimize negative impact of prospective threats. Therefore, in the
fast changing marketing scenario environment scanning assumes vital significance.
5.7 ENVIRONMENTAL FACTORS AFFECTING MARKETING FIRM
Broadly marketing environment may be divided into two categories—internal and
external. Internal marketing environment is manageable by the management of the
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company, whereas, every company has to adjust itself with external environment.
Marketing environment may be explained through the following factors:
I. External Marketing Environment
Factors included into external environment may be described as universal fac-
tors, These factors are generally uncontrollable by a specific marketing company, but
they are not totally uncontrollable. Each and every factor of external environment does
not affect every marketing company equally. Some factors may be having greater impact
and some may be having marginal impact. In the international marketing, company has to
take into stock of country specific marketing environment in particular and global envi-
ronment in general, to design effective policies and strategies. Marketing company must
try hard to influence its external environment where it is possible. For example, a mar-
keting company may improve its competitive position by appropriate strategic alliances
and joint ventures. Detail description of various factors of external environment is as
under.
(A) External Macro Environment
External Macro environment affects each and every firm equally. External Macro
environment consists following factors:
1. Demography
Demography can be defined as the long term statistical study of different
distributional characteristics of human population regarding specific country or
geographical zone. Demography has a special interest for marketing companies because
people constitute markets. Study of demography includes obtaining data regarding urban-
rural distribution, growth rate of population, age group-wise distribution, rate of mortality
in different age groups and sex-wise distribution of population. Marketing opportunities
are closely related with the size of market. World Development Report, 1996 indicates
that there were 58 countries having population less than one million. Poor countries
with small population cannot be attractive destination for marketing companies. China
and India are destination for international companies due to vast size of their population.
Even Indian rural market is three times greater than total United States’ population.
Countries having negative birth rate cannot be attractive for Johnson & Johnson,
which is the global leader in the area of baby care. Due to declining marketing prospects,
on the other hand, it may be boon to specific industries such as travel agencies, Hotel
industry, restaurants etc.
Major marketing companies in the area of insurance such as L.I.C., A.I.G., Aviva,
I.N.G., Prudential etc. may be deeply concerned with the study of age group-wise
distribution of population and mortality rate for the purpose of calculation of premium.
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High growth rate of population was major cause of worry for number of developing
countries. But it may be strong foundation for win-win game. Zero birth rate or negative
birth rate is causing serious problems for developed nations in the area of labor supply
in different industries. Therefore, Indian software engineers, management graduates and
doctors are in great demand in developed countries. High English speaking population is
also great asset for India.
Heterogeneous and short supply of population in relation to caste, ethnicity,
language and religion is creating enormous challenges for personnel mangers for smooth
management of work force.
About one-third population of Japan is above sixty. In this case marketing
opportunities for good automobile, high priced cloths may be reducing. On the other
hand it has been a boon to investment companies; companies providing personal safetyand
electronic safety system; Hospitals and Nursing homes; Yoga and mediation companies.
Therefore, it is clear that the study and interpretation of different distributional
characteristics of population marketing companies can draw useful conclusion to redesign
their marketing strategies
2. Economic Factors
Economic factors play vital role in marketing. People alone do not constitute the
market. They must have money to spend and willingness to spend it. India’s “middle
income group” which is estimated around 35 crores is attracting attention of all major
global companies to sell their diversified products and services to cater their varied
needs. The size of this segment is greater than total united state’s population. This seg-
ment has money to spend and willingness to spend on variety of products and services.
This is boon to marketing companies.
Stage of business cycle is crucial for important decisions in marketing. Business
cycle may be divided into four stages: prosperity, recession, depression and recovery.
Prosperity is a period of growth. During this stage companies tend to expand their
marketing operations by entering into new markets or induction of new products in the
product fines. Recession is a period of poor demand. Companies defer their investment
decisions in the recession stage. Recovery is the period when the economy is moving
from recession to prosperity.
Inflation is also important factor in economic conditions. Inflation is a rise in the
prices of goods and services. When prices rise at a faster rate in comparison of personal
income, consumer buying power declines. Inflation presents some real challenges to
marketing companies in the area of cost control and pricing decisions. Due to inflation
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consumer spends less as their buying power declines. On the other hand inflation may
increase speed of buying due to fear in the mind of customers that prices will be higher
tomorrow.
Marketing companies design their marketing strategies keeping in view nature of
the economy, gross national product and its distribution, growth rate of G.D.P., per capita
income, burden of foreign debt, credit rating, balance of payment position, money sup-
ply and rate of interest.
Economic growth rate of United States is around 2.5 per cent per annum, whereas,
economic growth rate of China and India is in between 7 to 10 per cent per annum. It is
making them attractive investment destination for marketing companies.
Interest rates are another macro external economic factor that influences mar-
keting programmes of the companies. High interest rates motivate consumers to defer
their buying decisions in long term purchase such as automobile and housing. In this
situation marketing companies offer their products below market rate of interest as a
promotional device to increase sale of their products. Global interest rates are coming
down.
Declining (fend of interest rates is forcing insurance companies operating into
life segment to close down their high yield products. In India, Life Insurance Corpora-
tion of India, which is the major player in the field, has closed down its number of high
yield products recently with very limited notice.
Declining trend of rates of interest is also casting its negative shadow on rate of
savings. Consumers tend to spend the money to enhance their living of standard when
rate of interest is around the rate of inflation or less than that. This situation, which is
transformation of saving prone to culture of spending money suits to marketing
companies.
3. Political Factors
Decisions of marketing companies are also affected by political factors. Role of
government in the economy is an important factor in this regard. In some countries
specific industries or sectors are fully state controlled; in those sectors no marketing
opportunities prevails. Role of government may be as participator. Government partici-
pation may be in the form of joint ventures, where a foreign company is allowed to set-
up units on the agreed terms. In India, “Maruti-Suziiki” was the best example in this
regard. The government may function as a regulator. In this situation the government
imposes regulations and under imposed regulations private companies’ arc allowed to
perform their activities. Only in the case of violation the government comes into the
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picture to take necessary action. The role of government will be minimum m the case of
laissez faire economy.
Political ideologies also affect marketing companies in business. Major politi-
cal ideologies are capitalism, socialism and democracy. China is getting much more
direct foreign investment due to its political system. U.S. companies feel comfortable
with dealing the government of China in comparison to the government of India,
Political closeness also plays its role in the business. For near about four decades
India has been important trade partner of U.S.S.R., due to political closeness. Due (o
changed global scenario and India’s growing closeness to U.S.A., is casting its shadow
on our relations with “Rusia”, both politically and economically. In contrast trade between
India and Pakistan has been very limited, in spite of geographical closeness, due to
political bitterness between the two countries.
Marketing companies are deeply concerned with a country’s political stability.
Political instability may be major cause of political risk. The agreements between a
country’s government and a marketing company can be turned down in the case of change
of power. Italy, is the only exception in this regard. In the last seventy years the people
of Italy have seen a new government in power almost after the expiry of one or one and
half year. Political instability can be evaluated on the basis of certain indicators. These
indicators are frequency of changes in regime, discontinuities in government policies,
incidences of violence, demonstrations, disruptions, various cultural divisions and
religious disharmony. For example, Sri Lanka has had a great deal of violence between
Sinhalese majority and Tamil minority.
It seems now our political leadership has taken lesson from developed countries.
Now the government is taking full care of business interests of our marketing companies
during the visits of top political leaders in foreign countries. Unfortunately, we could
not convert our political relations with number of African countries into economic
relations. China is far ahead from us in this regard. Now with the governmental support,
Indian companies are focusing their operations in African and Lathi American countries.
Trade and industry is now in high agenda in political visits. This is very good beginning
and its pace should be increased.
Therefore, the political environment is an important factor, not only in the initial
decision to invest in a specific country but also in the continuing marketing operations
there.
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4. Legal Factors
The governments in the world promulgate various legislations to safeguard the
interest of their nation, trade, industry and people. Marketing companies must be having
sound knowledge of main provisions of important trade laws where they are operating or
having intention to operate in the future. This knowledge will enable executives of
marketing companies to evaluate positive and negative impact on their marketing
operations in concerned countries.
China is getting maximum direct foreign investment due to two types of labour
laws promulgated by the government. For the specific geographical zones where
multinational companies are allowed, have special labor laws based on “hire and fire”.
For the rest of the China, it is having traditional labor laws. China can do it due to their
political system but Indian government cannot afford this luxury, due to democracy.
In the international business, marketing companies should know the legal
environment in each of its market, means country because these laws constitute the
“rules of the game”.
However, the legal environment of international marketing is more complicated
than domestic marketing due to three dimensions. International marketing companies
have to strike a judicious balance among the rules set by World Trade Organization, the
legislations of their own country and the legislations in the countries, where they are
operating. For example, in number of gulf countries the governments have passed strict
legislations regarding exposure of women in advertising. Marketing companies have to
take these provisions carefully while preparing advertising copy to promote their products
and services.
Norway bans several forms of sales promotion schemes, such as trading stamps,
contests, premiums etc., are unfair instruments for promoting products. In India, food
companies need special approval of the government to launch their brands. Therefore,
marketing companies must be having sound working knowledge of legislations regarding
their markets.
5. Technology
Technology has tremendous impact on marketing companies. Technology
significantly influences consumption patterns, life styles, company’s product-mix and
well being of human civilization. Technological development such as computers, aero
planes, television, antibiotics, nylon, automobiles, telephones etc. have made vital impact
on our lives.
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Every new technology is a force for “creative destruction”. Therefore,
technological development can affect market in several ways. Firstly, it can start entirely
new industries, as computers, robots, video games and lasers have done. Secondly, it
may radically alter or virtually destroy existing industries, such as television crippled
movie industry and cable T. V. to V.C.R. thirdly, it may stimulate markets and industries
related to the new technology.
Marketing companies should keep close eye on technological developments tak-
ing place in their industries. “Dual-use” and “Nano Technology” is the new areas where
global companies are keeping their eyes. These two technologies will transform the
marketing operations lot ally. Consumers will be immensely benefited by these two tech-
nologies in tile near future. Technologically superior products and services increases
operational efficiency of products and services reduces cost and enhance customer sat-
isfaction. After careful evaluation a firm should quickly adopt new technology, other-
wise it may be out of the fray.
Technology is having mixed blessing on our lives. A new technology may improve
our living standard and may provide greater comforts, but on the other hand it may create
number cf social, health and environmental problems. For example, frozen foods may
provide enormous convenience to customers, but more use of frozen foods may create
number of health problems. The automobiles make our life very comfortable, but it also
creates problems of traffic jams and air pollution.
Marketing companies should be proactive in developing new technologies for
the future to maintain its superiority over its competitors.
6. Competition
Competition has become fierce in marketing. Firm has to face three-tier
competition. Firstly, from the other companies of home country. Secondly, from the
companies where the firm is exporting. Finally, from the companies of different countries
dealing in the same product or service.
Marketing companies have to constantly monitor entire garnet of competitors’
marketing operations, such as their products’, pricing, distribution system and
promotional methods, for the formulation of effective competitive strategies.
Marketing firms have to face another two types of competition. Firstly, brand
competition from the other marketing companies dealing in the same product category.
Secondly, competition from substitute products. Substitute products are those products
which can be effectively used in place of original product. For example, tea is effective
substitute of coffee.
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Competitive environment has major influence on the marketing operations of a
firm. In the present era of globalization, the destiny of marketing companies is greatly
affected by global competition. Fierce competition may be faced effectively by making
alliances with suitable partners, even with past competitive enemy. Mergers and takeovers
may be another way for gaining strength for effective competition
7. Social forces
Marketing companies have to take close look of happenings in the social life of
their market to hammer out effective marketing strategies. Social norms and values are
dynamic. After the expiry of ten or twenty years there will be some shift in social values
and every society has their own norms
8. Cultural Factors
Cultural factors have their wider implications in marketing, due to varied culture
from one country to another country, even within the country itself. For example with
the formation of “1PL”, the cricket has been commercialized. But it seems that they
have ignored cultural difference between “wests” arid our country. The growing
controversy about use of “Cheer Leaders”, during the game is best example in this regard.
Culture may be termed as the integrated sum of total behavioral traits that are manifest
and shared by members of the society. Cultural heritage is handed over from one
generation to another generation,
Culture includes number of areas. Important areas are language, religion, educa-
tion, aesthetics, material culture, social organizations and political life. Marketers have
to study above areas of culture in their target markets to design effective marketing-
mix.
(i) Language has its important role in marketing. For example, the English Language
has a rich vocabulary for commercial and industrial activities. Therefore, English language
has become important in marketing. Numbers of Indian companies are becoming global
and availability of vast segment of English speaking people has helped them, up to great
extent. Now the China is working very hard in this direction to garner good international
markets. Learning a language well means learning the culture, because the words of
language are merely concepts reflecting the culture from it was formed. Marketers must
be having sound knowledge of language of their target markets for effective
communication with them.
(ii) Material culture also has strong linkage with marketing opportunities. Philosophies
of different cultures with regard to material aspect become very important in marketing.
Material culture is directly related to the way a society organizes its economic activities.
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Western and eastern cultures are poles apart in this regard. Western culture is materialistic
where standard of living is related with consumption of things. Whereas Hindu and
Buddhist philosophies believe in “Nirvana” or “Witlessness”. Mahatma Gandhi considered
industrialization a negation of human values. Nations affected by materialistic culture
sooner became industrialized countries, then in atomic age and space age. Therefore,
those nations affected by materialistic culture arc beside suited for marketing companies.
It is different thing that due to maturity and saturation in number of products and service
industries, now multinational companies are targeting developing countries which are
having vast population and good resources.
Entire marketing-mix in marketing is influenced by the material culture, be it
product or pricing or distribution or promotion.
(iii) Education is also an important part of culture. Important function of education
is the transmission of the existing culture and traditions to the new generation. Marketing
companies have a role in cultural change; this role demands them to become educators.
The innovative products and techniques the marketing companies bring are generally
new to the market. For good marketing prospects, the firm must educate society and
consumers regarding their benefits and uses. The firm’s ability to communicate will be
having positive co-relation with education level in target markets.
(iv) Religion is the core element in the culture. Companies are primarily
interested in knowing how people behave as consumers. It is the religion, beliefs and
attitudes of a culture that provide the best insight into the Behaviour of customers.
There are number of religions and religious groups in the world. The important
religions in the world are Christianity, Islam, Hinduism, Animism, Shinto and Buddhism.
Animism is the term used to describe the religion and philosophy of primitive people.
The idea of magic is the key element of animism. Islam originated in seventh century.
The number of Islamic countries has touched to about 56 in the world. The “Koran” is
accepted as the ultimate guide in Islam religion. The foundation of Islam is based on five
pillars—prayer, fasting, the recital of the creed, the pilgrimage to Mecca and alms giv-
ing. Muslims are not allowed to consume pork or alcohol. The role of women is very
restricted.
Hinduism is closely related with India, because about 85 percent of its popula-
tion is Hindu. The origin of Hinduism is about 1500 B.C. It is a common dictum that
“Hinduism is not a religion, but it is a way of life”. Hinduism is an ethnic, no
creedal religion. Capacity to absorb good ideas from outside has been the great strength
of Hinduism over the centuries. Hinduism tends to assimilate rather than to exclude.
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Joint families system is strength of Hinduism. One important Hindu practice is the caste
system. In traditional Hindu society each caste was having a specific occupational and
social role, connected with heredity. In Hinduism, there is great regard and respect for
cow. Nirvana is another important concept of Hinduism.
Christianity is another important religion of the world. It has completed about
2000 years. Christian religion comprises different religious groups such as Roman
Catholic and Protestant. Roman Catholic Christian traditionally has emphasized the
church and the sacraments as the principal elements of religion. They believe that there
is no salvation apart from the church. Protestant reformation paved the way for
Catholicism. Catholic Christian believes that salvation is individual matter. Christian
believes in hard work, achievements, accumulation of wealth, capital formation and desire
for greater production.
Shinto is the principal religion of Japan. Important elements of Shinto religion
are reverence for the special or divine origin of the Japanese people and reverence for
the Japanese nation and the imperial family as the head of their nation. The impact of
Shinto on Japanese life is reflected in an aggressive patriotism.
Buddhism springs from Hinduism about 600 B.C. This religion is reformation of
Hinduism. Buddhism religion believes in four truths—the noble truth of the cause of
suffering cites, the cause of desire, the noble truth of suffering states that suffering is
omnipresent and part of the very nature of life, the noble truth of cessation of suffering
sates that suffering ceases when desires ceases and middle path is the best way for life.
(B) External Micro Environment
Different factors ot External macro environment is generally uncontrollable by
the individual firm, but situation is different with regard to external micro environment.
The elements of external micro environment are a part of firm’s marketing system.
Therefore, marketing companies can manage them. Various elements of external
micro environment are as under:
1. The Market
A market may be defined as a place where buyers and sellers meet, goods and
services are offered for sale and transfer of ownership occur. Through, the market is
part of external environment, but it is also certain that the market of every company is
different. By effective use of market segmentation, the company may select correct
target market, by careful comparison of its products with the profile of target market.
For example, “Mercedes”, which is super luxury car, is having only 2.5 percent global
market share, but the company is happy with it. The market of “Maruti-800” is alto-
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gether different. Therefore, it is clear that every company is having its own market and
which can be influenced up to great extent.
2. Suppliers
Those institutions supplying raw materials or fabricated parts to the marketing
company are termed as suppliers. For providing consistent quality products and services
to the customers, strict specifications and guidelines regarding raw materials and
fabricated parts assumes vital significance. By formulating sound policies, the marketing
companies can keep smooth supply of raw materials to keep the production system
uninterrupted. In the case of shortages of company’s products, the customer may shift
to rival company’s brand.
3. Intermediaries
Intermediaries are important part of supply-chain of the company. Marketing
intermediaries are independent business organizations that directly aid the flow of goods
and services from marketing company to customers. By framing country specific policies
and strategies the marketing company may secure maximum co-operation from
intermediaries.
II. Internal Marketing Environment
The elements of internal marketing environment are generally manageable by the
management of the company. Marketing companies can get enormous benefits by effec-
tive management of various elements of internal environment. Different elements of
internal environment are as under:
1. Leadership
Leadership may be defined as the ability to influence a group toward the
achievement of goals. Effective leaders have a vision and ability to articulate the vision
into action. Effective leaders can be created by proper training, by providing conducive
environment and assigning them challenging tasks with required autonomy. In this context
the task of chief executive officer becomes very crucial. The visions of chief executive
officer of marketing companies have far reaching consequences on the sound functioning
of the company. For example, see the vision of Bill Gates, C.E.O. of “Microsoft”-
“Personal computer on every table” This vision immensely motivate the employees of
the company all round the world to increase the penetration of personal computers,
particularly in those countries where penetration is only 10 to 30 persons per thousand.
2. Research and Development
Research and development is key factor for success in marketing to induct
innovative products in the market and to make significant modifications in the existing
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products. Marketing companies of developed countries divert generally 3 percent of
their turnover to research and development activities for getting break through
innovations and significant modifications in she existing product-mix. This requires state-
of-the-art infrastructure and services of highly talented scientists and researchers.
Marketing companies can earn huge profits only by launching innovative products.
This task is time consuming and requires long time. For example, in the year 1966 an
agreement was signed between “SONY” and “PHILIPS” to jointly develop C.D. system.
It took a very long period to develop new product. In the year 1986 both the companies
jointly positioned C.D. system in the global markets and it was a great success.
Unmatchable products can be developed by effective research and development. For
example, it has been estimated that combined research and development cost of “Window-
2000” was about 660 million U.S. dollars. Therefore, there is no alternate of Microsoft’s
“Window-2000”. A different version of “Window-2000” was introduced as—”Window-
XP”. The company has continuously upgraded its software to effectively cater new
demands and requirements of customers. Company’s latest software which was named
as, “Window-vista” is working very well.
3. Human Resources
Management of human resources becomes very challenging for marketing com-
panies due to human resources from diversified cultures. Management of the marketing
companies can design suitable personnel policies and by providing good work culture,
may create dedicated and motivated human resources, which is the great asset for them.
“Marriot” hotel chain of U.S.A. keeps the employees at the top in its organization chart.
The management of the company believes that our employees must be satisfied first,
because satisfied employees will create satisfied customers and satisfied customers
will provide profitable sales volume to the company.
4. Financial Resources
Marketing companies have diversified investment and marketing operations in
lumber of areas. This requires effective management of financial resources. Portfolio -
management becomes crucial in this regard. Management of financial resources is
important for different aspects of marketing activities, such as providing funds to
research and development, induction of new products, capacity expansion of present
product-mix, implementation of sales promotion schemes and for advertising campaign.
5. Image of the Company
Image of the company is also manageable variable of marketing operations. It
takes years for marketing company to earn favorable public image regarding its products
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and services. Image building requires providing quality products and services at com-
petitive prices, continuous quality improvement, prompt after sales services and giving
proper attention 10 customer relationship marketing.
Example of “INTEL”, which is major microprocessor chip producing company of
the U.S.A. is ideal in this regard. The chip of this company has earned enormous reputa-
tion and image in the world. Therefore, we see the headline “INTEL INSIDE” in every
advertising copy and the brand name of computer becomes in shadow.
6. Marketing-Mix
Marketing company is free (o design its marketing-mix. Marketing-mix comprises
four Ps-product, price, place and promotion. Marketing companies have to design specific
marketing-mix, because requirement of products, affordability of prices, availability of
channel of distribution, requirement of advertising, availability of sales-fore and suitable
sales promotion schemes vary in the different segments of customers.
5.8 SUMMARY
In order to survive in increasingly competitive markets, businesses need to
monitor and respond to changes in their external environment. The company’s response
has been to ride the wave of new technological development. The emphasis has been on
developing technological solutions to the meet the needs of today’s customers. It is
based on the recognition that sophisticated consumers require a range of digital solutions
to access and display their images.
One factor can be part of a firm’s micro environment and macro environment.
The media can be used to illustrate this:
 A one off media story about the firm may affect daily operations and will there-
fore be part of the firm’s micro environment;
 Whilst a general desire to avoid a negative media story may influence a firm’s long
term business operations and therefore make up the firm’s macro environment.
Firms should not concern themselves too much about which of the three catego-
ries a factor fits into. Instead firms should ensure that they have correctly identified all
of the factors which make up their marketing environment and plan how to manage them
for the firm’s benefit.
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1. Define marketing environment
2. State different factors of external marketing environment. Discuss the impact of
external environment on firm’s marketing decisions.
3. What do you mean by internal environment? Discuss its impact on firm’s marketing
decisions.
4. Write an essay on marketing environment.
5.10 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
85
UNIT -6 : CONSUMER BEHAVIOUR
Structure:
6.0 Objectives
6.1 Introduction
6.2 Meaning and Definitions Consumer Behaviour
6.3 Characteristics of Consumer Behaviour
6.4 Buyer Behaviour
6.5 Consumer decision making process
6.6 Factors affecting Consumer Behaviour
6.7 Parties involved in Buying Behaviour / Determinants of Consumer Behaviour
6.8 Summary
6.10 References
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6.0 OBJECTIVES
• Define Consumer Behaviour
• Explain the characteristics of Consumer Behaviour
• Describe the process of Consumer Behaviour
• Bring out the factors affecting Consumer Behaviour
6.1 INTRODUCTION
The consumer market is estimated to be the 5lh largest in the world. The con-
sumer market has changed radically during the last ten years. There has been complete
transformation of the consumer markets in India. There is a definite shift from sellers’
market to buyers’ market. A real boom in consumer products market clearly points out is
growth in size range and sophistication. Consumer markets are the markets for products
and services bought by individuals for their own or family use. The market is a basic
issue if we consider any aspect of management and thus we are dealing with a vital con-
cern for all business firms. A market is someone who seeks a response from another
party called the prospect. If two parties are seeking to sell something to each other, both
of them are referred to as markets. Consumer Behaviour has become highly volatile in
the present era of globalization. Changes in consumer’s exposure, income, education,
experience, easy availability of foreign products and hallow effect have casted their
shadow on their Behaviour. Changes in perceptions play significant role in consumer
Behaviour, few years ago, “car”, which was deemed as luxury for the middle class of
society has become necessity now a days.
In the present marketing scenario it has become inevitable for business firm to
understand consumer Behaviour in order to provide want satisfying goods and services
to present and potential consumer.
6.2 MEANING AND DEFINITIONS OF CONSUMER BEHAVIOUR

Consumer Behaviour is the study of individuals, groups, or organizations and the
processes they use to select, secure, and dispose of products, services, experiences, or
ideas to satisfy needs and the impacts that these processes have on the consumer and
society
It blends elements from psychology, sociology, social anthropology, marketing
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and economics. It attempts to understand the decision-making processes of buyers, both
individually and in groups such as how emotions affect buying Behaviour. It studies
characteristics of individual consumers such demographics and behavioral variables in
an attempt to understand people’s wants. It also tries to assess influences on the consumer
from groups such as family, friends, reference groups, and society in general.
Customer Behaviour study is based on consumer buying Behaviour, with the
customer playing the three distinct roles of user, payer and buyer. Research has shown
that consumer Behaviour is difficult to predict, even for experts in the field.
Definitions
According to Walter and Paul, consumer Behaviour may be defined as “ the
process whereby individual decide whether, what , when, where, how, and from where to
purchase goods and services.
Webster says that “consumer behavior is all psychology, social and physical
behaviour of potential customer as they become aware of evaluate, purchase, consumes
and tell other people about product and services.”
6.3 CHARACTERISTICS OF CONSUMER BEHAVIOUR

Characteristics of consumer behaviour are:
 Consumer behaviour is the part of human behaviour. This cannot be separated. Human
behaviour decides what to buy, when to buy etc. This is unpredictable in nature. We
cannot say that what an individual is going to do in the next moment. Based on the
past behavioural pattern one can at least estimate like the past he might behave.
 Learning the consumer is difficult and complex as it involves the study of human
beings. Each individual behaves differently when he is placed at different
situations. Every day is a lesson from each and every individual while we learn the
consumer behaviour. Today one may purchase a product because of its smell,
tomorrow it may vary and he will purchase another due to some another reason.
 Consumer behaviour is dynamic. A consumer’s behaviour is always changing in nature.
The taste and preference of the people vary. According to that consumers behave
differently. As the modern world changes the consumer’s behaving pattern also
changes.
 Consumer behaviour is influenced by psychological, social and physical factors. A
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consumer may be loyal with a product due to its status values. Another may stick
with a product due to its economy in price. Understanding these factors by a marketer
is crucial before placing the product to the consumers.
 Study of consumer behaviour is crucial for marketers. Before producing a product
or launching a product, he has to go through a clear analysis of the consumer
behaviour. If the people or prospects reject the product, he has to modify it.
 Consumer behaviour is a continuous process as it involves the process starts be-
fore the buying and continuing after purchasing. Before buying there will be high
confusions and expectations about the product. After buying it, if the buyer is satis-
fied with the product he shows a positive behaviour, otherwise negative.
6.4 BUYER BEHAVIOUR

In addition to understanding the needs of your customers, you also need to
understand what motivates them to purchase, and how you can influence the buying process
to ensure that your products or services are on the shopping list.
Understanding your customers will help you to develop and distribute your product,
as well as getting the right price point and developing successful promotional activities.
The psychology of the buying process has been widely studied, and no matter
what size your business, knowledge of this process can help you become more successful.
Both businesses and consumers exhibit patterns of buying behaviour. The business
model is less open to debate as your business customers will almost certainly have some
formalised process of buying in place. Your task is to understand the process and match
your marketing activities to the different stages of the process. This means that the
customer will receive the right kind of contact at the right time.
Buyer behaviour is a process. Potential customers are subjected to various stimuli.
The customer is regarded as a black box as we cannot see what is going on in his mind.
He responds to the stimuli or input and may purchase some product or service of interest
to him. Buyer behaviour involves both individual processes and group processes. It
includes both consumer and industrial buyer behaviour. In buyer behaviour we consider
not only why, how, and what people buy other factors such as where, how often and under
what conditions the purchases is made.
Buyer behaviour is the decision processes and acts of people involved in buying
and using products.
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2.5
6.5 CONSUMER DECISION MAKING PROCESS
1. Problem/Need Recognition:
This is in general the first stage in which the consumer recognizes that what es-
sentially is the problem or need and hence accordingly a consumer can identify the prod-
uct or kind of product which would be required by the consumer. The buying process
strats when an unsatisfied need creates tension. Once the need is recognized, the con-
sumer became aware of conflicting motives or competitive uses for their scare resource
of time or money. The need may be biogenic or dormant until it is aroused by an external
stimulus such as an advertisement or the sight of the product. Need recognition may
also occur due to dissatisfaction with the existing product.
2. Information Search:
In information search, the consumer searches about the product which would sat-
isfy the need which has been recognized by the consumer in the stage previous stage.
Information search can be done in two waves: Internal and External
 Internal search, memory.
 External search if you need more information. Friends and relatives (word of mouth).
Marketer dominated sources; comparison shopping; public sources etc.
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A successful information search leaves a buyer with possible alternatives,
the evoked set.
3. Evaluation of Alternatives:
In this stage, the consumer evaluates the different alternatives which the consumer
comes across, when the consumer was searching for information. Generally in the
information search the consumer comes across quite a few products and thus now the
consumer has to evaluate and understand which product would be properly suited for the
consumer. Once all the reasonable alternatives are identified, the consumer then evaluates
each one preparatory to purchase decision. The criteria consumers use for their evaluation
include their past experiences and attitudes towards various brands. Consumer also uses
the opinions of member of their families and other reference group as guidelines in the
selection of a particular brand. Thus, the evaluation stages represent a mental trail of the
product. After evaluation the consumers make a decision either to purchase or reject the
product.
4. Purchase decision:
After the consumer has evaluated all the options and would be having the intention
to buy any product, there could be now only two things which might just change the
decision of the consumer of buying the product that is what the other peers of the
consumer think of the product and any unforeseen circumstances. Unforeseen
circumstances for example in this case could be financial losses which led to not buying
of the product.
5. Post Purchase Behavior:
After the purchase the consumer might just go through post purchase dissonance
in which the consumer feels that buying the other product would be better. But a com-
pany should really take care of it, taking care of post purchase dissonance doesn’t only
spread good words for the product but also increases the chance of frequent repurchase.
6.6 FACTORS AFFECTING CONSUMER BEHAVIOUR/

DETERMINANTS OF CONSUMER BEHAVIOUR
1. Cultural Factors
Consumer behaviour is deeply influenced by cultural factors such as: buyer cul-
ture, subculture, and social class.
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 Culture
Basically, culture is the part of every society and is the important cause of person
wants and behaviour. The influence of culture on buying behaviour varies from country
to country therefore marketers have to be very careful in analyzing the culture of different
groups, regions or even countries.
 Subculture
Each culture contains different subcultures such as religions, nationalities, geo-
graphic regions, racial groups etc. Marketers can use these groups by segmenting the
market into various small portions. For example marketers can design products accord-
ing to the needs of a particular geographic group.
 Social Class
Every society possesses some form of social class which is important to the
marketers because the buying behaviour of people in a given social class is similar. In
this way marketing activities could be tailored according to different social classes.
Here we should note that social class is not only determined by income but there are
various other factors as well such as: wealth, education, occupation etc.
2. Social Factors
Social factors also impact the buying behaviour of consumers. The important
social factors are: reference groups, family, role and status.
 Reference Groups
Reference groups have potential in forming a person attitude or behaviour. The
impact of reference groups varies across products and brands. For example if the prod-
uct is visible such as dress, shoes, car etc then the influence of reference groups will be
high. Reference groups also include opinion leader (a person who influences other be-
cause of his special skill, knowledge or other characteristics).
 Family
Buyer behaviour is strongly influenced by the member of a family. Therefore
marketers are trying to find the roles and influence of the husband, wife and children. If
the buying decision of a particular product is influenced by wife then the marketers will
try to target the women in their advertisement. Here we should note that buying roles
change with change in consumer lifestyles.
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 Roles and Status
Each person possesses different roles and status in the society depending upon
the groups, clubs, family, organization etc. to which he belongs. For example a woman is
working in an organization as finance manager. Now she is playing two roles, one of
finance manager and other of mother. Therefore her buying decisions will be influenced
by her role and status.
3. Personal Factors
Personal factors can also affect the consumer behaviour. Some of the important
personal factors that influence the buying behaviour are: lifestyle, economic situation,
occupation, age, personality and self concept.
 Age
Age and life-cycle have potential impact on the consumer buying behaviour. It is
obvious that the consumers change the purchase of goods and services with the passage
of time. Family life-cycle consists of different stages such young singles, married
couples, unmarried couples etc which help marketers to develop appropriate products
for each stage.
 Occupation
The occupation of a person has significant impact on his buying behaviour. For
example a marketing manager of an organization will try to purchase business suits,
whereas a low level worker in the same organization will purchase rugged work clothes.
 Economic Situation
Consumer economic situation has great influence on his buying behaviour. If the
income and savings of a customer is high then he will purchase more expensive prod-
ucts. On the other hand, a person with low income and savings will purchase inexpensive
products.
 Lifestyle
Lifestyle of customers is another import factor affecting the consumer buying
behaviour. Lifestyle refers to the way a person lives in a society and is expressed by the
things in his/her surroundings. It is determined by customer interests, opinions, activi-
ties etc and shapes his whole pattern of acting and interacting in the world.
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 Personality
Personality changes from person to person, time to time and place to place.
Therefore it can greatly influence the buying behaviour of customers. Actually,
Personality is not what one wears; rather it is the totality of behaviour of a man in different
circumstances. It has different characteristics such as: dominance, aggressiveness, self-
confidence etc which can be useful to determine the consumer behaviour for particular
product or service.
4. Psychological Factors:
There are four important psychological factors affecting the consumer buying
behaviour. These are: perception, motivation, learning, beliefs and attitudes.
 Motivation
The level of motivation also affects the buying behaviour of customers. Every
person has different needs such as physiological needs, biological needs, social needs
etc. The nature of the needs is that, some of them are most pressing while others are
least pressing. Therefore a need becomes a motive when it is more pressing to direct the
person to seek satisfaction.
 Perception
Selecting, organizing and interpreting information in a way to produce a meaningful
experience of the world is called perception. There are three different perceptual
processes which are selective attention, selective distortion and selective retention. In
case of selective attention, marketers try to attract the customer attention. Whereas, in
case of selective distortion, customers try to interpret the information in a way that will
support what the customers already believe. Similarly, in case of selective retention,
marketers try to retain information that supports their beliefs.
 Beliefs and Attitudes
Customer possesses specific belief and attitude towards various products. Since
such beliefs and attitudes make up brand image and affect consumer buying behaviour
therefore marketers are interested in them. Marketers can change the beliefs and attitudes
of customers by launching special campaigns in this regard.
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6.7 PARTIES INVOLVED IN BUYING BEHAVIOUR
1. Initiator
2. Influencer
3. Decider
4. Buyer
5. User
6.8 SUMMARY
Consumer behaviour is an attempt to understand and predict human actions in the
buying role. It has assumed growing importance under market oriented or customer
oriented marketing planning and management. Consumer behaviour if reflected from
awareness right through post purchase evaluation indicating satisfaction or non
satisfaction, from purchase. Consumer behaviour involves both individual and group
processes. It includes communication, purchasing and consumption behaviour and it is
basically social in nature. Hence, social environment plays an important role in shaping
buyer behaviour. Consumer behaviour includes both consumer and business buyer
behaviour. Thus consumer/buyer behaviour includes the acts of individual directly involved
in obtaining and using economic goods and services including sequence of decision
processes that precede and determine these acts. Actual purchase is only a part of the
decision process. An understanding of consumer/buyer behaviour is essential in marketing
planning and programmes. Consumer/buyer behaviour is one of the most important key
to successful marketing.

1. What do you mean by consumer behaviour?
2. Explain the characteristics of consumer behaviour
3. Discuss the process of consumer behaviour
4. Explain the concept of buyer behaviour
5. Explain the factors affecting consumer behaviour.
95
6.10 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
96
UNIT - 7 : MARKETING RESEARCH
Structure:
7.0 Objectives
7.1 Introduction
7.2 Meaning and Definitions marketing research
7.3 Characteristics of marketing research
7.4 Importance of marketing research
7.5 Marketing research process
7.6 Summary
7.8 References
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7.0 OBJECTIVES
After studying this unit, you should able to;
• Define marketing research
• Discuss the importance of marketing research
• Explain the process of marketing research
7.1 INTRODUCTION
Marketing is a dynamic and restless field. Since 1930, many new dimensions and
dramatic changes have taken place in marketing in which global marketing, customer
satisfaction, e-marketing, cut-throat competition, changes in fashion, style and habits of
customers are main. The old techniques of management by intuition and rule of thumb
are no longer valid in present marketing decision-making. In carrying out marketing
strategic planning and control, managers need information at almost every turn. They
need information about target markets, customer’s products, competition, buying
Behaviour, dealers and other forces in the marketing place. In response to these
requirements, a formal means of acquiring information to assist in the decision making
of marketing has emerged. Than managers have no choice other than marketing research
to obtain the information they need for decision-making.
7.2 MEANING AND DEFINITIONS OF MARKETING RESEARCH

Marketing research is a systematic effort for the solution of marketing problems.
It covers the field of problems, techniques and other aspects of marketing and related
decision-making and other implementation. In fact, the subject of marketing research is
the result of consumer-oriented marketing. Marketing research links the organization
with its market environment. It involves specifying, gathering, analyzing and interpreting
information to help the management to understand the environment, identify problems
and opportunities, and develop and evaluate courses of marketing action. It is a composite
term which relates to all research activities and functions of marketing.
Definitions
Clark and Clark, says “Marketing research is the careful and objective study
of product, design, markets and such transfer activities as physical distribution and ware-
housing, advertising and Sales Marketing.”
The American Marketing Association has defined marketing research as “The
systematic gathering, recording and analyzing of data about problems relating to the
marketing of goods and services.”’ This committee has defined it in a new sense that
98
marketing research is the function which links the consumer, customer, and public to
the marketer through information— information used to identify and define marketing
opportunities and problems; generate, refine and evaluate marketing actions; monitor
marketing performance; and improve understanding of marketing as a process.
Philip Kotler defines it as “Marketing research is the systematic problem analysis,
model building and tact finding for the purpose of improved decision-making and control
in the marketing of goods and services.” He further states that ‘marketing research is the
systematic design, collection, analysis, and reporting of data and findings relevant [o a
specific marketing situation facing the company.
According to Ronald and Ted, ‘’Marketing research may be defined as the
systematic gathering, recording and analyzing of data about problems relating to the
marketing of goods and services under essentially non-recurring conditions.
David and Wales say that ‘Marketing research is the branch of marketing intelligence
that conducts specific enquiries into problems in order to guide decisions.’
7.3 CHARACTERISTICS OF MARKETING RESEARCH

The above discussion explains the following characteristics of marketing research;
1. The nature of marketing research is curative one. The need for marketing research
is felt when a company is facing any specific marketing problems.
2. Marketing research is used to eliminate possible risk of specific problems.
3. Marketing research is scientific in nature. It is carried out in a systematic manner
in place of haphazard or hit and miss manner.
4. Marketing research contains objectivity rather than subjectivity. It means that the
investigations in marketing research are not carried out lo prove a prior finding nor
is it intentionally slanted to arrive at predetermined conclusions.
5. Marketing research is based on data, facts and information. Thus, marketing research
is a search for data which are associated or relevant to a marketing problem.
6. Marketing research may relate to any problem or difficulty in marketing
operations.
7. A specific procedure or process is followed to conduct marketing research. This
process may involve identification of objectives, situation analysis, gathering and
collection of information, analysis and interpretation of information and drawing
conclusions.
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8. Marketing research has managerial purposes. It provides vital help 10 marketing
executives for arriving at sound decisions.
9. Marketing research is solution oriented. After identification of real problems, ef-
forts are made in marketing research to suggest suitable workable measures to over-
come present problems.
7.4 IMPORTANCE OF MARKETING RESEARCH

 Consumer-oriented Marketing
 Reduces Risks
 Effective Managerial Decisions
 Identification of Opportunities
 Stimulates Sales
 Integration between Company and Consumer Interests
 Assessment of Real Image of the Company
 Reduction in Marketing Cost
 More Profitability
 Confidence and Progressive Spirit in Marketing Personnel
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7.5 MARKETING RESEARCH PROCESS
Problem Formulation
Situational Analysis
Determination of Research Objectives
Planning and conduct formal investigation
Collection of Primary Data or Techniques of Marketing Research
Data Processing
Report Writing
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1. Problem Formulation
The first step in the process of marketing research is problem formulation.
Identification of real marketing problem is necessary to keep the research activities
directed towards a specific goal. This stage involves developing an understanding of the
problem which requires further study and investigation. This task should be done very
carefully because sometimes the apparent problem may not be the real problem.
For example, a marketing firm which was dealing in commercial air-conditioning
equipments had been enjoying steady increase in sales over a good span of time. Firm
decided to conduct sales research. Elementary findings by the marketing research firm
shown though the firm’s sales volume had been increasing, but market share was declining;
because the industry was growing even at faster pace. Correct problem formulation is
very important for the determination of research objectives.
2. Situational Analysis
In the second step the researcher should carry out a situation analysis. Situation
analysis involves getting acquainted with the company and its business environment with
the help of internal records of the company and extensive interviewing of company’s
executives and personnel. The researcher tries to get a feeling for the situation sur-
rounding the problem within the company. This provides desired assistance to the re-
searcher to define the problem more clearly. After completing internal analysis, the
researcher tries to assess the company’s total business environment, particularly the
industry’s conditions in detail, to examine its effects on the company. The researcher
may consult customers, members of the channels of distribution, advertising agencies
in order to obtain their opinions and reactions about the marketing problem.
3. Determination of Research Objectives
When the real marketing problem has been identified with the help of situation
analysis the next step is determination of research objectives and development of
appropriate hypotheses (if necessary). Research objectives are a frame of ends to be
achieved through the research. Objectives are the ‘why’ aspect of the proposed study.
Why do we want to study the problem? What do we expect from the proposed study? the
answers to these questions may provide a clear direction to formulate specific objectives
of the research. Objectives set the path of research work. The researcher may define the
proposed problem more clearly by developing hypotheses for further testing.
Development of hypothesis is a valuable step in problem solving. Hypotheses are tentative
supposition or possible solutions to a problem based on the marketing experience,
judgment or some documentary evidence. The hypotheses so developed by researcher
are tested and the findings may either prove or disprove them.
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4. Planning and Conduct Formal Investigation
After the identification of real problem and determination of research objectives and
hypotheses the next important step is ihe preparation of a research plan and to conduct
formal investigation. The major steps in this stage may be discussed under the following
headings;
(a) Determination of Required Information or Data: Under this step the
researcher determines the information or data required to find out the solution of the
proposed marketing problem, keeping in view the objectives of the study. Some data
may be available within the company and remaining may be collected by the researcher
from outside sources. Procuring under information as well as over information, both
are undesirable, so the list of desired information or data should be prepared carefully.
(b) Selection of the Sources of Information: In terms of sources, the
information or data may be primary and secondary. Primary data are original data
gathered specifically for the project at hand. Secondary data are those which are already
gathered, having been collected originally for some other purposes. These data remain
available in published or unpublished forms. One of the biggest mistakes made by many
researchers is rushing out to get primary data before exhausting the information already
available in secondary sources. Secondary data may be collected much faster and at1 far
less expenses than primary data. Therefore, the researcher should get the desired
information giving priority to secondary sources. However, at the same time, secondary
sources which are to be used by the researcher should meet certain standards of accuracy
and must be reliable, relevant to the research problem and latest.
(c)Sources of Secondary Data: The researcher may gather secondary data from
various sources. Desired secondary data may be collected from the following sources:
(i) Internal records of the company may provide useful information with regard to sales
record of the company, cost structure of products, expenses, complaints of
consumers, etc.
(ii) Different departments of the Central Government and State Governments provide
very useful information in their publications. For example the
Department of Home Affairs publishes Census Reports which are very useful to
study demographic trends.
(iii) Marketing Research Companies, such as A.C. Nielsen India, ORG-MARG and
The Indian Market Research Bureau (IMRB).
(iv) Advertising Agencies,
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(v) Universities—large universities operate research bureaus and publish thefindings
of the researches carried out by the teachers and students,
(vi) Non-profit Research Foundations,
(vii) Trade, Professional and Business Associations,
(viii) Publications of Reserve Bank of India,
(ix) Centre for Monitoring the Indian Economy (CMIE).
(x) Publications of Planning Commission,
(xi) Newspapers, Magazines and Journals.
(xii) Internet.
(xiii) Yellow Pages of telephone directories.
(xiv) The Source Directory published by Mumbai based Source Publications,
(xv) R.K. Swami Marketing Guide,
(xvi) “Get it” Yellow Pages,
(xvii) Indian Institute of Foreign Trade (IIFT)
(xviii) Export Promotion Councils,
(xix) Commodity Boards,
(xx) The Thomas Register.
(d). Sources of Primary Data: After exhausting all reasonable secondary sources
of information the researcher may still lack desired information for the study of the
proposed marketing problem. Then the researcher will turn to primary sources to gather
the remaining required information. These primary data or information may be gathered
from the executives of the company, company’s sales force and members of the channels
of distribution. Sales people can often supply quite current information from their sales
territories. Middlemen may provide useful information and suggestions for the marketing
problem. Primary data may also be gathered from the consumers of the company’s product
to obtain their opinion, reactions, altitudes, motivates and buying habits.
5. Collection of Primary Data or Techniques of Marketing Research
There are three widely used techniques for gathering primary data: survey
technique, observational technique and experimental technique. Normally, not all the
three techniques are used for one marketing research project. The choice of technique
will depend upon requirement of research project, the availability of lime, financial
resources, personnel and facilities. A brief description of these techniques is given below;
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1. Survey technique
2. Sampling technique
a. Simple random sampling
b. Systematic random sampling
c. Quota sampling
d. Cluster sampling
3. Survey method
4. Observational technique
5. Experimental technique
6. Data Processing: Analysis and Interpretation
In this stage the market researcher analyses the data and interprets the findings of
the research. The data processing job involves editing, tabulation, analysis and
interpretation. In editing the researcher ascertains that the instructions have been followed
by investigators, answers are logical and consistent. In tabulation, data are arranged in
classes and are assigned weights, if any. In analysing tabulated data, the researcher
examines the data, compares them and makes desired statistical calculations. In
interpretation, the researcher draws necessary conclusions. If hypotheses were drawn
the researcher has to prove or disprove them on the basis of his findings. In the present
era, the availability of sophisticated electronic data processing equipments enables a
researcher to tabulate and analyse mass data quickly and relatively inexpensively.
7. Report Writing
The end product of the investigation is the researcher’s findings, conclusions and
recommendations presented in the form of Research Report. The researcher may prepare
two types of reports—first the General Report and second the Technical Report. The
General Report is prepared for the use of top management of the company. This report
is prepared in short and contains only identified problem, research objectives, main
findings, conclusions and recommendations. The Technical Report is a detailed report
containing introduction, identified problem(s), brief outcome of situational analysis,
objectives of the research; hypotheses, if any; research methodology; findings and
conclusions; recommendations; appendixes and bibliography.
8. Follow-up
The task of research does not end with the presentation of report to the company.
After detailed study of report the Company should implement the relevant suggestions.
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After the expiry of reasonable time the company should conduct follow-up studies to
assess the utility of the research carried out. It is in the interest of the researcher to
follow-up his study to determine whether his recommendations are being followed, and
if not what the reasons are. The researcher’s future relations with the marketing company
may be influenced by this step. The researcher may earn goodwill by the follow-up. It
may provide him lessons and guidelines” for further researches. In the absence of follow-
up by the researcher the company may not pay desired attention and action on the report.
The report may be filed and forgotten!).
7.6 SUMMARY
Marketing research by itself does not arrive marketing decision nor does it
guarantee that the organization will successful in marketing its products. However, when
conducted in a systematic, analytic, objective manner, marketing decision will reduce
uncertainty in decision making process and increase the probability and magnitude of
success.
1. What is marketing research?
2. Explain the significance of marketing research
3. Discuss the characteristics of marketing research
4. Explain the process of marketing research
7.8 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
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UNIT - 8 : MARKET SEGMENTATION
Structure:
8.0 Objectives
8.1 Introduction
8.2 Meaning of market segmentation
8.3 Bases of market segmentation
8.4 Factors affecting market segmentation
8.5 Target market
8.6 Positioning
8.7 Lifestyle marketing
8.8 Marketing mix
8.9 Summary
8.11 References
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8.0 OBJECTIVES
• Define market segmentation
• Explain the bases of market segmentation
• Highlight the factors affecting market segmentation
• Bring out the element of marketing mix
• Discuss the concept of positioning
• Explain target market
8.1 INTRODUCTION
Modern marketing has gained importance in the business world after advancement
of Industrialization. The early success of mass production brought about a remarkable
increase in the consumer products at affordable prices. Faced with the growing
inventories, enterprises turned their attention to the science of marketing in order to
identify and target willing customer. The variety and affordability of goods made possible
by mass production made this challenge relatively easy. But as soon as consumer pent up
demand was satisfied, consumer became less willing to purchase products that were not
a good match for their particular needs and wants.
8.2 MEANING OF MARKET SEGMENTATION

Market segmentation is a marketing strategy that involves dividing a broad target
market into subsets of consumer who have common needs and priorities, and then
designing and implementing strategies to target them. Market segmentation strategies
may be used to identify the target customers, and provide supporting data
for positioning to achieve a marketing plan objective. Businesses may develop product
differentiation strategies, or an undifferentiated approach, involving specific products
or product line depending on the specific demand and attributes of the target segment.
A division of market into different homogenous group of consumer is known as
market segmentation
8.3 BASES OF MARKET SEGMENTATION
There is no single way to segment a market. A marketer has to try different
segmentation variables, alone and combination, to find the best way to view the market
structure. Three broad groups of variables are used to segment consumer markets. They
are Customer based segmentation, Product related segmentation and Competition related
segmentation.
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The major bases for segmentation are Geographic, Demographic, Psychographics
and Behavioral variables.
a. Geographic segmentation
Over the years the marketers have learned to their sorrow that the same products
and sales pitches that work beautifully in one place often bomb in others. The reason is
consumers needs vary according to where they live. Geographic basis is generally the
starting point of all segmentation strategy.
The geographic location of customer does help the firm in planning its marketing offer.
The rural and
Urban divide is quite common in consumer market. Another very common base is
metro or non-metro market. The assumption in using the geographical basis for
segmentation is that a people in a particular geographical area have identical preferences
and consumption habits.
The geographical basis of segmentation helps marketer in designing products,
pricing, promotions and distribution strategies based on regional differences. One as-
pect of geographical market segmentation that appeals to marketers is the case with
which they can acquire this information and use it to compare sub segments.
b. Demographic segmentation
Segmentation of consumers based on demographic factors like age, sex, marital
status, family size, rays, religion, community, language, occupation, income/purchasing
capacity, educational level, social status, and purchasing capacity constitutes demographic
segmentation.
Age is a very commonly used base for market segmentation. It is based on the
assumption that equal in the same age group will behave in an identical manner. The age
based market segmentation consist of
Infants market, child market, teens market, adolescent market, youth market,
middle aged market, elders or seniors market etc.,
The age profile of a population also can tell us whether the market is predominantly
young or old. Youth market is one of the important age based market segmentation. The
contemporary Indian youth constitute big chunk market can be sub divided to make
different segments. The trouble with the youth market is that taste change faster with
fads changing overnight. Hence for a firm targeting a youth market remaining relevant
and contemporarily is the biggest challenge.
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Income is another commonly used demographic variable in market segmentation.
It is based on the assumption that as the consumer’s income increases, his/her
consumption behavior changes. Research findings indicate that expenditure on food and
other basic amenities as a percentage of total expenditure declines as consumer income
increases.
The market can be segmented as being: low income, low middle income, middle
income, upper middle income, higher income.
Gender The male market is different from the female market. Hence, gender is
used for segmenting the market for different products. While some products, like textiles,
are exclusively made for each segment there are others which are-not exclusively made
or marketed for one gender. A cosmetic firm will have to take a decision whether it
wants to manufacture and market cosmetics for men only or women or for both. Lately,
particularly in marketing jeans, the marketer is directing the product at both segments,
as the product is unisexual.
Occupation The occupation of the consumer is also an important variable in
segmenting the market whether a person is self-employed, works full or part time; his/
her position in an enterprise affects the consumption behavior. On the basis of
consumption, one may find segments like professionals (like a doctor, chartered
accountant and a consultant), traders or shopkeepers, businessmen or Industrialist, sales
personnel, teachers, university professors, self employed people, students, housewives
and the like.
Education The education profile of the customer will also affect his or her
preferences and the level of awareness. It is a known fact that as literacy increases and
people get educated, they become more aware about the environment and different
products. They also become more aware about their rights. Based on education, the Indian
market can be segmented as illiterates, literates, high school educated and secondary or
university educated persons. Again, within university-educated persons, the market can
be segmented among the graduates, postgraduates and post doctorates.
Marital status Another demographic basis used for segmentation is the marital
status of the customer. The assumption is that the behavior and assumption patterns of
single and married people differ.
Family size and structure is another important demographic variable is the fam-
ily size or structure. With the spread of the family planning programme and with its
acceptance among more and more urban families, one finds that the average family size
has been declining from a high of 5-6 persons per family in 1970s to 4 in the late 1970s
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and early 1980s to just 3 in the 1990s, One finds that the family norm now is birth
control. So today, the marketer can segment his market into families with three or less
members, families with four members and families with more than five members.
c. Psycho graphic variables
Psychographics is a method of studying people’s lifestyle, based largely on ana-
lyzing the general pattern of activities, interest, and opinions that they evidence, ‘two
consumers can share the same demographic characteristics and yet be very different.
For e.g. You may decide to take a side seeing vacation in Goa, while your best friend
whose demographic make up and income match your own, may prefer to get away from
it all in a small cabin in another city.
Most contemporary psychographics research looks at activities (work, hobbies,
social events, entertainments, shopping, sports), interest (family, job, community,
recreation, reading, watching TV), and opinions (about one self, social issues, politics,
business, economics, the future, specific products). Research that studies these three
variables uses what are often called AIO questionnaires to solicit people’s responses.
One of the most popular commercially available classification systems based on
psychographics measurement is Consulting Business Intelligence (SRIC- BI) VALS frame
work. VALS classifies adults into eight primary groups based on personality trails and
key demographics. The VLS segmentation system consist of eight types of customer
groups are as follows:
Innovators: Successful, sophisticated, active, take-charge people with high self
esteem. Purchases often reflect cultivated taste for relatively up scale, niche oriented
products and services.
Thinkers: Mature, satisfied and reflective people who are motivated by ideals
and value order, knowledge and responsibility. Favor durability, functionality, and value
in products.
Achievers: Successful goal oriented people who focus on career and family. Favor
premium products that demonstrate success to their peers.
Experiences: Young, enthusiastic, impulsive people who seek variety and
excitement. Spent a comparatively high proportion of income on fashion, entertainment
and socializing.
Believers: Conservative, conventional, and traditional people with concrete
believe. Favor familiar, and loyal to established brands.
Strivers: Trendy and fun loving people who arc resources constrain favor stylish
products that emulate the purchases of those with greater material wealth.
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Makers: Practical, down to earth, self-sufficient people who like to work with
their hands.
Survivors: Elderly, passive people who are concerned about change. Loyal to their
favorite brands.
d. Behavioral segmentation
Behavioral segmentation divides people into groups on the basis of how they behave
with respect to a product. Whether or not use it, how often they use it, how much of it
they use, and how loyally. Marketers employ a usage rate to group people according to
their purchase and use of a product. Consumer usage is most commonly categorized as
heavy, medium, light and non-usage.
Many marketers believe that behavioral variables are: Occasions, benefits, user status,
usage rate, loyalty status, buyer readiness stage, and altitude.
Occasion: Occasion can be defined in terms of the time of day, week, month,
year, or in terms of other well-defined temporal aspects of a consumer life. Buyers can
be distinguished according to the occasion when they develop a need, purchase a product
or use a product. Occasion segmentation can help firms expand product usage for e.g.
News paper, milk, ice cream, garments, etc.,
Benefits: Buyers can be classified according to the benefit they seek. Customers
purchasing toothpaste can seek different benefits such freshness, cleanliness, brightness
of the teeth etc.
User status: Markets can be segmented into groups of non-users, ex-users,
potential users, first lime user, regular users of a product. Blood banks cannot rely only
on regular donors to supply blood; they must also recruit new first-time donors and
contact ex-donors. Each will require a different marketing strategy. Included in the
potential user group are consumers who will become users in connection with some life
stage or life event. Mothers-to-be are potential users who will turn into heavy users.
Producers of infant products and services learn their names and shower them with
products and ads to capture a share of their future purchases. Market-share leaders tend
to focus on attracting potential users because they have the most to gain. Smaller firms
focus on trying to attract current users away from the market leader.
Usage Kate: Markets can be segmented into light, medium, and heavy product
users. Heavy users are often a small percentage of the market but account for a high
percentage of total consumption. For example, heavy beer drinkers account for 87 percent
of the beer consumer- almost seven times as much as the light beer drinkers. Marketers
would rather attract one heavy user than several light users. A potential problem however
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is that heavy user often either is extremely loyal to one brand, or never stays loyal to a
brand and is always looking for the lowest price.
Buyer- Readiness Stage: A market consists of people in different stages of
readiness to buy a product. Some are unaware of the product, some are aware, some are
informed, and some are interested. Some desire the product, and some intend to buy.
The relative numbers make a big difference in designing the marketing program. Suppose
a health agency wants to encourage women to have an annual pap test to detect possible
cervical cancer. At the beginning, most women may be unaware of the Pap test. The
marketing effort should go into awareness-building advertising using a simple message.
Later, the advertising should dramatize the benefits of the Pap test and the risks of not
taking it. A special offer of a free health examination might motivate women to actually
sign up for the test.
8.4 FACTORS AFFECTING MARKET SEGMENTATION

Following factors affect the feasibility of segmentation of market:
1. Easy to identify and measure:
First of all customers’ needs for the product must be heterogeneous. Not only
identification of potentials should be possible but measurement of the number of such
people should also be easy. Thus, segments should be identifiable and divisible.
2. Accessible:
Segmentation would serve no purpose, if the target customers can’t be reached.
Suppose a fast food company has identified the college canteens to be a good segment,
but if the colleges do not permit the fast food to supply or serve college canteens, the
segmentation would serve no purpose. Similarly, Cuban rum and cigar can’t reach Ameri-
can market due to political and traderelations.
3. Meaningful:
The basis used to distinguish market into segments must lead the company to
show clear variations in preferences, needs, and consumer behaviour in response to
different marketing mixes designed individually for each segment. Thus, division into
segments would enable a comparison with regard to sales, cost and profits. At least one
segment must have enough profit potential to justify “developing and maintaining a special
marketing mix for that segment.
4. Viability:
The basis used should lead to segments that are so large to be economically and
practically viable to be served. Viability depends upon size and sustainability, (enough
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volume), identity (unique characteristics), relevance and usefulness (relevant to important
characteristics), measurability (measured), access (not too difficult and too costly to
reach to them), and stability (stable in short, medium and long term).
5. Unique:
Segment so chosen has to be unique so that it can be distinguished from other
market segments.
6. Appropriate:
The segment must be appropriate to the objectives and resources of the
organisation.Exxon Mobil during 1993-2006 had three segmentation principles vali-
dated in the marketplace. First, simpler segmentation, which tends to be more robust,
flexible, and cost effective over the long term; second, it must reveal both where cus-
tomers are now and where they are going, so that the company can put the same face
before the customer in Cairo or Illinois; and third, segmentation analysis and strategy
must be updated regularly.
Other factors are:
 Size of the market
 Nature of the market
 Product life cycle
 Degree of competition
 Industry life cycle
 Fluctuation of market
 etc.,
8.5 TARGET MARKET

A target market is a group of customers towards which a business has decided to
aim its marketing and ultimately its merchandise A well-defined target market is the
first element to a marketing strategy. The marketing mix variables of product, price,
place and promotional strategy that determine the success of a product in the market
place.
Target markets are groups of individuals that are separated by distinguishable and
noticeable aspects. Target markets can be separated by the following aspects:
• Segmentations - addresses (their location climate region)
• Demographic or socio economic segmentation - (gender, age, income, occupa
tion, education, household size, and stage in the family life cycle)
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• Psychographic segmentation - (similar attitudes, values, and lifestyles)
• Behavioral segmentation - (occasions, degree of loyalty)
• product-related segmentation - (relationship to a product)
In addition to these segmentations, market researchers have advocated a needs-
based market segmentation approach to identify smaller and better defined target groups.
Some approaches to these smaller groups are:
 Select the target audience – the customers are grouped based on similar needs
and benefits sought by them on purchase of a product.
 Identify clusters of similar needs – demographics, lifestyle, usage behavior and
pattern used to differentiate between segments.
 Apply a valuation approach – market growth, barriers to entry, market access,
switching, etc. are used.
 Test the segments – A segment storyboard is to be created to test the attractive-
ness of each segment’s positioning strategy.
 Modify marketing mix – expanding segment positioning strategy to include all
aspects of marketing mix.
Strategies for reaching target market
Marketers have outlined four basic strategies to satisfy target markets:
undifferentiated marketing or mass marketing differentiated marketing, concentrated
marketing, and micro marketing niche marketing.
Mass marketing
A market coverage strategy in which a firm decides to ignore market segment
differences and go after the whole market with one offer. It is the type of marketing (or
attempting to sell through persuasion) of a product to a wide audience. The idea is to
broadcast a message that will reach the largest number of people possible. Traditionally
mass marketing has focused on radio, television and newspapers as the medium used to
reach this broad audience.
Differentiated marketing strategy
One where the company decides to provide separate offerings to each different
market segment that it targets. It is also called multi segment marketing and as is clearly
seen that it tries to appeal to multiple segments in the market. Each segment is targeted
uniquely as the company provides unique benefits to different segments. It increases the
total sales but at the expense of increase in the cost of investing in the business.
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Concentrated marketing
A strategy which targets very defined and specific segments of the consumer popu-
lation. It is particularly effective for small companies with limited resources as it does
not believe in the use of mass production, mass distribution and mass advertising. There
is no increase in the total profits of the sales as it targets just one segment of the mar-
ket.
Direct marketing
For sales teams, one way to reach out to target markets is through direct market-
ing. This is done by buying consumer database based on the defined segmentation pro-
files. This database usually comes with consumer contacts (e.g., email, mobile no., home
no., etc.).
8.6 POSITIONING
Positioning is the marketing activity and process of identifying a market prob-
lem or opportunity, and developing a solution based on market research, segmentation and
supporting data. Positioning may refer the position a business has chosen to carry out
their marketing and business objectives. Positioning relates to strategy, in the specific
or tactical development phases of carrying out an objective to achieve a business’ or
organization’s goals, such as increasing sales volume, brand reorganization or reach in
advertising.
Positioning concepts:
More generally, there are three types of positioning concepts:
1. Functional positions
 Solve problems
 Provide benefits to customers
 Get favorable perception by investors (stock profile) and lenders
2. Symbolic positions
• Self-image enhancement
• Ego identification
• Belongingness and social meaningfulness
• Affective fulfillment
3. Experiential positions
 Provide sensory stimulation
 Provide cognitive stimulation
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Product positioning process
Generally, the product positioning process involves:-
1. Defining the market in which the product or brand will compete (who the relevant
buyers are)
2. Identifying the attributes (also called dimensions) that define the product ‘space’
3. Collecting information from a sample of customers about their perceptions of
each product on the relevant attributes
4. Determine each product’s share of mind
5. Determine each product’s current location in the product space
6. Determine the target market’s preferred combination of attributes (referred to as
an ideal vector)
7. Examine the fit between the product and the market.
8.7 LIFESTYLE MARKETING

In the 21st century, “Lifestyle Marketing” has become the magic buzzword and
the latest merchandising strategy to enthral customers after the 80s “Niche Marketing”
and the 90s “Branding” craze. Simply put, lifestyle marketing is having a promotional
approach centred on the interests, values, attitudes and way of life of consumers/target
group. The key words here are ‘WAY OF LIFE’ of prospects and customers.
In lifestyle marketing one categorizes customers based on their interests, activities
and opinions. A classic example of lifestyle marketing is the HARLEY-DAVIDSON bike
that has morphed in to cult marketing. Similarly Shahnaz Hussain and her array of beauty
products are a way-of-life.
Lifestyle marketing attempts to group customers according to some amalgamation
of three categories of variables Activities, Interests, and Opinions (AIO) and identifies
the potency of a customer’s chosen lifestyle for determining the sort of products to be
purchased and the specific brands that are further likely to appeal to the chosen lifestyle
segment. Lifestyle marketing has assumed a new paradigm in today’s competitive business
world.
Lifestyle Marketing necessitates and works best when companies are able to
connect with the lifestyle of their existing and potential customers by developing
effective marketing strategies that seamlessly fit their way of living. It provides
tremendous opportunities to the companies to directly target a specific type of consumer
who will most likely be an enthusiast of the company’s specific products and thus, provide
a competitive business advantage to the company and generate more business.
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The companies have to be constantly attentive and tuned in to the simple reality
that understanding consumers and reflecting their AIO through sound message is what
really builds for successful Lifestyle Brands and Lifestyle Marketing.
With that in mind, the companies should dedicate a concrete portion of the
marketing energies towards Lifestyle MarketingLifestyle is something that defines our
very existence, a ‘way of life’ that is determined by the decisions we make on a daily
basis. Brands pertaining to lifestyle are fundamentally vehicles for self expression and a
way of telling the world much about who we are as human beings. Lifestyle Marketing is
committed to matching the needs of individuals to products and services that enhance
their ‘way of life’. Working across the lifestyle consumer categories; travel, tourism,
art, music, health, food, wine, technology and spa, we also operate in the B2B space
providing PR solutions for a variety of businesses that have included digital agencies &
travel management companies.
Consultative consideration is given to demographic habits, attitudes, tastes and
economic levels that underlie end-user behavioural patterns in an evolving and ever-chang-
ing consumer environment.
Lifestyle Marketing consultants operate in a sense as mobile Marketing Direc-
tors, providing strategy & implementation as a partner to your business. We love work-
ing with dynamic brands in our commitment to delivering effective communication so-
lutions & results.
8.8 MARKETING MIX

The marketing mix is a business tool used in marketing and by marketers. The
marketing mix is often crucial when determining a product or brand’s offer, and is often
associated with the four P’s:product, price, place and promation. In service market-
ing, however, the four Ps are expanded to the seven P’s or eight P’s to address the dif-
ferent nature of services.
In the 1990s, the concept of four C’s was introduced as a more customer-driven
replacement of four P’s.There are two theories based on four Cs:
(consumer, cost, communication, convenience), and Shimizu’s four Cs
(commodity, cost, communication, channel).
In 2012, a new four P’s theory was proposed with people, processes, programs,
and performance
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Category Definition
A product is seen as an item that satisfies what a consumer demands. It

is a tangible good or intangible service. Tangible products are those that
have an independent physical existence. Typical examples of mass-
produced, tangible objects are the motor car and the disposable razor. A
less obvious but ubiquitous mass-produced service is a computer
operating system
Every product is subject to a life cycle including a growth phase followed

by a maturity phase and finally an eventual period of decline as sales fall.
Product Marketers must do careful research on how long the life cycle of the
product they are marketing is likely to be and focus their attention on
different challenges that arise as the product moves.
The marketer must also consider the product mix. Marketers can expand
the current product mix by increasing a certain product line's depth or by
increasing the number of product lines. Marketers should consider how to
position the product, how to exploit the brand, how to exploit the
company's resources and how to configure the product mix so that each
product complements the other. The marketer must also consider product
development strategies.
The amount a customer pays for the product. The price is very important
as it determines the company's profit and hence, survival. Adjusting the
price has a profound impact on the marketing strategy, and depending on
the price on elasticity of the product, often it will affect the demand and
sales as well. The marketer should set a price that complements the
other elements of the marketing mix.
Price
When setting a price, the marketer must be aware of the customer
perceived value for the product. Three basic pricing strategies
are: market skimming pricing, market penetrated pricing and neutral
pricing. The 'reference value' (where the consumer refers to the prices of
competing products) and the 'differential value' (the consumer's view of
this product's attributes versus the attributes of other products) must be
taken into account.
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All of the methods of communication that a marketer may use to provide
information to different parties about the product. Promotion comprises
elements such as: advertising, public relation sales organization
and sales promotion.
Advertising covers any communication that is paid for, from cinema

commercials, radio and Internet advertisements through print media and
Promotion
billboards. Public relations is where the communication is not directly paid
for and includes press releases, sponsorship deals, exhibitions,
conferences, seminars or trade fairs and events. Word-of-mouth is any
apparently informal communication about the product by ordinary
individuals, satisfied customers or people specifically engaged to create
word of mouth momentum. Sales staff often plays an important role in
word of mouth and public relations (see 'product' above).
Refers to providing the product at a place which is convenient for

consumers to access. Various strategies such as intensive distribution,
Distribution(Place)
selective distribution, exclusive distribution and franchising can be used
by the marketer to complement the other aspects of the marketing mix.
8.9 SUMMARY
There are two bases for segmenting consumer markets; consumer chrematistics
and consumer responses. Marketers usually segment markets according to five broad
classes of characteristics: demographic, geographic, psychographics, behavioral, and
benefit. Demographic segmentation is based on such factors as age, life stage, gender,
ethnicity, religion, income, education, socioeconomic status, and household size.
Geographic segmentation takes into account international, national, regional, state, city,
county and even neighborhood differences. The chief variables in psychographics
segmentation arc social class, lifestyle, and personality; the VALS 2 model is often used
in psychographics segmentation. Behavioral segmentation is generally based on usage
rates, user status, or brand loyalty. Some markets are segmented on the basis of the
specific benefits consumers seek or the problems they expect a product to solve.
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1. What are the bases for segmenting consumer market?
2. Explain the variables in demographic basis of segmentation?
3. What is Geographical and Psychographics segmentation?
4. Explain the behavioral basis for market segmentation?
8.11 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
121
UNIT - 9 : CONCEPT OF A PRODUCT –MAJOR PRODUCT
DECISIONS -PRODUCT LINE AND PRODUCT MIX
Structure:
9.0 Objectives
9.1 Introduction: Concept of Product
9.2 Major Product decisions
9.3 Consumer Product classes
9.3.1 Convenience Products
9.3.2 Shopping Products
9.3.3 Speciality Products
9.3.4 Unsought Products
9.4 Product Hierarchy
9.5 Product Mix
9.6 Determinants of the Product Mix
9.7 Factors influencing Product Mix.
9.8 Product strategies
9.9 Factors Influencing Changes in Product Mix
9.10 Product Line
9.11 Product Line strategies
9.11.1 Line stretching
9.11 .2 Line Filling
9.11.3 Line Modernisation
9.11.4 Line Feathering
9.12 Summary
9.13. Self Assessment Questions
9.14. References
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9.0 OBJECTIVES
After studying this unit, you will be able to ;
• Know the definition of product and prodoct mix
• Explain the major classification of product classes
• Discuss the determinants of Product mix.
9.1 INTRODUCTION- CONCEPT OF PRODUCT
When a marketing firm has decided to generate revenue through the exchange
process for the existence, naturally it should offer some products or services to the
target market. This the exchange mode for the survival of a firm. The products or
services it offers tot he target market are the central variables in its marketing efforts.
In a dynamic competitive environment the products offered by the firm should meet the
expectations and aspirations of the target market for enjoying continued patronage.
Hence, a marketing firm that develops market offerings must consider the different
aspects of product or services from the consumers viewpoint.
A product may be defined as a bundle of utilities consisting of various product
features and accompanying services. The bundle of utilities or the physical and
psychological satisfaction that the buyer receives is provided by the seller when he sells
a particular product. The customer does not buy merely the physical and chemical
attributed of a product. He is really buying want satisfaction. He will buy a product which
can offer him expected satisfaction. What a buyer buys is a mixture of expected physical
and psychological satisfactions. Therefore, the term ‘product‘ does not mean only the
physical product but the total product including brand, packaging, label, status of
manufacturer and distributor and– Product (Toothpaste)- Product definition( Provide
dental care). services offered to the customer, in addition to the physical product. Eg.
Company( Colgate)
Product means need satisfying offering of affirm. , The idea of ‘Product’ as
potential customer satisfaction or benefits is very important. Many business managers
get wrapped up in the technical details involved in producing a product. Most customers
think about a product in terms of the total satisfaction it provides. That satisfaction may
require a “total” product offering that is really a combination of excellent service , a
physical good with the right features, useful instructions, a convenient package, a
trustworthy warranty, and even a familiar name that has satisfied the consumer in the
past. Product quality should also be determined by how customers view the product.
From a marketing perspective, quality means a product’s ability to satisfy a customer’s
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needs or requirements ie., how the customer thinks a product will fit some. Purpose.
For example , the best satellite T.V service may not be the one with the highest number
of channels but the one that includes a local channel that a consumer wants to watch.
Similarly, the best quality clothing for casual wear on campus may be a pair of jeans, not
a pair of dress slacks made of a higher grade fabric. However, a product with better
features is not a high-quality product if the features aren’t what the target market
wants. Quality and satisfaction depend on the total product offering.
According to Philip Kotler: “A product is anything that can be offered to a
market for attention, acquisition, use or consumption that might satisfy a want or a need”.
A product or service is essentially offered to satisfy a need or want. So, want satisfying
is the basic characteristics of a product. It can also be defined as an article introduced
in the market that seeks attention, desire for acquisition and image for use to get
satisfaction of a want or need of a customer. A firm’s marketing plan must begin with the
determination of its offerings to the target market. A customer focused firm must
formulate its offerings –product or services on the basis of analysing the exact needs
and wants of the target market. The product is the heart of the marketing mix. Marketing
mix determines the rightness of a product in the market with a view to provide consumer
satisfaction to a large extent. Thus, the implication of the marketing mix lies in identifying
a right product with an appropriate planning of the product-line at the right price is done
with potential scope of business expansion, product diversification and qualitative
improvement in products through the right promotion policies. It is essential to plan for
product in the market in a way to optimise the profit of the firm and the efficiency.
A product includes both goods and services. It is known by its actual utilities
and also the perception that consumers have about them . In this sense, a product can be
defined as :
From the point of view of the seller: A product is a” any want- satisfying good
or service which is considered together with its perceived tangible and intangible
attributes.” The tangible attributes constitute the physical object like car or a television
set. The intangible attributes are the services that form part of the product and consist
of benefits and satisfactions that are intangible and do not result in any ownership.The
shape, colour, sound effect, picture effect and sales services are the intangibles attached
with product. “Television”
From the point of view of the buyer: From the consumer’s viewpoint, a product
is defined as a series or group of satisfactions. Whatever be the tangible or intangible
features of a product, unless the consumer perceives a product as need –satisfier , the
product fails to achieve its intended purpose.
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9.2 MAJOR PRODUCT DECISIONS
Product decisions involve product mix- total group of products offered by the
company. Product lines –group of closely related product items. Brands –combination
of name , symbol, tem or design that identifies specific product, Packaging, Labelling
and . Positioning.
A product is closely associated with the need and level of satisfaction of the
customers.The hierarchy of products is a based on their utility and intensity of customer
satisfaction. In developing a useful product, a planner has to look upon its levels. A
product has many other dimension besides its physical appearance. A product has five
layers or dimensions according to Philip Kotler. At the time of visualizing any product,
the marketer thinks of it at different levels. These are:
 Core Product/Benefit
 Basic Product
 Expected Product
 Augmented Product.
 Potential Product
Core Product/ Benefit: The fundamental aspect is the core product , which tries
to answer the question of why the buyer should have it or buy it. The marketer should try
to reveal the underlying motives behind buying the same product, should also determine
what that product means to the consumer before designing the product. Aspirations of
the consumers differ form place to place from time to time. Thus , the same product
may satisfy different generic requirements. The marketer should design the product
after considering the impact of different possible generic requirements. Core product
meets the basic needs . It may be defined as the product that provides a core benefit to
a customer irrespective of its taste, colour, attraction, beauty etc.. Eg., Cloth, Food Item.
It is the fundamental dimension of a product as it represents a bundle of benefits to its
prospective buyer. The core product answers the question: ‘ What is the buyer really
buying’? For example a woman buying washing machine is buying comfort and not a
mere collection of drum, heater and nuts and bolts for their own sake. The basis job of a
marketer is to sell the core benefits.
Basic Product : The basic product is what the target market recognises as the
offer. Tangible product broadly possess five characteristics comprising quality, features,
style, brand and packaging. These factors have a direct bearing on the product marketing.
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Expected Product: The customer expects the basic product to be enveloped by
certain features, style, quality and brand, package. The most visible part of the product is
its features. Thus , an expected product is that product which in normally taken for granted
by the customer. The product levels also determine the selling process to a large extent.
The core product play an important role in product planning while the tangible product
initiate the sales management process. The augmented product drive the concept of
extended sales mechanism for marketing expansion and product diversification.
Augmented Product: Product augmentation is a set of approaches followed by
a company in promoting its product through effective delivery and service, incentives to
customers and dealers, warranty to seek customers’ confidence on product and maintain
a product-oriented relationship of customers’ with the company. It represents the totality
of the benefits that a person may receive or experience in getting the formal product.
The augmented product of a T.V seller is not only the T.V, but also delivery, free
installation, guarantee, and service and maintenance. This dimension of the product is
very important for a firm operating in a competitive market. The firm that develops the
right augmented product will be able to attract more customers and survive the
competitive market. The company must consider the relative cost of the augmentation
and the price accepted for the product by the customers. The resulting trade-off sets the
limits for product differentiation strategy to be adopted by the company. Marketer usually
tries to identify many tangible aspects in the form of features, style, packaging, quality
, etc. Marketer should offer particular features depending on the generic need of the
buyer.
Consumers are attracted by diverse augmented services, for examples ,marketers
may use the corporate image or brand name, delivery warranty, credit terms, after sales
programmes etc. If a company could customize the various types of augmented service
ina product , it stands the best chance to succeed in the long run.
Potential Product : The last level of the product is its potential part , ie., all the
unexpected changes in technology, attributes, features styles, colour, grade, quality etc
that might change the structure and character of industry.
The product levels indicate the importance of all benefits that are or could be
passed on to a consumer. Further, they help indicate the importance of creating
differentiation by changes in the product levels which might be required to counter
competition.
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9.3 CONSUMER PRODUCT CLASSES
Consumer product classes are divided into four groups. They are:
1. Convenience
2. Shopping
3. Speciality and
4. Unsought.
Each class is based on the way people buy products.
9.3.1 Convenience Products are products a consumer needs but isn’t willing to spend
much time or effort on shopping. These products are bought often, require little ser-
vice or selling, does not cost much, and may even be bought by habit. A convenient prod-
uct may be a staple , impulse product or emergency product.
 Staples are products that are bought often, routinely , and without much thought,
like breakfast cereals and most other packaged foods used almost every day in almost
every household. Goods that consumers purchase on a regular basis. For example ,
toilet soap, detergent, toothpaste.
 Impulse products are products that are bought quickly- an unplanned purchase
because of a strongly felt need. Impulse products are items that the customer hadn’t
planned to buy, decides to buy on sight, may have bought the same way many times be-
fore, and wants right now. If the buyer doesn’t see an impulse product at the right time,
the sale may be lost. These goods are usually procured due to external stimulus.
 Emergency products are products that are purchased immediately when the need
is great. The customer doesn’t have time to shop when a traffic accident occurs, or a
thunderstorm begins. The price of the ambulance service, raincoat won’t be important.
9.3.2 Shopping Products are products that a customer feels are worth the time and
effort to compare with competing products. Shopping products can be divided into two
types, depending on what customer are comparing: Homogeneous or Heterogeneous
shopping products.
 Homogeneous shopping products are shopping products the customer sees as
basically the same and wants at the lowest price. Some consumers feel that certain sizes
and types of computers, television sets, washing machines and even cars are very similar.
So they shop for the best price. In some product, the Internet has become a way to do
shopping quickly.
 Heterogeneous shopping products are shopping products the customer sees as
different and wants to inspect for quality and suitability. Furniture, clothing are some
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examples. Often the consumer expects help from a knowledgeable salesperson. Quality
and style matte more than price. In fact, one the customer finds the right product , price
may not matter at all, as long as it is reasonable. Branding may be less important for
heterogeneous shopping products.
9.3.3 Speciality products are consumer product that the customer really wants and
makes a special effort to find. Shopping for speciality product doesn’t mean compar-
ing . The buyer wants that special product and is willing to search for it. It’s the customer’s
willingness to search that makes it a speciality product. Any branded product that con-
sumer insist on by name is a speciality product. Marketing managers want customers to
see their products as speciality products and ask for them over and over again. Building
that kind of relationship isn’t easy. It means satisfying the customer every time.
9.3.4 Unsought products are products that potential customers don’t yet want or know
they can buy. So they don’t search for them at all. Consumers won’t buy these products
if they see them unless promotion can show their value. There are two types of unsought
products. New unsought products are products offering really new ideas that potential
customers don’t know about yet. Informative promotion can help convince customers to
accept the product. Ending its unsought status. Regularly unsought products are products
like life insurance and encyclopaedias’, that stay unsought but not unbought forever .There
may be a need, but potential customers aren’t motivated to satisfy. For this kind of products,
personal selling is very important.
9.4 PRODUCT HIERARCHY
The product hierarchy stretches from basic needs to particular items that satisfy
those needs. The hierarchy consists of six levels:
1. Need family: The core need that underlines the existence of a product family.
Example thirst
2. Product family: All the product classes that can satisfy a core need with reasonable
effectiveness . Example Mineral water, Fresh juice, Bottled Juice, Soft drinks, Tea,
Coffee
3. Product class: A group of products within the product family recognized as having
a certain functional coherence . Also known as product category. Example Soft drink.
4. Product line: A group of products within a product class that are closely related
because they perform a similar function , are sold to the same customer groups ,
are marketed through the same outlets or channels, or fall within given price ranges.
A product line may be composed of different brands or a single –family brand or
individual brand that has been line extended. Example Aerated soft drinks.
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5. Product Type: A group of items within a product line that share one of several
possible forms of the product.
6. Item or product variant: A distinct unit within a brand or product line distinguish-
able by size, price, appearance or some other attribute.
9.5 PRODUCT MIX
It is the set of all product lines and items that a particular company offers to
buyers. The width, depth and consistency of product mix enables a company to define its
product portfolio, appeal to different consumer needs/ segments and encourage one-
stop buying. The width of a product mix refers to how many different product lines a
company carriers. The depth of a product mix refers how many variants of each product
are offered in the line, for eg., Colgate-Palmolive ‘s Halo shampoo comes in three
formulations and three sizes and hence has a product mix depth of nine This kind of
assortment is popularly referred as stock keeping units. The consistency of a product
mix refers to how closely related the various product lines are in end use. Hence, Nestle’s
product lines are consistent in the sense that they are all food products, P& G has unrelated
product mix. A broad width or deep mix goes to satisfy the needs of several consumer
groups and maximise shelf-space and sustain dealer support. Most producers deal with
more than one product and no producer depends on a single product for along time. The
market conditions may compel the producer to add new product or services in order to
survive in the environment. The number of products produced and offered by a firm is
called its product mix. Tee product mix of Tata’s ranges from table salt to heavy machines
and equipment, products of Hindustan Machine Tools ranges from Wrist watches to
Computer Numerical Control machines. Thus the product mix of a company may consists
of several business divisions, each business division may have one or more product lines
and each product line may have one or more products targeting different market segments.
Product Mix of Company XYZ
Product Mix of Co. XYZ
Business Division Business Division
Product Line Product Line Product Line Product Line
P1 P2 P3 P4 P5 P6 P7 P8
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The product mix of the company XYZ consists of two major business divisions
and each business division has two product lines. Further , each product line has two
product/brand. Therefore, the number of business is two, the number of product lines is
four and the number of products is eight. The product mix of the company –business
division , product line and product/brands is under the direct control and responsibility
of the top management which also reviews the performance of the product mix of the
company. It may take decisions toad new product to the already existing business divi-
sions or drop products and even wind up a business division after evaluating its contri-
butions to the overall earnings of the company.
Product mix greatly affects the positioning of the product and expansion plans.
For example. Videocon , an electronic manufacturing company introduced itself into
kitchen equipments by starting a new company with brand ‘Kenstar’. The line expansion
was considered to be inconsistent with the Videocon’s image in consumer electronics
and therefore a separate product line with different brand was offered to the Indian
consumer.
9.6 DETERMINANTS OF PRODUCT MIX

The conditions, which appear to exert a major influence on the product mix
decision, are technology, competition, operating capacity, and market factors.
Technology: The rate of technological change is accelerating, and technical re-
search is unquestionably the most basic force affecting the product mix of the indi-
vidual company.
Competition: A second important determinant of a firm’s product mix is change
in the competitor’s product offerings. Changes in competitive products represent a direct
challenge to a company, and if the change is a truly significant improvement, it may
prove disastrous unless it can be matched or surpassed within a reasonable length of
time. In addition to changes in their product design, competitors may make changes in
overall product mix and put a rival at a competitive disadvantage.
Operating capacity: Another important factor influencing a marketer’s product
mix is under-utilised capacity. Since production facilities are usually composed of
complexes of inter-related machines, changes in production capacity can rarely be made
in small increments.
Market factors: Although declines in demand are disturbing to management and
may result in an expansion of the product mix in an effort to replace lost business, upward
changes are also significant. These market factors comprise:
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 Shifts in customer’s product mix
 Changes in availability or cost
 Changes in manufacturing processes
 Shifts in location of customers
 Changes in levels of business activity
9.7 FACTORS INFLUENCING PRODUCT MIX

It is very difficult for a marketer to take a decision about the number of products
it should produce at a given time because the number of products of product-mix is
affected by several factors. Changes in the product –mix , ie., adding or eliminating
products may be due to the following factors:
• Change in demand for the product.
• Change in purchasing power or behaviour of the customers.
• Change in company targets.
• Development of by-products by using residual, at low cost.
• The competitor’s actions and reactions.
• Financial influences of the firm.
• Advertising and distribution factors.
• Goodwill of the firm .
• Possibility of adding new product to its product line at less cost.
Most of the firms sell more than one product in the consumer goods market and
each of these products has a limited life span(Product-life –cycle) . In order to make
best sale during life time of the product, marketing managers adopt strategies called as
product strategies. This is a process where a course of action to monitor, compare and
evaluate the performance of different products and make decisions about future of the
products.
9.8 PRODUCT STRATEGIES

Product strategies are determined by the product mix. Different ways in which
product mix can affect its product strategies are as follows:
 Strategy to widen the product mix: Firms can build up their reputation in the
market by wideningtheir product mix, that is, adding another product line to the existing
product line. Firms dealing in selling garments may, for example, also start selling
footwear.
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 Strategy to lengthen the product mix or full –line strategy: Firms can add
more products in the given product line. For example, a firm which is selling only
ball pens may add fountain pens, gel pens, pencils and other items of stationery to its
existing product line. The firm dealing in garments which is currently selling only trousers
may lengthen its product line by selling shirts, ties, socks, belts etc. Full line strategy
helps firms to offer a wide range of products in the existing product line and penetrate
into a larger market share.
 Strategy to deepen the product mix: Firms can deepen their product mix by
adding more varieties to the existing product. A firm dealing in cotton shirts for men
only can deepen its product mix by selling cotton , silk an synthetic shirts for men and
children. This strategy also helps firms to widen market share.
 Strategy to develop product line consistency: Depending on whether firms wish
to add more products in the existing or delete some of them form the existing line in
order to maintain consistency in the existing market or in several markets, firms can
frame strategies to develop product line consistency. Firms, can delete some products
from the existing line say for example trousers from men’s range of attire and become
marketing specialist aiming at exclusive market segment, or delete some product lines
say footwear and become specialist in a single line product or delete all but one product
to become specialists in production and marketing of that product.
The product mix, thus helps firms in framing strategies what will help them in
making long-term decisions and achieve specific objectives of the marketing depart-
ment and overall objectives of the firm.
9.9 FACTORS INFLUENCING CHANGES IN PRODUCT MIX

• Change in market demand: the change in the demand of a product (due to change
in habits, fashion, purchasing power, income, attitudes and preferences of consumers)
affects the decision of product mix.
• Cost of production: if the company can develop a new product with the help of the
same labour force, plant and machinery and techniques, it can decide to start the
production of that product at lower cost.
• Quantity of production: if the production of new product is considered to be at a
large scale and the company can add one more item to its product line just to get the
economics of large scale production. Keeping in view its production capacity and
other factors.
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• Advertising and distribution factors: Advertising and distribution factors may be
the one of the reason for the changes in production mix. If the advertising and
distribution factors organization are the same, the company may take the decision to
add one more item to its product line.
• Use of residuals: if residual can be used gainfully, the company can develop it’s by
products into the main products. For example, a sugar mill can profitably develop
the production of paper card board or wine from biogases.
• Change in company desire: keeping in mind the objectives of the firm, maintaining
or increasing the profitability of the concern, the firm may eliminate some of its
unprofitable processes or may start a new more profitable product. In this way, the
firm tries to make its product mix an ideal one.
• Competitions actions and reactions: the decision of adding or eliminating the
product may be the reaction of competitor’s actions. If company thinks that it can
meet the competition well by making necessary changes in the size, colour, packing
or price, it can make such changes.
• Change in purchasing power or behaviour of the customers: if the numbers of
customers are increased with the increase in their purchasing power or with the change
in their buying habits, fashion, etc. the company may think of adding one or more
product keeping mass production or increase in profitability in the mind.
• Full utilization of marketing capacity: if the company is not getting desired results
from the market, it can decide to stop the production of such a product and divert its
resources to produce a new product or improve the existing product, according to
the needs of the consumers.
• Financial resources: finance is the life blood of the firm. Availability of the finance
may necessarily some changes in the product of the company. If the company is
short of finance or if the product is continuously going into loss the company may
decide to drop such production similarly, if the company has sufficient funds, it may
improve its products.
9.10 PRODUCT LINE

It is a group that is closely related because they perform a similar function,
targeted at the same customer group, and marketed through the same channel. Product
mix may consist of product lines which come under different business divisions. An
individual product in a line is termed as a product item. Thus , there are many product
items in a product line and a number of product lines in the product –mix of a big firm.
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Product line analysis is an essential dimension in evolving a product plan. Product line
is a component of product –mix which a company offers to the customers exhibiting the
length and width of the range of products. The analysis of product line depends on two
important information’s. They are volume of sales and profit on each item and the com-
petitors’ product line in the same market or segment. The analysis of the product –line
requires an awareness on the market profile to plan the positioning of the product in a
competitive environment.
9.11 PRODUCT LINE STRATEGIES

9.11.1 Line Stretching:
Decisions pertaining to line stretching are taken whenever the marketer feels he
can increase his profits by either adding or dropping items from the line. It can be up-
wards, downwards or both ways. Upward stretching occurs when a company enters the
upper end through a line extension. The reason for this may be a higher growth rate,
better margins or simply a wish to b a full line marketer. An example of a successful
upward stretch would be that of Lifebuoy, which started from a hygienic bath soap for
the masses to a premium quality liquid hand wash for the higher strata of society. Through-
out the stretch the brand had used hygiene as its core benefit. Downward stretching
takes place when the company finds that its offerings are at the high price end of the
market and then stretch their line downwards For example, P& G’s Ariel detergent be-
gan at premium end and the downmarket Ariel bar was introduced to tap the lower seg-
ment.
9.11.2 Line Filling
A product line can also be lengthened by adding more items within the present
product range. There are several reasons for line filling.
 Reaching for incremental profits.
 Trying to satisfy dealers who complain about lost sales because of missing items
on the line.
 Trying to utilise excess capacity
 Trying to offer a full line of the product.
 Trying to plug hole in the positioning map.
The launch of Cinthol, in different variants is an example of line filling. Today
Cinthol is a lime soap with yellow packaging and cologne variation with blue wrapping
apart from the initial Cinthol fresh. The company needs to differentiate each item in the
consumer’s mind.
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9.11.3 Line Modernization :
In the rapidly changing market, product modernisation is carried out continu-
ously. Because competitors are constantly upgrading their options, each company must
redesign their own offering. A company would like to upgrade customers to higher-val-
ued , higher –priced items. A major issue is the timing of the product line improvements
so that they do not happen too early and damage the sales of their current product line,
or come out too late so that the competition can establish a strong foothold.
9.11.4 Line Feathering:
In case of durable products, marketers at times select one or a few items to “fea-
ture”. The idea is to attract consumers into the showrooms and then try to get them
exposed to other models. At times, the marketer will feature a high end item to lend
prestige to the product line. These products act as “flagships” to enhance the whole line.
Sometimes a company finds one end of its line selling well and the other poorly.
The company may try to boost the demand for the slow-moving items, especially if they
are produced in a factory that is lying idle due to lack of demand.
Some of the growth strategies followed by FMCG companies are as follows:
• Multi -brand strategy
• Product flanking
• Brand extension
• Building product lines
• New product development
• Innovations in core products
• Long term outlook
• Extending the PLC
• Expanding markets by usage
• Wide distribution network
• Monitoring the pulse of the consumers
• Advertising and media coverage
• Sales promotion.
9.12 SUMMARY
A product thus may be defined as a bundle of utilities consisting of various
product features and accompanying services. A product has several layers and each of
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the layers contributes to the total product image. Thus product –mix involves planning,
developing and producing the right types of products and services to be marketed by the
firm. Product decisions are very important to ensure the sale of products. The product-
mix of a company is one of the most important aspects of its operations. A firm may
offer many product items in a product line and a number of product lines in the product
mix.

1. What do you understand by the term product?
2. Explain the different layers of a product.
3. Define product mix.
4. What is Product line?
5. Explain the factors influencing product mix.
6. Briefly explain the product line strategies.
9.14 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
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UNIT -10 : BRANDING, PACKAGING AND LABELLING
STRUCTURE:
10.0 Objectives
10.1 Intriduction to Branding
10.2 Defintion of branding
10.3 Essntials of a Good brand
10.4 Criteria for choosing a brand name
10.5 Benefits of Branding
10.5.1 To Buyers
10.5.1 To Sellers
10.6 Strategic Relevance of Branding
10.7 Introduction to Packaging
10.8 Functions of Packaging
10.9 Importance of Packaging
10.10 Introduction to Labelling
10.11 Summary
10.12 Self Assessment Qustions
10.13 References
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10.0 OBJECTIVES
After studying this unit, you will be able to;
• Define branding.
• Discuss the importance of Packaging
• Explain the concept of labelling
10.1 INTRODUCTION TO BRANDING
The physical product is only a part of the product image. It cannot stand alone
before the potential buyer. There are other elements that surround the product to give a
complete product concept. The word “brand” derives from the Old Norse ”brandr”
meaning “to burn” - recalling the practice of producers burning their mark (or brand)
onto their products. The Italians used brands in the form of watermarks on paper in the
13th century. Blind Stamps, hallmarks and silver-makers’ marks are all types of brand.
Factories established during the Industrial Revolution introduced mass-produced
goods and needed to sell their products to a wider market - to customers previously
familiar only with locally-produced goods. It quickly became apparent that a generic
package of soap had difficulty competing with familiar, local products. The packaged-
goods manufacturers needed to convince the market that the public could place just as
much trust in the non-local product. Pears Soap, Campbell soup, Coco-Cola, Juicy Fruit
gum, and Quaker Oats were among the first products to be “branded” in an effort to
increase the consumer’s familiarity with their merits. Many brands of that era, such
as Uncle Ben’s rice and Kellogg’s breakfast cereal furnish illustrations of the problem.
A product is something that is made in a factory; a brand is something that is bought by
a customer. A product can be copied by a competitor; a brand is unique. With the opening
up of the economy in the early 1990s, dramatic changes in consumer lifestyles and
widening consumer choices consequent to a variety of products being available in the
market; business houses in India have started realizing the value of brands. Even non-
branded commodities lie rice, salt, refined cooking oil and industrial products like
cement, aluminium are being converted into prestigious brands that have come to stay.
Basically , a brand name is an integral part of a product and plays a key role in its
promotion. It helps to create, maintain , stimulate and strengthen the demand for a
product. T o the consumer , brand is a promise of quality. To a company, well managed
brands are creators of wealth.
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10.2 DEFINITION OF BRANDING
According to American Marketing Association, ‘A brand is a name, term,
design, symbol or any other feature that indentifies one seller’s product or service as
distinct from those of other sellers. The legal term for brand is trade mark. A brand may
identify one item, a family of items or all items of the seller. A brand is a complex
concept that covers practically all means of identifying a product and embraces a set of
values and attributes. It is both tangible as well as intangible and is developed over time.
Brand is a name , trade mark , logo, term , symbol or design or a combination of
them which is intended to identify the goods or services or one seller or group of sellers
and to differentiate them from those of competitors. A brand identifies the product for
a buyer and gives seller a chance to earn good-will and repeated patronage . Brand is not
a mere trademark or name or logo. It is a set of ‘intangible values’ which create deep
psychological impressions in the minds of consumers. It represents the trust and
reputation which a company has built for a product for a product over the years. A
successful brand helps to create a strong emotional bond with customers. Brand helps
to create added value in the product or service. The importance of the brand is that it
always attempts to create an impression of added value for the product or service in the
minds of consumers. Branding is the practice of giving a specified name to a product
or group of products from one seller. Branding strategy indicates how the firm chooses
to use branding as an integral part of its overall marketing strategy. Branding is another
dimension of marketing strategy. A brand is essentially a seller’s promise to deliver a
specific set of features , benefits, and services consistently to the buyers. The best
brand convey a warranty of quality. It conveys the Attributes, Benefits, Values, Culture,
Personality, and User. Example Mercedes Car, Godrej, . Brand vary in the amount of
power and value they have in the market place. At one extreme are brands not known to
most buyers. Then there are brands for which buyers have a high degree of brand awareness.
Similarly there can be high degree of brand acceptability and high degree of brand loyalty
also. The brand name is the centre around which the entire marketing mix is built up.
The brand name can incorporate all marketing efforts together either in the consumer
mind or in the marketing program. Brands are most powerful instruments of sales
promotion as they contribute to ever-increasing competition, importance of packaging
as a distinct function as branding and packaging go hand in hand, need for advertising
and publicity, development of consumer brand consciousness . Not only branding gives
separate identity and easy recognition to the product but it also creates special consumer
preference . Branding constitutes the basis for successful activity of demand creation.
Example Vim, Lifebuoy , Lux, Colgate, Promise etc.
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10.3 ESSENTIAL OF GOOD BRAND
1. A brand should suggest about a product’s benefits- its use, quality, product’s nature,
purpose, performance.
2. The name should be short, simple, easy to pronounce to spell and remember, easy to
identify and easy to advertise .
3. It should be capable of being registered and protected legally under the legislation.
4. It should have a stable life and be unaffected by time.
5. It should be unique, attractive and distinctive eg., Wheel, Rin, Fair & Lovely
Brands typically are made up of various elements, such as:
• Name: The word or words used to identify a company, product, service, or concept.
• Logo: The visual trademark that identifies the brand.
• Tagline or Catchphrase: “The Quicker Picker Upper” is associated with Bounty pa-
per towels.
• Graphics: The dynamic ribbon is a trademarked part of Coca-Cola’s brand.
• Shapes: The distinctive shapes of the Coca-Cola bottle and of the Volkswagen Beetle
are trademarked elements of those brands.
• Colors: Owens-Corning is the only brand of fibreglass insulation that can be pink.
• Sounds: A unique tune or set of notes can denote a brand. NBC’s chimes are a fa-
mous example.
• Scents: The rose-jasmine-musk scent of Chanel No. 5 is trademarked.
• Tastes: Kentucky Fried Chicken has trademarked its special recipe of eleven herbs
and spices for fried chicken.
• Movements: Lamborghini has trademarked the upward motion of its car doors.
• Customer relationship management.
10.4 CRITERIA FOR CHOOSING A BRAND NAME

 Easy for customers to say, spell and recall (inc. foreigners)
 Indicate products major benefits
 Should be distinctive
 Compatible with all products in product line
 Used and recognized in all types of media
 Single and multiple words Bic, Dodge Grand Caravan, IBM PC (letters), or a com-
bination Mazda RX7
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 Use words of no meaning to avoid negative connotation, Kodak, Exxon
 Can be created internally by the organization, or by a consultancy
 Legal restrictions, i.e. Food products must adhere to the Nutrition Labeling and
Education Act, 1990...May 8 1994
10.5 BENEFITS OF BRANDING

1.5.1 To Buyers
• Help buyers identify the product that they like/dislike.
• Identify marketer
• Helps reduce the time needed for purchase.
• Helps buyers evaluate quality of products especially if unable to judge a products
characteristics.
• Helps reduce buyers perceived risk of purchase.
• Buyer may derive a psychological reward from owning the brand, IE Rolex or
Mercedes.
1.5.2 To Sellers
 Differentiate product offering from competitors
 Helps segment market by creating tailored images, IE Contact lenses
 Brand identifies the company’s products making repeat purchases easier for cus-
tomers.
 Reduce price comparisons
 Brand helps firm introduce a new product that carries the name of one or more of
its existing products...half as much as using a new brand, lower co. designs, adver-
tising and promotionalcosts.
EXAMPLE, Gummy Savers
• Easier cooperation with intermediaries with well known brands
• Facilitates promotional efforts.
• Helps foster brand loyalty helping to stabilize market share.
• Firms may be able to charge a premium for the brand.
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10.6 STRATEGIC RELEVANCE OF BRANDING
Brand is much more than the name or the creation of an external indication that
the product or service has received an organisation’s imprint or its mark. The following
are the strategic relevance and logic of branding. A brand :
 Aims to segment the market.
 Starts with a big idea.
 Has an enduring value.
 Tries to protect the innovation.
 Is a living memory.
 Shall sustain though the product may die.
A brand aims to segment the market: Brand building is part of a strategy aimed
at differentiating the offering companies try to better fulfil the expectations of specific
groups of customers. They do so by consistently and repeatedly providing combination
of attributes-both tangible , practical and symbolic , visible and invisible value-under
conditions that are economically viable for the company. The company wants to leave its
mark on a given field and sets its imprint on the particular offering.
A brand starts with a Big Idea: The first task in brand building is defining what
the brand infuses into the product or service. Branding , however, is not based on what
goes on, but what goes in. The result is an augmented product or service which must be
indicated in one way or the other if it is to be noticed by potential buyers, and it the
company is to reap the fruits of its efforts before it is copied by others.
A brand has an Enduring Value: If a brand is merely a label, then such a
product would lose its value as soon as it loses its sign of brand identification. This
explains the value of Lux soap when it carries the HLL label for the past 75 years.
A brand tries to protect the Innovation : Brand s become known through the
products they create and bring on to the market. Whenever a brand innovates, it generates
‘me-too-ism’ . Any progress made quickly becomes the standard to which buyers become
accustomed to. Competing brands most often follow through and at times bring out
improved versions as they do not want to fall beneath the market expectations. For a
short time, an innovative brand enjoys monopoly, but it will be a fragile one unless the
innovation is patented.
A Product may Die but the Brand will sustain: A brand protects the innovator
, granting momentary exclusiveness and rewarding the willingness to take risks. Brand
cannot be reduced to a symbol or a product or a merely graphic and cosmetic exercise.
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A brand is the signature on a constantly renewed , creative process. Products are
introduced, they live and disappear, but the inner or core value of the original brand
endures.
Brand is a living Memory: The spirit of the brand can only be inferred through
its products and its advertising . The content of the brand grows out of the cumulative
memory of various acts, provided they are governed by a set of unifying ideas or
guidelines. The importance of memory in encompassing a brand explains why its image
can vary structurally from generation to generation.
Advantages of Branding: Over the years , successful companies have come to
realise that brand names are indispensable for promoting and developing their products.
A brand is strategic instrument which, if handled properly, can prove to be very rewarding
to its owners. Successful brands liked Lux, Coco- Cola, Pepsi, Titan, Colgate etc.,
command enormous value as they enhance the competitive position of the company
concerned, contribute to its financial well-being and benefit not only manufacturers
and consumers but also distributors.
• Brand build relationship with Consumers
• Gives assurance to uniform quality
• Develops brand loyal consumers
• Assures continuity of sales volume and revenue.
• Facilitates Product Promotion
• Enables strong control over Middlemen
• Assures against Threat from competitors
• Gives Maximum mileage for Expenditure incurred
• Enhancement in the value of the Company
• Reduction in Threat from Price Competition
• Introduction of New Products
Thus branding is the process of stamping a product with a specific name and mark
to give it an individuality. Brand names are printed or inscribed not only on the products
but also on their packages to make them easily distinguishable.
10.7 INTRDUCTION TO PACKAGING

Packaging means wrapping , compressing, filling or creating of goods for the
purpose of protection of goods and their convenient handling. Packaging is called the
fifth ‘P’ of marketing. Packaging is concerned with designing and producing of appropriate
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packages for a product. The significance of packaging has increased because of severe
competition n the market and rise in the standard of living of the people. Good packaging
protects a product on its route from the seller to the buyer. Packaged goods are more
convenient to handle. Packaging facilitates the sale of a product. It acts as a silent
salesman of the manufacturer, particularly at a place where there is widespread use of
self-service. Packages are sealed to ensure products of right quality to the customers.
Package means a case, container, wrapper or other receptacle for packing goods. The
Packaging is the designing and producing of the container or wrapper for a product in
order to prepare the goods for transport, sale and usage.
Packaging is an integral marketing strategy to glamorize a product in order to
attract the consumer’s attention. Many consumers will judge a product by its packaging
before buying it, so creating a compelling and alluring design will build first time buyers
intrigue. Packaging is literally the products identity. Another all time classic case of is
the Coca Cola bottle. On it, Coke displays an instantly recognizable logo and distinctive
shape which propelled the product to global fame. In many cases, as with coke, the
packaging is so important that it costs more than the product itself. As a result, packaging
should be included amongst the four P’s of marketing: product, place, promotion and
price. The role of packaging in marketing has become quite significant as it is one of the
ways companies can get consumers to notice products.
Packaging plays a vital role in terms of protection, storage and hygienic handling
of a product and it plays a key role in the marketing mix. Timothy Beattie, GM of Pyrotec
PackMedia, a leading provider in product identification solutions, says, “Packaging is
often regarded as the most important form of advertising at the most critical point of all
in the purchasing journey: the point of purchase.”
Once the decision is taken on the brand then the design and make-up of the package
and the labelling of the package becomes important. Packaging includes the activities
of designing and producing the container for a product. The container is called the
package , and it might include three levels of material. Primary , secondary and shipping
package. Packaging has become the potent marketing tool. Well-designed packages can
create convenience and promotional value. Various factors have contributed to
packaging’s growing use as a marketing tool ,such as Self-service, Consumer affluence,
Company and Brand image, and Innovation opportunity. Developing an effective package
for a new product requires several decisions. Companies must give sufficient attention
to growing environmental and safety concerns about packaging . Shortages of paper,
aluminium , and other materials suggest that marketers should try to reduce packaging.
Many packages end up as broken bottles and crumpled cans . Modern methods of packaging
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are available to the manufacturers to establish their branded products as distinct from
those of his rivals. The more effectively a product is packaged , the more effective is its
identity and individuality. Packaging is much more than mere packing. Packaging is a
marketing necessity. In the present day consumer oriented marketing approach, packaging
has gained unique importance. From the marketer’s point of view it is a sales tool, it
identifies the maker as well as the product and carries the brand name, the package label
informs the buyer about the inner contents and how to use them, it is the biggest
advertising medium , it moves the product at the point of purchase, it encourages impulse
buying , it establishes product image and it identifies the product with advertising. Thus
modern package acts as a multi-purpose arrangement.
10.8 FUNCTIONS OF PACKAGING
Packaging should serve the basic functions:
1 .Protection of the product : The basic function of the package is to protect the product
from:
 Breakage or damage due to mishandling. For example cardboard package for the
washing machines.
 Extremes of temperature. For example, package for the Amul butter includes
information for keeping the product in refrigerator.
 Contamination with external elements such as dirt or chemical elements. For example,
Sunfloweroil comes in sealed packs so that no external object may disturb the purity
of the oil.
 Absorption of moisture or odour of foreign elements. For example, drugs are packed
in sealed bottles, and aluminium foils to protect them from absorbing odour.
 Loss of liquid or vapour. For example, petrol is packed in plastic containers which
are fully covered and placed over one another. This leads to control in pilferage of
the bottles in transit.
2. Appeal to the Customer: Package is an important marketing tool particularly for
consumer products such as cosmetics, chocolates, and gift articles. A package performs
the self-selling tasks-attract attention, tell the product features and usage; and build
confidence on the product usefulness. Packaging has special role to play for sales
promotion activities.
3. Perform Functionally: The science and technology part of the package refers to a
package performing functions. For example, Dalda used to come in tin packs. Now, it
comes in plastic packs with handle grip so that the package not only stores the product,
it is handy and therefore can be kept near the place of cooling.
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4. Convenience: A good design of the package would provide many advantages: convenient
to stock, display , not waste shelf-space, retains its looks during shelf display, and is
easy to dispose-off. Thus standardisation of the packages provide great convenience to
the manufacturers ,resellers and the consumers.
5.Cost –Effective: A package costs the manufacturer. The cost of package should not
alarmingly increase the price of the product.
6. Easy handling: Packaged goods are very easy to handle. Handling instructions can
also be mentioned on the package to ensure safe handling of goods, example ‘Glass
Handle with Care’.
7. Preventing Adulteration: Packaging is also necessary to prevent adulteration of
goods by the unscrupulous traders. For instance, Ghee, Oils etc, need sealed packaging
to prevent any possibility of adulteration.
8. Publicity to Product: Packaging gives individuality to the product and this acts as a
device of publicity. Manufacturers choose attractive packages so that the users are able
to remember and identify their products. Packaging helps in pushing up the sales of a
product. It beautifies the product so as to attract the customers. A customer may be
ready to pay a higher price of a product because its package is very attractive and
reusable.
10.9 IMPORTANCE OF PACKAGING

Packaging is an important device of sales promotion. It acts as a colourful and
silent salesman. IT gives full information about the uses and features of the product to
the users. It helps in giving individuality to the product. Branding is not possible without
packaging. In the modern age of competitive marketing , packaging has assumed certain
other objectives also. It is used as a medium of publicity, in preventing adulteration of
goods, and ensures safety of the product. The packaging industry uses glass, aluminium
paper, tin, paper and cardboards, cellophane, plastic, polythene for producing packages.
While managing the packaging function, attention needs to be given to the various
regulations that the government has laid down. Government regulations are many and
encompass areas such as use of specific packaging materials for certain products, con-
sumer protection , transportation of hazardous cargo etc.
Earlier the role of packaging was merely to protect the product. With the prolif-
eration of brands in consumer goods, packaging no longer takes a backseat in the mar-
keting mix. Today with so many parity brands trying to vie for consumers attention and
shelf space, attractive packaging has become a necessity. Also because brand loyalty is
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fast eroding in case of fast moving consumer goods, consumers are resorting to more of
impulse buying and are eager for try new brands. In the light of this tendency, attractive
packaging has gained importance. Hence, the companies today are just not catering spe-
cific benefits according to their buyer specifications, but are trying to add value by in-
novative packaging.
Of late, packaging has been used in the positioning of some product. In particular,
the size, shape, type, colour, and design of packaging has been carefully chosen to give
the product distinct identity. For example , fruit juice brands like Frooti received a good
response from the market partly because of their attractive tetra packs. This form of
packaging also added to the shelf-life of the product and make it easy to store as well as
carry. Pond’s cold cream in a handy tube enhanced sales, both through market enlarge-
ment and greater consumption. Its new package changed the entire concept of cold cream
being used only once a day, to one that could be used at any time throughout the day. This
positioning by elegant packaging specifically appealed to frequent travellers.
Another frequently applied packaging technique is economy size packaging. The
products in very small sized packets , has also become popular means of positioning the
product for some special group of customers. The Indian market is today replete with
cases where success can be attributed to smaller sized packages. Today, sachets are
being used for packaging many items of personal use such as shampoos, meant for a
single use. Another packaging oriented positioning is found in cases of reusable and
convenience packaging. This form of packaging has attracted consumers who look for
economy and convenience, for eg., Nescafe in reusable glass jars or disposable sa-
chets.
The package provides the buyer’s first encounter with the product and is capable
of turning him ‘on’ or ‘off’. Many marketers have called packaging a 5th P along with
Price, Product , Place and Promotion. Packaging is treated as an element of the product
strategy. Well designed packages can create an image of convenience or quality for the
consumer and promotional value for the product. Planter’s Pride , a high quality brand of
Darjeeling tea, targeted at the ‘discerning’ consumer of tea was priced at a premium. The
brand success is believed to be because of its vacuum packaging. Uncle Chipps’ potato
chips commands a high premium on its range of packaged potato chips based on delivery
of freshness, crispness and retention of flavour. This is possible by the use of packaging
technology wherein the product is packed in air-tight metal foil packets filled with a
nitrogen atmosphere to prevent air from leaking in and spoiling the product. Product
packaging plays an important role in marketing mix, in promotion campaigns, as a pricing
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criterion, in defining the character of new products, as a setter of trends and as an
instrument to create brand identity and shelf impact in all product groups.
Packaging can also differentiate one brand of product from another brand. Because
the product packaging can contain company names, logos and the colour scheme of the
company, it helps consumers to identify the product as it sits among the competition’s
products on store shelves. The shopper may identify with the company brand, which
propels them to buy the product. If the product packaging changes, it may alter the brand
perception of the company, which doesn’t mean that the consumer would not still purchase
the product, but it may delay the purchase until the person is able to identify the product
according to its new packaging. Customers are drawn more than anything, to products
that look good. Something that is well designed and interesting is bound to attract more
potential customers than a product that is poorly designed and looks bland. This is the
importance of packaging design. Customers drawn to package are bound to remember
it.
Thus the purpose of product packaging is to protect the product from damage.
Product packaging not only protects the product during transit from the manufacturer to
the retailer, but it also prevents damage while the product sits on retail shelves. Most
products have some form of packaging. For example, soups must have a container and
package while apples may have packaging for transport but not to sell the product from
the produce department of the local grocery store. How a product is packaged may be
what attracts the consumer to take a look on the product as is sits on store shelves. For
this reason, many companies conduct extensive research on colour schemes, designs
and types of product packaging that is the most appealing to its intended consumer.
Packaging also plays an important role for portraying information about the product.
Outside packaging may contain directions on how to use the product or make the product.
Packaging may also contain ingredients and nutritional information about the product.
This information can help to sell the product because it allows potential customers to
obtain the necessary information they need to make a purchase decision. Information
contained on a package may propel the reader to buy the product without ever having to
speak to a store clerk. Therefore, Packaging which appeals to more than one sense attracts
greater attention, intensifies perception and stimulates interest in buying. Packaging
that can be felt, smelled and heard as well as looked at wins the customer’s favour, which
often means that he will be prepared to pay a higher cost for that product. Innovative
packaging makes new products stand out over trusted, familiar ones. As a consumer, the
very first form of advertising is definitely the packaging of a particular product. If it is
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wrapped in a very interesting storage with attractive colours and pictures (and probably
a clear product description) then the percentage of me purchasing it will automatically
increased. Thus, manufacturers should really come up with not o give the consumer
information about the product he/she is buying and what it will do for him/her.
10.10 INTRODUCTION TO LABELLING

Sellers must Label products. The label might carry only the brand name or a
great deal of information. Labelling has social significance. Packaging, branding and
labelling go together and constitute an integral part of product planning and development.
The purpose of labelling is to give the consumer information about the product he is
buying and what it will and will not do for him. Warranty is a stipulated collateral to the
main purpose of contract. A Warranty is an obligation of the producer and the seller to
stand behind the product and assure the buyer that he will derive certain services and
satisfaction from the product. The product warranty must be clear, unambiguous and
meaningful . It has become an important selling point and means of product differentiation
in a competitive market. Warranties are also considered as promotional devices.
Sellers must label products. The label may be an elaborately designed graphic
that is part of the package. The label might carry only the brand name or a great deal of
information. Even if the seller prefers a simple label, the law may require additional
information. Labels perform several functions such as:
 Identifies the product or brand
 Grade the product
 Describe the product- who made it, where it was made, when it was made, what it
contains, how it is to be used and now to use it safely
 Promote the product through attractive graphics.
A good label is one which helps a potential buyer to make his decision by provid-
ing relevant and correct information. Apart from the information which must be statuto-
rily given , the label should provide:
• Picture of the product, accurate as to size, colour, and appearance
• Description of raw materials used along with methods of processing.
• Directions for use, including cautions against misuse.
• Possible effects , if any.
• Brand name
• Dates of manufacture and expiry
• Statutory warning, if any
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With product labelling , the key ethical issue is whether or not labels mislead the
buying public. Proper labelling is particularly important in the food, pharmaceutical and
cosmetic industries , as we literally consume these products or absorb them into our
skin. Increasingly, food products are required to demonstrate their country of origin.
Labels are used for various purposes in a modern world. They are used within and outside
organizations. Labels are even useful for domestic purposes. These printed labels portray
the identity of a company in a marketplace. They are used to label documents, products,
mails and much more. The labels are also deployed for promotional purposes. Marketers
deploy these labels for pure informative purposes like to give a description of a product.
Packaging and labelling are used for various products in retail and wholesale
establishments. Packaging provides a convenient way for customers to lift and transport
products. Labelling helps consumers identify a product. Without labels, for example, all
fruit drinks on a shelf would look the same. Certain types of packaging and labelling also
appeal to consumers. Customers may prefer a certain product brand because of the
packaging and labelling. There are several key reasons packaging and labelling are
important in marketing. Marketers must make sure they adhere to certain labelling laws
for certain products. Besides food, there are labelling laws for electronics and textiles
also.
10.11 SUMMARY
Labelling gives necessary information to the customers about the products. The
customers can get knowledge about the quality and features of product without tasting
the product. Label provides information about the price, quantity, quality etc. of the
product, due to which the customers buy the product without doubt and hesitation. They
compare the product with the same nature products of other firms on the basis of the
information provided on the label. Label becomes helpful to sellers to sell out the product.
It protects the customers from malpractices of the middlemen. Labelling is very important
element affecting sales and distribution process of a product.
In marketing, the importance and necessity of labelling of a product can be
mentioned as follows: Labelling identifies the product : Label helps to identify the
product and brand. It popularizes the product and its brand name.. Labelling grades the
product: Label helps to express grade of the product. For example, wheat can be expressed
with the grades such as 1, 2, 3, 4. Label becomes useful to grade any product according
to its quality. Labelling describes the product: Label gives introduction of the product,
describes and expresses its grade. Information and instructions about- who manufactured
the product, when and where it was manufactured, how many ingredients have been used
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in it, how to use the product, how to keep the product safe, etc. are given on the label.
This becomes helpful to the customers. Labelling promotes the product: Label helps
to promote the product. Customers’ attention is drawn by attractive and fascinating graphs,
figures or marks. This motivates the customers to buy the product. Label plays and
important role in sales and distribution as it makes the customers take buying decision.
Labelling protects the customers: Label protects the customers. As maximum selling
price, quantity, quality etc. are mentioned on the label, the customers are protected from
the possible malpractice of middlemen.

1. Why is branding important to consumers and to organisations?
2. ‘Package is a silent salesman.’ Why
3. What are the important brand strategy decisions? Give examples
4. Define labelling? Why labelling is done for products?
10.13 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
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UNIT – 11: PRODUCT LIFE CYCLE- NEW PRODUCT
DEVELOPMENT- PRODUCT DIVERSIFICATION
STRUCTURE:
11.0 Objectives
11.1 Introduction
11.2 Phases of Product Life Cycle (PLC)
11.3 Significance of PLC to Marketer and the Media
11.4 Strategies at different stages of PLC
11.5 Advantages of PLC
11.6 New Product Development - (NPD) Introduction
11.7 Definition-of New prodoct development
11.8 Why New Products fail?
11.9 Stages of New Product Development
11.10 Advantages of Test Marketing
11.11 Disadvantages of Test Marketing
11.12 Buyers’ Product Adoption Process
11.13 Diffusion Process
11.14 Product Diversification
11.15 Summary
11.17 References
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11.0 OBJECTIVES
• Define Product Life Cycle
• Discuss the major classification of product classes
• Explain the determinants of Product mix.
11.1 INTRODUCTION
Just as people go through infancy, childhood, adulthood and old age, so too do
products and brands. And just as we swing from being needy, to being overall contributors
to our families or to society, and then back to being needy again over the course of our
lives, so – in effect – do products. Like human being, every product has its life. And this
has been described as PLC. The PLC is generally termed as Industrial goods may have a
longer life than consumer goods. When a product idea is commercialized, the product
enters into the market and competes with the rivals for making sales and earning profits.
PLC is generally termed as product –market life cycle because it is related to a particular
market. A product may be old in one market and have a new life in another market. Rural
and Urban market. PLC may be short for some products and long for some other products.
The period may differ form product to product. Every product passes through certain
stages known as PLC.
As consumers, we buy millions of products every year. Older, long-established
products eventually become less popular, while in contrast, the demand for new, more
modern goods usually increases quite rapidly after they are launched. Because most
companies understand the different product life cycle stages, and that the products they
sell all have a limited lifespan, the majority of them will invest heavily in new product
development in order to make sure that their businesses continue to grow. Sooner or
later all products die and if management wishes to sustain its revenues , it must replace
the declining products with the new ones. The concept of PLC is used as a forecasting
tool. It can alert management that its product will inevitably face saturation and decline.
Proper marketing strategy can also be evolved through different stages of life cycle.
After the product has been developed it is launched in the market with the help of
promotional tools. Product development must be followed by successful introduction
of the product in the market. For this planning for introduction starts during the process
of product development itself. Every firm makes sales projection during the introduction
, growth and maturity stage of the PLC. To achieve the projected sales target it formulates
promotional, pricing and distribution policies. The concept of PLC helps integrated
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marketing policies relating to product promotion, pricing, distribution. The product
life cycle has 4 very clearly defined stages, each with its own characteristics that mean
different things for business that are trying to manage the life cycle of their particular
products. These stages are called as.
11.2 PHASES OF PLC: INTRODUCTION, GROWTH, MATURITY AND

DECLINE
 Introduction: This stage of the cycle could be the most expensive for a
company launching a new product. The size of the market for the product is small, which
means sales are low, although they will be increasing. On the other hand, the cost of
things like research and development, consumer testing, and the marketing needed to
launch the product can be very high, especially if it’s a competitive sector. In this stage,
competition is almost or non-existent, prices are relatively high, markets are limited
and the product innovation is not known much. Growth in sales volume is at a lower rate
because of lack of knowledge on the part of consumers and difficulties in making the
product available to the customers. During this stage, high expenditure has to be incurred
on advertising and promotional techniques. Prices are usually high because of small
scale of production, technological problems and heavy promotional expenditure
 Growth Stage: As the product grows in popularity , it moves into the
growth stage of the PLC In this stage, demand expands rapidly, prices fall, competition
increases and distribution is greatly widened. The manager focuses his attention on
improving the market share by deeper penetration into the existing markets and entry
into new markets. Promotional expenses tend to increase. The growth stage is typically
characterized by a strong growth in sales and profits, and because the company can start
to benefit from economies of scale in production, the profit margins, as well as the
overall amount of profit, will increase. This makes it possible for businesses to invest
more money in the promotional activity to maximize the potential of this growth stage.
 Maturity stage : During the maturity stage, the product is established and
the aim for the manufacturer is now to maintain the market share they have built up. This
is probably the most competitive time for most products and businesses need to invest
wisely in any marketing they undertake. They also need to consider any product
modifications or improvements to the production process which might give them a
competitive advantage As the product enters into maturity stage as competition
intensifies further and market gets stabilized. Profits decline because of stiff competition
and marketing expenditure increases. Prices are decreased because of competition and
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innovation in technology. There is saturation in the market as there is no possibility of
sales increase. This stage may last for a long period. But sooner or later, demand of the
product starts declining as new products are introduced in the market. Product
differentiation, identification of new segments and product improvement are emphasized.
 Decline Stage: Eventually, the market for a product will start to shrink,
and this is what’s known as the decline stage. This shrinkage could be due to the market
becoming saturated (i.e. all the customers who will buy the product have already purchased
it), or because the consumers are switching to a different type of product. While this
decline may be inevitable, it may still be possible for companies to make some profit by
switching to less-expensive production methods and cheaper markets. This stage is
characterized by either the product’s gradual displacement by some new products or
change in consumer buying behaviour. Sales fall sharply and the expenditure on promotion
is cut. The decline may be rapid . To avoid decline, new features may be added , packaging
may be improved, economy packs may be introduced, promotion of product should be
selective to reduce distribution costs.
The idea of the product life cycle has been around for some time, and it is an
important principle manufacturers need to understand in order to make a profit and stay
in business. However, the key to successful manufacturing is not just understanding this
life cycle, but also proactively managing products throughout their lifetime, applying
the appropriate resources and sales and marketing strategies, depending on what stage
products are at in the cycle.
11.3 SIGNIFICANCE OF PLC TO THE MARKETER AND THE MEDIA

PLC analysis, if done properly, can alert a company as to the health of the product
in relation to the market it serves. PLC also forces a continuous scan of the market and
allows the company to take corrective action faster. But the process is rarely easy. A
company or product’s life cycle has a significant impact on decisions related to the use
of media. Business owners have to make different marketing decisions at every stage in
a product’s life, beginning with the need to generate awareness for new products and
ending with the ability to maintain that awareness. When a new product is introduced, or
a new company opens its doors, the business owner’s challenge is to generate awareness
for that product or service. In these very early stages of market introduction the use of
traditional print and broadcast media is a proven way to create demand. Once a product
has gained market awareness, advertisers begin creating product preferences among target
customers. Establishing that preference over other available offerings requires telling
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the product’s story through various media. At this point, mass media use gives way to
more targeted media, including social media, which allows more information to be shared.
Competing in a crowded market occurs during a product’s mid-life stage.
Marketers begin to rely on word-of-mouth generated not only through satisfied
customers, but also through the public relations efforts of third-party endorsements.
What advertisers say about their own products and services will always be viewed by
consumers with a certain amount of scepticism. What they hear from others, including
the media, has more impact at this stage in the product life cycle.
Once a product is established, the advertiser’s challenge is to maintain that
awareness. At this stage, mass media becomes important in maintaining a general level
of awareness for the product. Mass media also raises awareness among new market
entrants, and even established product marketers know that there are always opportunities
to attract new customers. Products and services eventually reach a point of diminishing
returns. When this happens, media use declines unless the marketer is able to introduce
a brand extension or an entirely new product. Then the cycle begins again. At every stage
in a product’s life cycle, the marketer will be concerned about choices related to
generating awareness, preference, demand and, ultimately, a purchase decision.
11.4 STRATEGIES AT DIFFERENT STAGES OF PLC

The Introduction stage is probably the most important stage in the PLC. In fact,
most products that fail do so in the introduction stage. This is the stage in which the
product is initially promoted. Public awareness is very important to the success of a
product. If people don’t know about the product they won’t go out and buy it. There are
two different strategies you can use to introduce your product to consumers. You can
use either a penetration strategy or a skimming strategy. If a penetration strategy is used
then prices are set very high initially and then gradually lowered over time. This is a
good strategy to use if there are few competitors for your product. Profits are high with
this strategy but there is also a great deal of risk. If people don’t want to pay high prices
you may lose out. The second pricing strategy is a skimming strategy. In this case you
set your prices very low at the beginning and then gradually increase them. This is a good
strategy to use if there are a lot of competitors who control a large portion of the market.
Profits are not a concern under this strategy. The most important thing is to get you
product known and worry about making money at a later time.
 Growth: If you are lucky enough to get your product out of the introduc-
tion stage you then enter this stage. The Growth stage is where your product starts to
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grow. In this stage a very large amount of money is spent on advertising. You want
to concentrate of telling the consumer how much better your product is than your com-
petitors’ products. There are several ways to advertise your product. You can use TV and
radio commercials, magazine and newspaper ads, or you could get lucky and customers
who have bought your product will give good word-of-mouth to their friends/family. If
you are successful with your advertising strategy then you will see an increase in sales.
Once your sales begin to increase you share of the market will stabilize. Once you get to
this point you will probably not be able to take anymore of the market from your com-
petitors.
 Maturity: If the product completes the Introduction and Growth stages
then it will then spend a great deal of time in the Maturity stage. The key to surviving this
stage is differentiating your product from the similar products offered by your com-
petitors. Due to the fact that sales are beginning to stabilize you must make your
product stand out among the rest.
 Decline: This is the stage in which sales of your product begin to fall.
More innovative products have been created that replace yours. Many companies decide
to withdrawal their products from the market due to the downturn. The only way to in-
crease sales during this period is to cut your costs reduce your spending. Very few prod-
ucts follow the same cycle. Many products don’t even make it through all four stages.
Some stages even bypass stages. For example, one product may go straight from the
Introduction stage to the Maturity stage. This is the problem with the PLC. There is no
set way for a product to go. Therefore, every product requires a great deal of research
and close supervision throughout its life. Without proper research and supervision your
product will probably never get out of the first stage. Many firms abandon the product in
order to put the resources to better use.
11.5 ADVANTAGES OF PLC

When PLC is predictable , management. should take precaution in taking advance
• Steps before decline by adopting product modification, pricing strategies, style,
quality change.
• Firm can prepare an effective product plan by knowing PLC of a product
• Management can find new uses of the product for the expansion of the market dur-
ing growth stage and for extending the maturity stage.
• Management can adopt latest technology changes to improve quality of product,
features and design.
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11.6 NEW PRODUCT DEVELOPMENT - INTRODUCTION
Development of new products is a continuous function of marketing management
in the present day environment. The products offered by a firm to the customers must be
suitable to meet the changing needs of the customers. The life of the firm is closely
related to the development of new products through technological innovations. The
technological innovations are important to the growth of established business as well as
the development of new business. Businessmen must make a detailed study of the market
in relation to the products. New products mean new profits. For instance, a ready-made
garment dealer has to plant the garments to be in line with the changing fashions. Product
failure wastes the money, material, energy and time spent on product development apart
from defeating the objectives of the firm.
Once the product is planned and brought into market, it is likely to survive for a
long period of time unless disturbed by environmental forces like changes in consumers’
tastes, technological factors and competitors’ policies. These forces provide an impetus
to firms to continuously develop new streams of products which will substitute fading
or outgoing products. It is not rare to find companies where new products are failing at
an alarming rate as they involve huge costs and high levels of risk. Some of the probable
causes for this failure are:
 wrong conception of the product idea;
 over estimation of the market size;
 a rightly conceived idea but wrongly designed priced and
 inadequate advertisement of the product.
These failures result in high product costs and these costs, if not commensurate
with the generated revenues are likely to result in failure of the product. It is, therefore,
necessary that marketing executives conduct a thorough market research and develop
products which are able to withstand the vagaries of environment , satisfy the needs of
consumers and help firms achieve their long-term objectives of growth. Firms can de-
velop new products by:
• acquisition of patent rights and production of products through some one else’s
technology, or
• development of one’s own R &D efforts to develop its products. This is practically
referred to as product development.
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11.7 DEFINITION OF NPD
Product development as an element of overall marketing strategy is defined as
“the development of original products, product improvements, product modifications
and new brands through firm’s own R& D efforts.”
Product development includes a number of decisions, namely, what to manufacture
or buy, how to have its packaging, how to fix its price and how to sell it. In the case of a
manufacturing organisation, the production department will develop and produce products
on the advice of the marketing department because it is the marketing department which
knows better the requirements of the customers. In case of purely trading organisations,
the purchase department will procure those products as are suggested by the marketing
department. The work of product planning and development will be performed by the
marketing department itself. New product development consists of creation of new
ideas, their evaluation in terms of sales potentials and profitability, production facilities,
resources available, designing and production testing and marketing of the product. The
main task of the product planners is to identify specific customer needs and expectations
and align company’s capabilities with the changing market demands. In each of these
stages, the management must decide as to whether to move on to the next stage or to
abandon the product or to seek additional information.
Product planning and development is necessary for its survival and growth in the
long-run. Every product has a life-cycle and it becomes obsolete after the completion
of its life-cycle. Therefore , it is essential to develop new products and alter or improve
the existing ones to meet the requirements of customers. One of the most common
product planning problem relates to the addition of new products to the existing product
line. Addition of new product involves generation of new product ideas, appraisal of
various possibilities, economic analysis, product development, product testing, test
marketing and developing markets. Another important problem of product planning is
modification or elimination of existing products. The need for continuous modification
of the product is great because society’s needs are always changing , and improved
products must be introduced to fulfil them. All products have certain deficiencies as
they are the result of a great many compromises. Research makes possible the reduction
of these deficiencies and brings about improved products.
A new product can be:
 Continuous Innovation...No new buyer behavior to learn, i.e. -products not previ-
ously marketed by the firm, but by others
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 Dynamic Continuous Innovationminor education needed for consumers to adopt
product
 Discontinuous Innovation...entirely new consumption patterns
For a new product to succeed it must have desirable attributes, be unique, have its
features communicated to the consumer Developing new products is expensive and risky.
Failure not to introduce new products is also risky.
11.8 WHY NEW PRODUCTS FAIL ?

• Lack of differentiating advantage
• Poor marketing plan
• Poor timing
• Target market too small
• Poor product quality
• No access to market
11.9 STAGES OF NEW PRODUCT DEVELOPMENT

Product development does not just happen, it has to be planned. Dynamic firms
plan their innovations for five to ten years in advance. They have a definite idea of exactly
what product developments they want and what new products they will need to cater to
the demands of their customers.
Stages in New Product Development
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Screening of Ideas
Commercial Feasibility
Product Designing and

Evaluation
Test Marketing
Commercialisation/
Launching the Product
Only a few ideas are good enough to reach commercialization. Ideas can be
generated by chance, or by systematic approach. Need a purposeful, focused effort to
identify new ways to serve a market. New opportunities appear from the changes in the
environment.
1. Generation of Product Ideas : The product planners must visualise new
product ideas. Ideas may be contributed by professional designers, scientist, customers,
sales force, dealers, competitors, etc. Ideas may also come from brainstorming sessions
of management. It may be noted that the source of ideas is not so important as the firm’s
system for stimulating new ideas and then acknowledging them and reviewing them
promptly. New product ideas may come form company’s research and development
department, managers , salespersons, consumers or industrial users, middlemen, company
suppliers of raw materials, governmental agencies, company competitors and their
products, trade associates, private research organisations, inventors, exhibits and trade
fairs, wholesalers and retailers, advertising agencies, commercial laboratories and trade
journals, etc. Consumers complaints or dissatisfaction can also be the source of new
ideas. Consumers are said to be one of the best sources.
2. Screening of Ideas: The ideas generated at the first stage are examined to
eliminate those which have no potential or which are capable of making any significant
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contribution to the marketing objectives. The ideas should be screened properly because
any idea passing this stage would cost the firm both money and time. This involves
evaluating the company’s capabilities with respect to scientific knowledge and technical
skills in terms of possible new products and product improvements. The basic idea is to
find out which ideas arrant further study. The screening should be rigorous enough to
eliminate poor stuff, but not so rigorous as to eliminate potential good possibilities.
The list of information required in evaluating new product possibilities should be drawn
up in such a way as to throw some light on the profit possibilities, the risk and cost of
capital involved.
3. Commercial Feasibility: The product planners evaluate the nature and
importance of market needs and appraise the extent to which present products fulfil
them. The evaluate new ideas in the light of the company’s capability with respect to
scientific knowledge, technological skills and financial resources. Only the most feasible
and profitable ideas are picked – up for further detailed investigation. Marketing research
is critical during this phase since it can reveal the changing behaviour of buyers , strategies
of competitors and availability of new technological ideas.
4. Product Designing/ Development: This phase relates to actual development
of the new product based on the product data evaluation system. A programme is made
for the proper development of the product. First a precise description of the features of
the proposed product should be studies. After , this selected consumers may be called
upon to offer their comments on the proposed product. Decisions regarding branding,
packaging, labelling, et., are also made during this phase. When the product takes a
tangible form, consumer testing can be done. Consumer testing will provide the ground
for final selection of the product for mass production and distribution.
5. Test Marketing: Test marketing is necessary to find out the viability of
marketing programme for large-scale distribution. Before the product is widely
distributed, it is tried in a selected market. Customers’ reaction may be noted and product
may be improved further, if necessary. Test marketing allows greater control over the
new product. If there are defects in the product, it could be withdraw from the market
quickly without any loss to the reputation of the firm. Test marketing is generally done
by consumer goods companies rather than by industrial goods firms who usually try out
new products with selected customers or obtain general reactions by having their sales
people demonstrate products when they make their rounds.
6. Commercialisation / Launching the Product: After the test marketing gives
green signal for the introduction of product in the National market, the firm may proceed
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to finalise all features of the product. The marketing department will launch a full fledged
production promotion campaign for mass distribution. Distribution channels will be
chosen to make available the product wherever it is demanded. After this, the life cycle
of the product will start and the marketing manger will adopt differ strategies during
different stages of the product life cycle to maximise sales volume. Necessary
improvement in the product may also be introduced as and when necessary in the light
of changed customer requirements and innovations in technology. In launching a new
product , the company must make four decisions:
When : The first decision is whether it is the right time to introduce the product.
Where: Secondly, the company must decide whether to launch the new product
in a single locality, a region , several regions, national market or the international mar-
ket. Normally , companies develop a market rollout over time.
To whom: Within the rollout markets the company must target its distribution
and promotion to the best prospect groups, like early adopters, heavy users, opinion
leaders and so on.
How: The company must develop an action plan for introducing the new product
into the rollout markets. It must allocate the marketing budget among the marketing mix
elements and sequence the various activities.
11.10 ADVANTAGES OF TEST MARKETING

 Lessens the risk of product failure.
 Reduces the risk of loss of credibility or undercutting a profitable product.
 Can determine the weaknesses in the MM and make adjustments.
 Can also vary parts of the MM during the test market.
 Need to select the appropriate MM and check the validity.
11.11 DISADVANTAGES OF TEST MARKETING

• Test market is expensive.
• Firm’s competitors may interfere.
• Competitors may copy the product and rush it out.
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11.12 BUYERS’ PRODUCT ADOPTION PROCESS
This process involves the stages through which an individual consumer passes
while arriving at a decision to try or not to try or to continue using a new product. It is
assumed that the consumer moves through five stages in arriving at a decision to
purchase or reject a new product.
 Awareness : The consumer is first exposed to the product innovation though print,
audio-visual media or demonstration, and becomes aware of the existence of the
new product.
 Interest : The consumers becomes interested in the product and searches for
additional information and Buyers are receptive to learning about product.
 Evaluation : Buyers consider product benefits and determines whether to try it
 Trial : Buyers examine, test or try the product to determine usefulness relative
to needs
 Adoption: Buyers purchase the product and can be expected to use it when the
need for the general type of product arises.
Rate of adoption depends on consumer traits as well as the product and the
firm’s marketing efforts.
11.13 DIFFUSION PROCESS

The acceptance of new products and services by consumers is an important factor
which determines their success or failure. The framework for exploring consumer
acceptance of new product is drawn from the areas of research known as the diffusion
of Innovations. The diffusion process is concerned with how innovations spread, ie.,
how they are assimilated within a market. It is the process by which the acceptance of
an innovation is spread by communication to members of a social system over a period
of time. The manner in which different members of the target market often accept and
purchase a product go through the adoption process.
• Innovators- 2.5 % of consumers : They are very eager to try new ideas and prod-
ucts, accept risks.
• Early Adopters : Tend to be opinion leaders. Adopt new products but use discre-
tion, 13.5% Respectable opinion leaders, or role models. Consumers check with
these persons before adopting a new idea.
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• Early Majority : 34% of consumers, first part of the mass market to buy the prod-
uct. These consumers take time to adopt new ideas. They deliberate for some
time before adopting.
• Late Majority: Less cosmopolitan and responsive to change, 34% .They are scep-
tical people who take a long time before adopting. They adopt due to economic
necessity or a react to peer pressures.
• Laggards: Price conscious, suspicious of change, 16%, do not adopt until the prod-
uct has reached maturity. They are diehard traditionists who are oriented to the
past and suspicious of the new. They are the last people to adopt an innovation.
The adoption of some products and services may have minimal consequences
whereas the adoption of the innovations may lead to major behavioural and lifestyle
changes.
11.14 PRODUCT DIVERSIFICATION

Is the process of expanding business opportunities through additional market
potential of an existing product. Diversification may be achieved by entering into
additional markets and/or pricing strategies. Often the product may be improved, altered
or changed, or new marketing activities are developed. The planning
process includes market research,product adaptation analysis and legal review, or Process
by which businesses attempt to expand their market reach and customer base by delivering
products somewhat different than the ones for which they are known. These new products
can simply be extensions of existing brands or they may be entirely new. By engaging in
product diversification, a company can extend its business into new areas and markets,
thereby increasing their opportunities for profit. There are some potential pitfalls to
this strategy, including the possibility that a company might stretch itself too thin or that
it might dilute its original brand with the existence of the new product lines.
Diversification, in any form, is essentially a way to manage risk. By removing all
of the focus from one area and spreading it among many different areas, there is less
reliance on any one area to produce. This strategy can be used by investors attempting to
spread out their money and gain new areas of exposure. Companies that sell products to
the public may also need diversification, especially if they can’t sustain their businesses
with just one product or approach. For that reason, product diversification is an often
effective business strategy.
There are several ways in which a company may achieve product diversification.
It doesn’t necessarily have to be with a completely new product, although that is one way
165
to achieve diversity. A particular brand might be naturally extended. For example, a com-
pany that sells cola might decide to bring out a line of diet colas based on their original
formula but with fewer calories than the original product. That is a prime example of
what product diversification can do. It can expand the audience for a particular brand,
and it can improve the overall bottom line of a company if done effectively. Ideally, the
new products or brand extensions can act as a complement for the original brand, so that
customers familiar with the original brand might also have use for the new choices.
It is important for business leaders to realize that there are some drawbacks asso-
ciated with product diversification. Too much extension can eventually dilute the origi-
nal brand and confuse the customers the company is attempting to reach. In a worst-case
scenario, it may even dissuade customers from the original brand. Business familiar
with making one type of product can also stumble if they are unfamiliar with base. Add-
ing new products and service lines or starting new companies within a group can signifi-
cantly enhance your ability to grow rapidly. However, it’s important to pursue a strategy
that is right for you and your company. Businesses diversify for a number of reasons.
Perhaps the most basic of these is survival.
There are many ways in which to diversify. The most straightforward of these is
to provide a natural extension of the goods or services that you already offer to customers.
manufacturers can boost revenues by not only acting as suppliers but also providing
follow-up services such as maintenance. This approach can be particularly useful when
the economic cycle turns down. In hard times, customers don’t necessarily have the
inclination to invest in new machinery but they will spend on maintaining the equipment
they’ve already got. Thus, a manufacturer that provides both goods and services can
maintain a consistent revenue stream.
Diversification can also take the form of brand extension across an apparently
unconnected range of products or companies. Many business owners expand by forming
new companies that operate under different brand and/or trading names and sell uncon-
nected products within a group structure. There are some advantages to this approach.
Brand extension carries a certain degree of risk. With the right people, business plan and
structure in place, diversification can serve to supercharge growth.
11.15 SUMMARY
The concept of product life cycle highlights that products die and that if manage-
ment wishes to sustain its revenues, it must replace its declining products with the new
ones. Development of the new product is a continuous function of marketing manage-
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ment. The product offered by the firm to the customers must be suitable to meet the
changing needs of the customers. Product development includes a number of decisions
ie., what to manufacture, or buy, how to have its packaging, how to fix its price and how
to sell it. One of the most common product planning problem relates to the addition of
new products to the existing product line. The need of continuous modification of the
product is great because society’s needs are always changing, and improved products
must be introduced to fulfil them.

1. Explain the stages of the product life cycle.
2. Explain the strategies adopted during different stages of PLC.
3. State the advantages and disadvantages of test marketing.
4. Explain the stages in new product development process.
5. Explain the adoption process.
6. What is product diversification?
11.17 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
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UNIT -12 : PRICING DECISIONS- FACTORS AFFECT
ING PRICE DETERMINATION, PRICING
METHODS AND TECHNIQUES , PRICING
POLICIES AND STRATEGIES
STRUCTURE:
12.0 Objectives
12.1 Introduction
12.1.1 Importance of Pricing
12.1.2 Objectives of Pricing
12.2 Price Determination
12.3 Pricing Practices
12.3.1 Full Cost Pricing
12.3.2 Rate of Return Pricing
12.3.3 Marginal Cost Pricing
12.3.4 Acceptance Pricing
12.3.5 Customary Pricing
12.3.6 Intuitive Pricing
12.4 Pricing of Multiple Products
12.5 Dumping
12.6 Transfer Pricing
12.7 Market Penetrating Pricing
12.8 Discount Pricing
12.9 Product Line Pricing
12.10 Segmented Pricing
12.11 Psychological Pricing
12.12 Pricing Methods, Policies and Practices
12.13 Pricing of a New Product
12.14 Summary
12.16 References
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12.0 OBJECTIVES
• Define pricing
• Know the various pricing practices
• Explain pricing strategies adopted.
12.1 INTRODUCTION
Price is one of the crucial elements in the marketing mix. It is a powerful
marketing tool which, in the hands of a skilful practitioner, can have an all-pervasive
effect on the company’s long-term success. Pricing policy has critical implications for
profit. However, at the same time price often entails psychological and behavioural
responses. These relate to the perceived quality and value for the product, thereby
influencing how it can be positioned in the marketplace. Pricing decisions cannot be
taken in isolation. They must always be taken in full harmony with firms’ strategic
environment and the realities of the marketplace. A price which meets the firm’s strategic
criteria but not the expectations of the market is an wrong as the one that satisfies the
customers but fails to meet the commercial needs of the firm.
Prices that a company will charge for its products depend upon the objectives
that it wants to accomplish by selling its product. Customers are widespread over wide
geographical locations and buy company’s products in different quantities. This causes
companies to develop pricing policies that will support the overall objectives of the
firm. The primary objectives of the firm are long-run profit, growth, and survival. Pricing
contributes to each one of these objectives. By affecting the sales volume and profit
margins, it contributes to the company’s long run profits. By contributing to the company’s
cash reserves , it helps in meeting its investment opportunities thereby allowing room
for growth. Sound pricing strategies that help firms in meeting their goals and also
providing customer satisfaction help in survival of the firms. A firm, at a given point
time, can deal with diversified products catering to diversified group of consumers. It
will, therefore, have to choose from a number of pricing policies keeping into
consideration the fact that these policies should be consistent with the firm’s overall
marketing strategy.
An important element of marketing mix that generates revenue for the firm is
pricing. Pricing deals with determining the price of the product at which it is transferred
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from the seller to the buyer. Traditionally, price was considered as the most important
factor that influenced the buyer’s decision to buy the product. Today there are a host of
non-price considerations such as brand image, advertising, packaging design, brand name,
etc. Though non-price considerations largely affect the affluent market decisions, price
factor continues to remain an important marketing tool that affects both , the seller and
the buyer.
As a narrow concept, it is the amount of money charged by the seller for the
product or service that is sold to buyers. Though sellers wish to charge a high price for
products, buyers wish to pay a low price for the same. They both, thus arrive at a mutually
acceptable price through negotiation and bargaining.
As a wider concept, price is not just the exchange value for the product transferred,
it also reflects value for all the benefits that will accrue to the buyer on use of a given
product or a service.
Marketer: A marketer takes into account both the factors, demand and costs, while
pricing a product. While demand affects the upper limit of the prices, costs affect the
lower limit. Pricing decisions, thus , falls within a range where marketers have the
flexibility of determining different prices for the product.
12.1.1 Importance of Pricing :
The importance of pricing as stated by E. Raymond Corey: “ Price is a key element
in an overall business strategy, and to make strategic pricing decisions one should know
what objectives are being served”. Pricing decision serves to act as a catalyst for
integrating the firm’s product, promotion and channel decisions. It determines the quality
of a product, the means of its promotion and the channel through which it will be
transferred to consumers. It helps in recovering the costs of production, administration
and distribution costs. Pricing decisions are flexible and can be easily changed according
to market conditions, product variability, general economic conditions, government
regulations etc. Pricing helps firms capture a bigger market share by gaining an edge
over their competitors. Pricing policy of the firm depends on its objectives.. The
objectives can be Survival of the firm, Rate of return on investment, Maximization of
profits , Maximization of revenue, and Maximization of sales growth and other objectives
like Public image and Social obligations..
12.1.2 Objectives of Pricing :
Prices that a company will charge for its products depends upon the objectives
that it wants to accomplish by selling its product. The objectives of the pricing policy
are as follows :
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 Survival of the firm: To begin with, if firms are not able to earn huge profits ,
they will try to recover their variable costs and a part of fixed costs also to ensure their
survival in the market. As a short –run objective, firms wish to survive in the market in
the hope to achieve the long-run objectives of not only survival but also growth and
prosperity. The objective of pricing is, thus , to keep the plant and machinery in operation
so that firms continue to produce and sell products to satisfy market demands in the
hope of getting a bigger share of the market in future.
 Rate of Return on Investment(ROI) – ROI is the amount of profit earned on
capital invested by the firm . Profit , in turn, depends on sales volume and both profit
and sales volume depend on price. Thus , ROI sets price at a level what will generate a
target rate of return for the firms. Firms which invest in risky projects expects a higher
ROI and , therefore , set a higher price for their products. Pricing through ROI provides
consistency to the firm’s pricing strategies.
 Maximization of Profits: Profits ,being the difference between sales revenue
and costs and sales revenue being the product of units sold and selling price per unit , the
firms can maximize their profits by reducing their costs or increasing the selling price.
Firms estimate the demand and costs associated with different prices and choose a price
that will generate maximum revenue for them. Pricing that aims at maximizing firm’s
profits suffers from the following drawbacks:
i. It ignores the concept of social responsibility and attempts to maximize firm’s prof-
its at the cost of social benefits.
ii. It assumes that the firm has complete knowledge about its products demand and
cost which is not practical.
iii. It ignores the firm’s long –run objective of wealth maximization and emphasizes on
its short-run objectives of profit maximization.
iv. It ignores the impact of other factors such as, government regulations, competitors
pricing policies , etc.
 Maximization of revenue: Depending on the demand for their products , some firms
wish to set prices that will maximize the revenue from sales. This is in anticipation of
long-run growth and profits
 Maximization of Sales Growth: Rather than maximizing their revenue by charging
higher prices for their products, some firms wish to maximize their sales growth by
selling a large volume of products at a low per unit selling unit. Larger sales volume and
consequently , sales value will spread uniformly over the number of units produced and
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sold and result in low per unit cost of production. This will further result in an increase
in the long-run profits of the firm . This policy is known as market penetration pricing.
 Maximization of market share: In consonance with the increase in the share of
their revenue from sales, firms wish to set prices at a level where they are also able to
capture a bigger share of the market. Firms can sacrifice short-run profits at the cost
of a bigger market share in the hope to earn higher profits in later years.
 Product quality leadership: High prices can be indicative of high quality also. An
advertisement which says ‘Pay more-Get more’ can create an impression in the minds of
the consumers that a higher price is offering them higher benefits, Firms selling their
products at higher prices will succeed in markets only if the quality assured is actually
provided by them to consumers.
 Other objectives: Considerations such as public image and social obligations provide
for setting prices where partial or full cost recovery be made but price is geared to meet
consumer’s wants and desires more than providing maximum profits to the firm.
12.2 PRICE DETERMINATION

The optimal pricing and output decisions depend on the goals of the firms and the
nature and degree of competition faced by the firms. Price theory is the keystone of
economic theory. It is one of the main branches of the modern economic analysis.
Pricing has always been treated as one of the central problems in a free enterprise or a
mixed economy. The determination of price is an important function on the part of
management in all business concerns and industrial units. Price affects profit position
.Total revenue of the firm depends on the price per nit and the total units sold. The
quantity sold goes on changing with variations in the price. Total cost depends on the
quantity of output produced. Pricing plays a significant role in profit planning. Traditional
economic theory maintained that it is only the buyers and sellers who determine the
price of a product or a service. But in practice many other agencies participate and
influence the pricing process. These include competitors and the government,
Competitors influence the demand for the product. The demand gets divided among
competitors and thus affects the market share. The government influences prices through
taxes, subsidies and price controls. There are thus many factors which influence the
price of a commodity. Pricing decision involves consideration of existing competition,
company’s goal of maintaining quality and service and continuation of demand and profit.
The problem of pricing centres round three types of decisions:
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i the basic price level decisions;
ii price structure decision and
iii price discount structure.
A good pricing policy should take care of the company objective, Marketing
strategy, Allocation of responsibilities , Administration of price changes and Allowance
for discounts and credit.
Company objectives- Pricing should help in achieving the pricing objectives
whether they be maximization of profits or sales revenue or market share.
Marketing Strategy: Pricing should allow firms to compete in the market against
its competitors and also other elements of the marketing mix.
Allocation of responsibilities: Pricing policy should allocate responsibilities
about who should set the prices and how.
Administration of price changes: Pricing policy should not only aim at setting
prices but also at establishing a system for administering price changes in the event of
changing demand and other market conditions. Also, short-run pricing policies should
be in line with the long-run policies.
Allowance for discount and credit: Pricing policy aims at generating revenue
from customers as per the list price of the products. But most of the buyers focus on
the net price, that is, list price less discount.Goods may also have to be sold on credit to
attract customers. An effective pricing policy must, therefore, allow for provisions with
respect to discounts and sale on credit.
Factors affecting price determination: Numerous factors affect the pricing
and decisions of a firm. Such factors could be classified under two groups:
1. Internal Factors
2. External Factors
Internal factors are the forces which can be controlled by a firm to a certain
extent such as company objectives, marketing mix, costs, etc. But external factors are
the forces outside the firm over which a business has no control. They create difficul-
ties in determining the price of a product
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Internal Factors:
 Objective of the Firm: A firm may have various objectives and pricing contribute
in achieving them. Firms may pursue a variety of objectives such as maximizing sales
revenue, maximizing market share, maximizing customer delight, maintaining particular
image, maintaining stable price etc. Pricing policy should be established only after
proper considerations of the objectives of the firm.
 Role of Top Management : It is the top management which generally has full
authority over pricing . The marketing manager’s role is to assist the top management in
price determination and administer the pricing within policies laid down by top
management. Pricing activities have such direct effect on sales volume and profit that
the marketing manger cannot keep himself aloof from pricing policy making and strategy
formulation.
 Marketing- Mix: Price in one of the important elements of the marketing mix
and therefore, must be coordinated with the other elements ie., production , promotion
and distribution. In some industries, a firm may use price reduction as a marketing
technique; others may raise prices as a deliberate strategy to build a high –prestige
product line. The effect will fail if the price change is not commensurate with the total
marketing strategy that it supports.
 Product Differentiation: The price of the product depends upon the
characteristics of the product. In order to attract the customers, different characteristics
and benefits are added to the product , such as quality, size, colour, attractive package,
alternative uses, etc. Generally customers pay more price for the product which is of
the new style , design better package, etc.
 Cost of the Product: Cost and price of a product are closely related. The most
important factor is the cost of production. In deciding to market a product, a firm should
also try to decide what prices are realistic, considering current demand and competition
in the market.
External Factors:
 Demand: The market demand for a product has a big impact on pricing . Since
demand is affected by the prospective buyers, their capacity and willingness to pay, their
preference etc are taken into account while fixing the price. A firm can determine the
expected price in a few test-markets by trying different prices in different markets and
comparing the results with a controlled market in which price is not altered. If the demand
of the product is inelastic, high prices may be fixed. On the other hand, if demand is
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elastic , the firm should not fix high prices, rather it should fix flexible prices than that
of the competitors.
 Competition: Competition in the market is a crucial factor in price determination.
The prevailing information about what price the competitors are charging for similar
products and what possibilities lie ahead for raising or lowering prices, also affect pricing.
 Buyers: The nature and behavior of the consumers and users, for the purchase of
a particular product do affect pricing, particularly if their number is large.
 Suppliers: The suppliers of raw materials and other inputs can have a significant
effect on the price of a product.
 Economic Conditions: This is a very important factor in as much as prosperity
or depression influences the demand to a very large extent. The inflationary or
deflationary tendency also affects pricing. T meet shortages or rising pricing and
decreased demands, several pricing decisions are available such as prices can be boosted
protect profit against rising costs; price protection systems can be linked with the price
on delivery to current costs ; the emphasis can be shifted from sales volume to profit
margin and cost reduction.
 Government Regulations: The regulatory pressures, anti-price rise and control
measures effectively discourage companies from cornering too large a share of the market
and controlling prices.
12.3 PRICING PRACTICES

Many pricing methods , based on different considerations are employed in
practice. While fixing the price , the firm is guided by company objectives such as
profit maximisation, sales maximization, growth maximization, establishing a favourable
Image with the public and the government . While determining the price inter-departmental
discussions within a company are necessary. For example the marketing department,
has to discuss the question of capacity to produce with the production department
before setting a price which creates demand. Capacity to produce depends upon the
existing production capacity and availability or raw –materials at appropriate prices.
While setting the price , a firm should consider both demand and cost factors. The
relative importance of these factors in pricing depends upon the product in question and
the market environment under which the firm operates. Some of the widely accepted
methods of pricing:
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12.3.1 Full-Cost Pricing :
This method of pricing is the simplest and the common method of determining
the selling prices of products. It is also known as cost-plus pricing, margin pricing and
mark-up pricing. A firm, under this method, computes the selling price of its product by
adding certain percentage to the average total cost of the product. The objective here is
to cover costs and to derive a pre-determined percentage of profit.
The percentages differ from firm to firm and from industry to industry and even
from product to product in the same industry. Pricing of this type is based n full absorp-
tion costing plus a mark-up for profit. Firms use the following costs ie., variable and
Fixed production costs and variable and fixed selling and administrative costs. In addi-
tion to these costs, price includes a make-up that provides for profit.
12.3.2 Rate of Return Pricing:
Rate of return pricing is merely a refinement of the full-cost pricing. In this
method, the producer considers a pre-determined target rate of return on capital in-
vested. The company estimates future sales, future costs and arrives at a mark-up that
will achieve a target return on the company’s investment.
% age of mark-up on cost = Capital employed x Planned rate of return
Total Annual Cost
Suppose the capital employed is rupees six million and total annual cost is ru-
pees twelve million with a planned rate of return of 20%. The percentage of mark-up, is
= 6 x 20 = 10%
12
If the total cost per unit = Rs.50.00
10% mark-up = Rs. 5.00
the selling price would be Rs.55.00
12.3.3 Marginal Cost Pricing:
Marginal cost pricing implies that the price of a product should be determined
on the basis of the marginal or variable costs. Fixed costs need not be considered in
pricing. In this method of pricing, fixed costs are totally ignored and only variable
costs are taken into account while determining the price. This is done on the assumption
that fixed costs are cause by outlays which are historical and sunk. Their relevance to
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pricing decision is limited as pricing decision requires planning the future. Under
marginal cost pricing, the objective of the firm is to maximize its total contribution to
fixed costs and profits. Marginal cost pricing is useful when demand conditions are
slack. It helps in optimum allocation of resources and as such it is the most efficient can
effective pricing technique. It enables the firm to face competition. That is the reason
why export prices are based on marginal costs since international market is highly
competitive. It is suitable for pricing over the life-cycle of a product. Each stage of the
life-cycle has separate fixed cost and short-run marginal cost. Lastly, it is useful for
multi-product and multi-process firms. Here absorption of fixed cost into product costs
is difficult.
12.3. 4 Acceptance Pricing:
This method of pricing conforms with the system of price leadership. A firm
initiates price changes and the other firms in the industry follow the pattern set by the
leader. Other firms accept the leadership. The emphasis in on the market. Firms make
necessary price adjustments to suit the general price structure in the industry. Hence
this technique is known as acceptance pricing or going –rate pricing. Normally, indus-
try , tries to determine the lowest price that the seller can afford to accept considering
various alternatives. This technique of acceptance pricing is supported on the following
grounds:
 It helps in avoiding cut-throat competition among the firms.
 It is a rational pricing method when costs are difficult to measure
 Acceptance pricing is less troublesome and less costly since exact calculation of
costs and demand is not necessary.
 It is suitable to avoid price hazards in oligopoly market.
The firm should evaluate whether the new should be accepted by (i) comparing
the new price with the incremental cost of production; and by (ii) comparing the total
cost and revenue situation. The firm accepting the price must think in terms of its won
long-run profitability. When firms in the industry accept one of the firms as leader and
follow the same price policy, it is also called the Imitative Pricing. Imitation is the easy
way of decision-making. In this situation the firm uses the market analysis of another
firm and does not bother about demand and cost estimates. This is generally done in
retail trade.
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12.3.5 Customary Pricing :
Customary prices may defined as those prices which more or less remain fixed
having prevailed for considerably long period of time Only if there is a significant change
in costs, the customary prices change. While changing the customary price, it is neces-
sary to have a knowledge of the pricing policies and practices adopted by the competing
firms. It is also important to know the reaction of the customer to change in price by
bringing about the price change in a limited market segment.
12.3.6 Intuitive Pricing:
Intuitive pricing is basically a psychological approach to pricing. Prices under
this method are based on the feel of the market This method is highly subjective and its
applicability differs from situation to situation. Prices under this method are determined
on the basis of anticipated trends in costs and demand. Price constitute a barrier to
demand when it is too low as much as when it is too high. Above a particular price, the
article is regarded as too expensive and below another price, as constituting a risk of not
giving adequate value. From the point of view of consumers, prices are quantitative and
unambiguous, whereas product quality , product image , customer service , promotion
are qualitative. If the a price is too low, consumers will tend to think that a product of
inferior quality is being offered. Manufacturers run the risk of lowering prices too
drastically when improvements in production or reduction in the cost would allow it.
Very often under these circumstances, lower prices may be offered to the consumer by
having the goods sold under a different brand name.
Charm Prices: are those prices which end with odd figures such as Rs.999 and
have greater effect than even prices such as Rs.5 and Rs.10. In recent years charm pricing
practices are in great use.
12.4 PRICING OF MULTIPLE PRODUCTS

Many firms produce more than one product. Even those firms producing specialized
articles produce a commodity in multiple models, styles and sized. Such product are
substantially differentiated form each other. Firms producing TV sets, Radio sets, Scooter
are examples of multiple products. Pricing in a multi-product firm has two important
aspects. First, each product has a separate demand curve . Second, all products have
only one inseparable marginal cost curve due to common organization by interchangeable
production facilities for all the products. This results in average cost and marginal cost
becoming inseparable and average revenue and marginal revenue remaining separate. A
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multi-product firm tries to maximise its revenue in all its markets. Professor Eli W.
Clemens of the University of Maryland has explained multi-product pricing by assuming
that a firm has one product and the firm’s plant is being operated at 60% or 70% of
capacity. Marginal revenue and marginal cost for one product are equal. With its idle
capacity of personnel, plan and organisation, the firm can think of expanding its production
without anticipating much increase in marginal costs. The idle capacity can be used to
produce second, third and fourth product.
A multi-product firm is shown to have four products L,M,N, and O in its line or
production. The AR and MR curves are given in their segments. ‘C’ is the point of
intersection between MC and MR. The equal marginal revenue line EMR is drawn parallel
to X- axis through point ‘C’. It equates Mrs with MC . The output –level and price for
each product is determined by the intersection points of EMR and Mrs. OQ1,Q1Q2,
Q2Q3 and Q3Q4 are the quantities for the four products L,M,N, and O respectively.
Their respective prices are P1Q1,P2Q2, P3Q3 and P4Q4. These are the price-output
combinations which maximizes total revenue from each product and they also maximise
the overall revenue of the firm.
12.5 DUMPING
Dumping refers to selling in the foreign market at price below the home market
price. According to some economists, dumping means selling in the foreign market at a
price below the cost of production. If the foreign price is above the home market price,
it is referred to as reverse dumping. Dumping may be sporadic, intermittent or long
period. Sporadic dumping is resorted mostly to sell the excess stock that may arise
occasionally. Intermittent dumping refers to the periodic sale abroad of goods at prices
below the home market price. Intermittent dumping may be resorted to gain a foothold
in the foreign market to combat a new competition in order to retain a long held position;
to eliminate or discipline competitor. Long-period dumping may be resorted to facilitate
the utilization of the full capacity of the plant continuously. Operation at full capacity
lowers the average cost and increases profits in the home market. The foreign market
price must at least recoup the marginal cost of the product and the home market price
must be above the average cost. Dumping is generally condemned. Most nations take
measures to combat dumping like imposing anti-dumping import duties.
12.6 TRANSFER PRICING

Transfer prices relate to the prices charged by different divisions of the same
firm for commodities and services exchanged between them. This system of pricing has
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become common in the modern industrial system consisting of multi-product –multi-
process companies. Organisation of large firms on a divisional basis is found
advantageous from efficiency and profitability point of view. All divisions in a firm are
profit centers. Transfer pricing becomes more relevant in those firms where inter-profit-
centre relationship system exists. Manager of each division of the firm tries to increase
his profits for which he has to raise the price he charges to another division. This may
result in increasing the profits of his division but in bringing sown the company profits.
In other words it refers to the determination of the price of the intermediate products
sold by one sem-autonomous division of the same firm. It is essential in determining
the optimal output of each division and of the firm as a whole, and in evaluating divisional
performance and determining divisional rewards.
Market skimming pricing-Skimming pricing is like skimming cream from milk.
Products which do not face competition in the market are sold at an artificially high
“Which is gradually reduced over a period of time. The firms following this policy earn
greater profits per unit at the initial stages of the product entry in the market. These
surpluses can be used for further expansion and growth of the firms. High prices avoid
competition unless the competing firms bring in genuine quality products. This policy
has the advantage of earning high profits in the initial years whereby company’s costs
can be recovered and used for promotional avenues till the time competitors enter the
market. The policy also has the disadvantage of attracting competition as high profit
margins will induce the competitors to introduce similar products.
This policy is suitable in the following cases :
 The products must be of high quality which correspond to their high prices.
 Products are patented and, therefore, there exists barriers to entry in the trade.
 The cost of production is low so as to offer higher profit margins to the sellers.
 Product features provide value satisfaction to consumers.
 Potential competitors are weak in introducing a similar product in the market in
the near future.
 Product demand is inelastic. Consumers are ready to pay a high price for the
products.
 Price sensitivity is uncertain. High prices can be subsequently reduced but low
prices cannot easily be increased later on.
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12.7 MARKET PENETRATING PRICING
As against charging high prices at the introductory stage of the product, the
penetrating policy aims at capturing a bigger share of the market by charging low
prices of the product. The firms penetrate deep into the market, sell their products at
low price to attract a large number of customers, make large volumes of sales and work
at a low profit margin. High volume of sales will result in low per unit cost of products
and also offer the firms economies of scale. This will give the firms cost advantage
over their competitors and a promising long-run profit and growth. This pricing policy
is suitable in the following cases :
Products must be price sensitive so that low price can result in sales.
• An opportunity to enjoy economies of scale must exist, that is, larger should result
in low cost of production and distribution.
• Firms are prepared to sacrifice their short-run profits in the hope to capture a ma-
jor share of market.. Initially, firms might not even be able to recover their starting
up costs.
• Low prices should result in keeping the competitors away from the market. If not
so done, entry of competitors will vitiate the very purpose of the pricing policy.
12.8 DISCOUNT PRICING

It refers to selling at a price less than the list) price to deal with different classes
of customers, (ii) prompt them to make early payments,( iii)courage them to buy in
large volumes, and (iv) encourage off season buying. Deductions from the list price is
called as discount. Following are the different types of discounts offered by the firms:
 Cash discount - It is offered to customers for prompt payment of their bills. It
increases sellers’ liquidity and reduces the possibility of bad debts.
 Quantity discount - It is offered to customers who place bulk orders with sellers.
For example, sellers can sell a product at Rs. 15 per unit if units up to 100 in
number are bought and Rs. 13.50 if units more than 100 in number are bought. It
therefore gives incentive to buy large number of units from one seller rather than
buying from multiple sources.
 Seasonal Discount-To maintain smooth level of production and sales throughout
the year, sellers offer seasonal or off-season discount to sell their goods during
off-peak season. Discount on sale of woollens during summer is an example of
seasonal discount.
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 Trade discount – It refers to discount offered by manufacturer to channel mem-
bers (whole salers , retailers etc.) for smoothly carrying out the sales activities and
providing the important functions of selling, storing and record keeping.
12.9 PRODUCT LINE PRICING

When sellers sell different varieties of the same product, they resort to a pricing
policy referred to as product line pricing. This policy is adopted when different variet-
ies of products have different features with respect to their cost, speed, size, design,
customer valuation, competitors’ prices etc.
Optional-product pricing - This pricing policy is offered by companies which
offer optional products along with the main product. A music system., for example , will
sell audio cassettes or CDs with it. The firms have to price these accessories in a man-
ner that will attract customers to buy the main product. The price of the CDs , if listed
below the market price, will induce buyers to buy the same along with the CD player
rather than buying them separately from the same of a different seller.
Keep-out pricing - It aims at selling products at a price that will keep competi-
tors out of the market. It may even amount to selling below the cost, that is, loss. This
policy therefore, suitable for big business firms which can offset this loss against prof-
its from sale of other products.
Follow the leader pricing- This pricing policy is normally followed in
oligopolistic market situations which is characterized by a few sellers. Small seller
quickly responds to big firms’ marketing and pricing strategies. A price cut by a big
seller is followed by other also but a price rise is not followed by them. Big firms may
lose the market by a rise but cannot attract more customers through a price cut. Since
small firms charge the same price as big ones do, this is called as “follow the leader”
pricing policy.
By-product pricing - Processing of iron, petroleum and chemical products in
by-products which are of no use to the seller of the main product. He may, therefore,
either dispose them off as scrap and adjust the scrap value in the cost of the main prod-
uct thereby reducing the overall cost and price of that product or sell it to consumers at
a price that the consumers value it at. The scrap value or the selling price should be
more than the cost of storing the by-products, otherwise it will be reflected in the sell-
ing price of the main product.
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12.10 SEGMENTED PRICING
It refers to selling the products at different prices where difference in prices is
not commensurate with the difference in costs. Perhaps, difference in prices is more
than the difference in their costs resulting in additional profits for the firms. Segmented
pricing can take different forms such as :
• Customer segmentation - Same products are sold to different customers at
different prices. A doctor, for example, may sell his services to affluent clients at
a price higher than that charged from poorer sections of society.
• Product-form segmentation - A product is brought out in different versions and
sold at different prices where price difference is more than the cost difference.
Example Sale of Maruti Zen,
• Location segmentation - Products sold at different locations are priced differ-
ently. This is because of difference in the buying capacity of buyers at different
locations. A product which sells for Rs. 500 in a big showroom may sell for Rs.
400 in a small retail outlet.
• Time segmentation - The same product sells at different prices during different
times of the year. An air conditioner that sells for Rs. 25,000 during summer season
may sell for Rs. 24,000 during winter season. This form of segmented pricing
supports the discount pricing where off-season discounts are offered to keep the
production line going.
12.11 PSYCHOLOGICAL PRICING

Price carries a psychological feeling about the quality of the product in the buyer’s
mind. High prices generally symbolise high quality and therefore, even if the goods
worth Rs. 300 are sold for Rs. 500, consumers will readily purschase them provided
they are sold at an established and reputed showroom. Some sellers believe in pricing
that ends at an odd number, for example Rs. 499 instead . 500. Though the difference is
only Re. 1, psychologically, buyers fell that they are paying 400s and not 500s.
Promotional pricing - To promote the sale of products, sellers sometimes sell
their products at a price below their cost price in the hope that loss on sale of one
product can be made up against profit on sale of another product. This is done to attract
consumers for the loss –making product so that it proves to be successful in the long-
run.
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12.12 PRICING METHODS, POLICIES AND PRACTICES
In setting the price for products, the manufacturers consider primarily the profit
.Each producer has his aim of profit maximisation. Usually, the pricing policy is based
on the goal of obtaining a reasonable profit. Most of the businessmen want to hold the
price at constant level..They do not desire frequent actuations. The price rigidity is the
practice of many producers. Rigidity does not mean inflexibility. It means that prices
are stable over a given period, say a year.
There are four important methods of pricing: (i) Cost-plus or full cost pricing,
(ii) Pricing for a of return, (iii) Marginal cost pricing, (iv) Administered pricing and (v)
Going-rate policy.
Full Cost Pricing: Cost -plus or full cost pricing is a method commonly adopted
by the businessmen to fix a price of the product. He calculates the cost of production
per unit and adds a margin of profit to it. In other words, the producer adds a certain
percentage of profit which he considers as fair to his cost in order to arrive at a price
which is acceptable to the consumers. This procedure is known as cost-plus pricing.
Cost-plus pricing means the addition of a certain percentage of profit to the cost
of production to arrive at a price. For example, the cost of production of a product is
Rs.10. If the management es to have a mark of 100 per cent, then Rs.10 is the addition to
the cost. Hence, the price is Rs.20 per unit of the product. Here two elements make up
the price: one is the average cost per unit and the other is the mark-up (profit). These
two components are found in the cost-plus pricing.
Despite a few limitations, this method is very popular among many producers in
India, the publishing Industry uses cost-plus pricing in fixing the prices of various
publications. Cost of production is first assessed and a certain percentage of profit is
added and the selling price is fixed. This percentage is called mark up. Sometimes pricing
of the product by this method may result in making the price to be prohibitive. When
such a firm has to face competition it finds it very difficult to sell its product in the
market. In such cases, it has to abandon the cost- plus pricing and bring the price to the
level of the rivals. In order to do so, it has to reduce some costs. This means that cost-
plus pricing will have to be modified suitably.
In India, cost-plus pricing methods is extensively used. It is because of two
specific advantages. Firstly, presence of seller’s market in India, makes it possible to
pass on the additional costs to the buyers. Secondly, this is easy and has approval of the
government in fixing the prices of the product of all public sector industries.
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Rate of Return Pricing: The cost-plus pricing method has led to a controversy
with regard to fair rate of return. Some businessmen argue that the decent percent of
return on investment is fair, but some others do not accept this conclusion. Under this
method, the price is determined by the planned rate of return on investment which is
expected to be converted into a percentage of the mark up. The profit margin is deter-
mined on the basis of the rate of production and the total cost of a year’s normal produc-
tion. Then, the capital turnover is computed by taking the ratio of invested capital to the
annual standard cost. Then the mark up percentage of profit is obtained by multiplying
capital turnover by the goal rate of return. Let us take the following example: say, the
capital turnover is Rs.0.9 lakh. The desired rate of return is 27 per cent. Now – % mark
up = Capital turnover x desired rate of return
· = 0.9 x 27 = 24 per cent
Now, 24 per cent is the mark up. Or it may also be found out by this method:
While defining the rate of return, it is held that it should cut across business
cycles and should be determined on the basis of standards of reasonableness. This method
is essentially the cost-plus pricing method but an improved one. Since it builds price on
cost which is standardised, it develops a profit mark up related to a rate of return.
Marginal Cost Pricing: Under cost-plus pricing and rate of return pricing, the
prices of products are determined on the basis of total costs, (variable + fixed costs).
Under marginal cost pricing, fixed costs are ignored and pricing is determined on the
basis of marginal costs. Marginal cost means cost of producing additional units of the
product. The firm uses only those costs which are directly attributable to the output of
the specific period. The price so determined must cover the marginal cost and the total
cost will have to be covered in the long run. Price based on marginal costs will be much
more aggressive than the one based on total costs. Further, when a firm has a large unused
capacity, it should explore the possibility of producing and selling more - it should coverI
marginal cost. The real difficulty is to know the marginal cost.
Advantages of Marginal Cost Pricing : Under marginal cost pricing, prices
are never rendered uncompetitive merely because of higher fixed overhead costs. If the
variable costs are higher, the prices also will be higher, but they can be controlled in the
short period and thus make the price competitive. Marginal costs reflect more accu-
rately the future as distinct from the present cost structure. Marginal cost pricing per-
mits a producer to resort to aggressive price policy than is possible under full cost
pricing. An aggressive pricing would lead to higher sales and by increased marginal physi-
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cal productivity and lower input factor prices, marginal cost can be reduced.. Marginal
cost pricing is very much useful over the life cycle of a product.
Marginal cost pricing is more effective than full cost pricing because it helps in
solving short run problems. That is, under the conditions of change, marginal cost is the
most suitable method of short-run pricing. In the short-run pricing, only marginal costs
are covered and fixed costs completely ignored.
The only difficulty in marginal cost pricing is ignorance of the marginal cost
technique. In a period of business recession, the firms using marginal cost pricing can
overcome the recession by lowering the pries and thereby allowing the sales to increase.
With the existence of idle capacity and the pressure of fixed costs, firms successfully
cut down prices to a point equivalent to marginal cost and earn a fair rate of return in the
period of crisis.
Going Rate Pricing :The going rate pricing is opposite of full cost or cost-plus
pricing. The going rate means, adjusting its own price policy to the general price struc-
ture in the industry, adopted where it is difficult to measure the costs. Though the firm
has complete freedom to fix its own price, it will not do so, but instead, it tries to adjust
its own price policy with the price prevailing in the market. The going rate pricing is
adopted when the price leadership is very well established. When firms want to avoid the
tension of price rivalry in the market, they adopt the going rate pricing. This is very easy
and there is no need for a firm to take the trouble of calculating costs and demand.
Some guidelines for price fixation have been given by Bates and Parkinson are: .
• It is necessary to know the costs incurred in relation to output and also to distin-
guish between prime costs and overhead costs.
• In the beginning, prices should cover prime costs and later on the price should
cover the entire costs.
• The firms must know the prices of the products sold by other firms. The costs
incurred must be comparable to the costs of the other firms for the same amount
of output.
• If the demand for the product of a firm is sluggish, then it will have to reduce the
price a bit in order to improve its position.
• If the costs of raw-materials and labour rise, the firm is compelled to increase the
price.
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• If the costs are rising and the sales are sluggish, then the firm must be able to re-
frain from raising the price.
• The capacity of the plant must be used to the optimum extent. Production should be
concentrated on those products whose demand is high.
• The firm by improving sales campaign , must build the image of the firm.
• If the price set by the firm are bringing good profit, then the firm should resort to
expansion of production.
• Prices should not go against the public interest.
• If the company is making high profits by selling at a price, the rivals are sure to
enter into the industry and compete with the profits.
12.13 PRICING OF A NEW PRODUCT

If the new product is with high distinctiveness among the existing products, then
the fixation of the price should be based on the demand, the market target and the pro-
motional strategy.
In the case of pioneer products, the estimation of their demand is very difficult.
The estimate of demand for such products should be studied in the following manner:
 Whether the new product is accepted by the consumers.
 At what price it is acceptable.
 If three or four prices are fixed, what would be the volume of sales at each price and
 What would be the reaction of the manufacturers of the substitutes.
Product Acceptability
It is based on the willingness of the consumers to buy the product. The willingness
to buy depends upon a factor that is whether it would meet their requirements. If it does
not meet the needs and requirements of the consumers, the product should be improved
to serve the purpose. Supposing the new product is a strategic alternative, then it should
be found out* consumers would buy the new one in place of the old one.
Price Discrimination means offering different prices to different customers.
Price Discrimination only works if the Firm has Market Power if the firm can distinguish
between customers and the firm can prevent resale.
First Degree Price Discrimination is also called Perfect Price Discrimination.
The Firm charges each customer exactly what they are willing to pay i.e. the Firm prices
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according to the demand curve. Marginal Revenue is the Price, therefore P=MC is the
optimum. The Firm captures the entire surplus
In practice it is nearly impossible. Auctions attempt to approximate this situation.
Second Degree Price Discrimination also called Quantity Discrimination. The
Firm offers bulk discounts to customers who buy large quantities. This works if a firm
cannot distinguish between customers; instead offer 1 at P1or 2 or more at P2each and
customers will sort themselves depending on their individual demands.
Third Degree Price Discrimination also called Multi-Market Price
Discrimination. The Firm charges different prices in different markets. All people in
the same market pay the same price. The market could be geographically or
demographically defined for eg. Ex. Student or Senior Discounts
Two-Part Tariff :The Firm charges a price per use as well as a membership/en-
trance fee. The Price should be set at P = MC to maximize consumer surplus. The mem-
bership or entrance fee can then be set to capture all the consumer surplus.
Bundle Pricing 1 : The Firm sells two items as a bundle. Bundling works if con-
sumers value the goods differently.
Pricing Strategies: Every firm has to take pricing decisions from time to time
depending upon its pricing policies and conditions prevailing in the market. As an element
of the marketing –mix, pricing strategies should be directed towards the accomplishment
of specific marketing objectives which lead to overall organisational objectives. Pricing
is not an end in itself, but a means to achieve certain objectives of the marketing
department of a firm. Some of the important pricing strategies are as follows: Pricing
at prevailing prices: This strategy is followed to stay in the market because a price
above the market price would sharply bring down sales while a lower price would not
significantly increase sales. Penetrating Pricing, One price versus Variable Price
Policy: hear the seller charges the same price to similar types of customers who purchase
similar quantities of the product under essentially the same term of sale. Price Lining:
is used extensively by the retailers. The retailers usually offer a good , better and best
assortment of merchandise at different price levels Psychological Pricing, Leader
Pricing, Follow the leader Pricing, Discriminatory or Dual Pricing , Resale Price
Maintenance , Value for Money and Premium Pricing are some of the strategies
companies follow to get their merchandise into the hands of the customers.
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12.14 SUMMARY
One of the most important decisions made by managers is setting the price of the
firm’s product. If price is set too high, the firm will be unable to compete with other
suppliers. But if the price is too low, the firm may not be able to earn a normal rate of
profit. Manager must tailor their decisions to the specific market environment in which
their firm operate. Decision making environment depends on the structure of the mar-
ket, naturally it follows that no single theory of the firm can adequately describe all of
the conditions in which firms operate. The ability of an individual firm to affect the
price and total amount of a product supplied to a market is related to the number of
firms providing that product. If there are numerous sellers of nearly equal size, the in-
fluence of any one firm is likely to be small. In contrast, in a market consisting of only
a few sellers, an individual firm can have considerable impact on price and total supply.
The size distribution of the firms is also an important characteristic of market struc-
ture. When the market includes a dominant firm or a few large firms that provide a sub-
stantial proportion of total supply , those large businesses may be able to exert consid-
erable influence over price and product attributes. For example Microsoft computers.

1. What are the objectives of pricing ?
2. Discuss the importance of pricing policy.
3. How is the price for the new product determined?
4. Explain the factors affecting price determination.
5. Distinguish between market skimming and market penetration pricing policy
6. Explain Full cost pricing and Marginal Cost pricing.
12.16 REFERENCES
New Delhi, 2013.
Irwin,2009.
189
India, 2014.
Marketing Channels, New York: Harper and Row, 2003.
6. William J Stanton:“ Fundamentals of Marketing”, Prentice Hall Of India Private
Limited, New Delhi, 1999.
7. S. Neelamegham: “Marketing in India: Text and Cases”, Vikas Publishing House
Pvt. Ltd, New Delhi, 2012.
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UNIT –13 : DISTRIBUTION AND PROMOTIONAL
STRATEGIES
Structure:
13.0 Objectives
13.1 Introduction: Concept of Distribution
13.2 The nature of marketing channels
13.2.1 Marketing channel concepts
13.2.2 Marketing channel create utility
13.2.3 Marketing channels facilitate exchange efficiencies
13.2.4 Marketing channels for supply chain
13.3 Functions of distribution channels
13.3.1 Product availability
13.3.2 Meeting customers service requirements
13.3.3 Promotional effort
13.3.4 Market information
13.3.5 Cost effectiveness
13.3.6 Flexibility
13.4 Types of distribution channel
13.4.1 Producer - Customer
13.4.2 Producer – Retailer- Customer
13.4.3 Producer- Wholesaler- Retailer- Customer
13.4.4 Producer- Agent – Wholesaler- Retailer- Customer
13.5 Distribution Channel Intermediaries
13.6 Channel management Decision
13.7 Summary
13.9 References
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13.0 OBJECTIVES
• Explain the meaning of channels of distribution
• Identify different channels of distribution
• Describe the functions of wholesalers and retailers
• Distinguish between wholesalers and retailers
13.1 INTRODUCATION CONCEPT OF DISTRIBUTION

Distribution intensity can be referred to in terms of the number of retail stores
carrying a product in a geographical location. In intensive distribution, the manufacturer
distributes the products through the maximum number of outlets. In exclusive distribu-
tion, the number of distribution channels will be very limited. In selected distribution,
the number of retail outlets in a location will be greater than in the case of exclusive
distribution and fewer than in the case of intensive distribution. Distribution manage-
ment is of strategic importance to any organization as distribution plays a crucial role in
the success of the product in the market. Distribution management also helps to maxi-
mize profits.
In managing the distribution channels, maintaining a mutually beneficial
relationship between the manufacturer and distributor is necessary. International
distribution is gaining importance with the increase in the number of multinational
companies (MNC). There are certain factors to be considered in international
distribution. The distributors should be chosen carefully with a long-term focus. It is
better to build a long-term relationship with the local distributors. They should be
provided with all the necessary support in expanding their operations. The marketing
strategy for the product should be controlled solely by the MNC. Information plays an
important role in distribution and the MNC has to ensure that the local distributors provide
them with the required information which will help them to increase sales and expand
their business.
13.2 THE NATURE OF MARKETING CHANNELS
13.2.1: Marketing Channel Concepts:
A marketing channel (also called a channel of distribution) is a group of individuals
and organizations that directs the flow of products from producers to customers. The
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major role of marketing channels is to make products available at the right time at the
right place in the right quantities. Some marketing channels are direct—from producer
straight to customer—but most channels have marketing intermediaries that link producers
to other intermediaries (wholesalers & retailers) or to ultimate consumers through
contractual arrangements or through the purchase and reselling of products. Wholesalers
buy and resell products to other wholesalers, to retailers, and to industrial customers.
Retailers purchase products and resell them to ultimate consumers.
Although distribution decisions need not precede other marketing decisions, they
are a powerful influence on the rest of the marketing mix. Channel decisions are critical
because they determine a product’s market presence and buyers’ accessibility to the
product. Channel decisions have additional strategic significance because they entail
long-term commitments. It is usually easier to change prices or promotional efforts
than to change marketing channels.
13.2.2: Marketing Channels Create Utility
Marketing channels create three types of utility: time, place, and possession.
1. Time utility—created by having products available when the customer wants them.
2. Place utility—created by making products available in locations where customers
wish to purchase them.
3. Possession utility—means the customer has access to the product to use or to store
for future use
Channel members sometimes create form utility by assembling, preparing, or
otherwise refining the product to suit individual customer needs.
13.2.3: Marketing Channels Facilitate Exchange Efficiencies
1. Marketing intermediaries can reduce the costs of exchanges by efficiently
performing certain services or functions. Intermediaries provide valuable assistance
because of their access to, and control over, important resources used in the proper
functioning of marketing channels.
2. Despite these efficiencies, the press, consumers, public officials, and other
marketers freely criticize intermediaries, especially wholesalers.
a) Critics accuse wholesalers of being inefficient and parasitic.
b) Buyers often wish to make the distribution channel as short as possible, assuming
that the fewer the intermediaries, the lower the price will be.
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c) Because suggestions to eliminate them come from both ends of the marketing channel,
whole salers must be careful to perform only those marketing activities that are
truly desired.
3. Critics who suggest that eliminating wholesalers would lower customer prices
do not recognize that this would not eliminate the need for services that wholesalers
provide. Although wholesalers can be eliminated, the functions they perform cannot.
13.2.4: Marketing Channels For Supply Chain
An important function of the marketing channel is the joint effort of all channel
members to create a supply chain, a total distribution system that serves customers and
creates a competitive advantage.
1. Supply chain management refers to long-term partnerships among marketing
channel members working together to reduce inefficiencies, costs, and redundancies in
the entire marketing channel and to develop innovative approaches, in order to satisfy
customers.
a) Supply chain management involves manufacturing, research, sales, advertising, ship-
ping and, most of all, cooperation and understanding of tradeoffs throughout the
whole channel to achieve the optimal level of efficiency and service.
b) Whereas traditional marketing channels tend to focus on producers, wholesalers,
retailers, and customers, the supply chain is a broader concept that includes facili-
tating agencies, such as shipping companies, communication companies, and other
organizations that take part in marketing exchanges.
2. Supply chain management helps firms realize optimum the supply chain costs
through partnerships & thereby improve all members’ profits.
3. Supply chain ends with the customer and require the cooperation of channel
members to satisfy customer requirements.
4. Technology has dramatically improved the capability of supply chain manage-
ment on a global basis.
5. Supply chain management should not be considered just as a new buzzword.
Reducing inventory and transportation costs, speeding order cycle times, cutting
administrative and handling costs, and improving customer service—these improvements
provide rewards for “all” channel members.
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13.3 FUNCTIONS OF DISTRIBUTION CHANNELS
A distribution channel - set of independent organizations involved in the process
of making a product or service available to the consumer or business user ensures:
13.3.1:Product availability:
 The most important objective for a channel.
 Attain the desired level of coverage in terms of appropriate retail outlets.
 The item’s positioning within the store.
13.3.2:Meeting customers’ service requirements:
• Crucial objective of businesses attempting to differentiate themselves on service
dimensions.
• Some of the service requirements include:
• Order cycle time
• Dependability
• Communication between buyer and seller
• Convenience
• Post-sale services
13.3.3:Promotional effort
 Obtain promotional support from channel members for the firm’s product.
13.3.4:Market information
 Middlemen are often relied on for fast and accurate feedback.
 A high level of channel feedback is particularly important for firms in highly
competitive industries.
 Feedback is crucial for prospectors.
13.3.5:Cost-effectiveness
• Important to businesses pursuing low-cost analyzer or defender strategies.
13.3.6:Flexibility
• Firms pursuing prospector strategies in new or rapidly growing or technically tur-
bulent product categories, consider this important.
• A flexible channel is one where it is relatively easy to switch channel structures or
add new types of middlemen.
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13.4 TYPES OF DISTRIBUTION CHANNEL
13.4.1: Producer-Customer:
This is the simplest and shortest channel in which no middlemen is involved and
producers directly sell their products to the consumers. It is fast and economical channel
of distribution. Here, the producer or entrepreneur performs all the marketing activities
himself and has full control over distribution. A producer may sell directly to consumers
through door-to-door selling, direct mail or through his own retail stores. Big firms
adopt this channel to cut distribution costs and to sell industrial products of high value.
Small producers and producers of perishable commodities also sell directly to local
consumers.
13.4.2:Producer-Retailer-Customer:
This channel of distribution involves only one middle-man called ‘retailer’. Un-
der it, the producer sells his product to big retailer (or retailers who buy goods in large
quantities) who in turn sell to the ultimate consumers. This channel relieves the manu-
facturer from burden of selling the goods himself and at the same time gives him con-
trol over the process of distribution. This is often suited for distribution of consumer
durables and products of high value.
13.4.3:Producer-Wholesaler-Retailer-Customer:
This is the most common and traditional channel of distribution. Under it, two
middlemen i.e. wholesalers and retailers are involved. Here, the producer sells his product
to wholesalers, who in turn sell it to retailers. And retailers finally sell the product to
the ultimate consumers. This channel is suitable for the producers having limited finance,
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narrow product line and who need expert services and promotional support of wholesalers.
This is mostly used for the products with widely scattered market.
13.4.4: Producer-Agent-Wholesaler-Retailer-Customer:
This is the longest channel of distribution in which three middlemen are involved.
This is used when the producer wants to be fully relieved of the problem of distribution
and thus hands over his entire output to the selling agents. The agents distribute the
product among a few wholesalers. Each wholesaler distributes the product among a
number of retailers who finally sell it to the ultimate consumers. This channel is suitable
for wider distribution of various industrial products.
Case: Marketing Small Ruminants in Indonesia
The village collector is a key figure in the marketing system since 50% of the
animals are handled by him. He usually lives in the locality and provides several services
vital to the effective operation of the marketing system. He bears at least part, and often
all, of the risks inherent in trading by taking legal title to the animals. If an animal cannot
be sold on a particular day or has to be sold at a low price then these costs are borne by
the village collector. He also helps finance trade by paying the farmer 50% of the agreed
price immediately and the balance after the next market day. The village collector also
meets the transport costs. He increases the efficiency of the marketing system since
unit transport costs are lower when several animals are transported to market. In Indonesia,
most ruminants are farmed by smallholders who usually have a single animal to sell at a
given time. Sometimes the village collector performs a storage function too by holding
animals until market prices are acceptable.
Smallholders have alternatives to selling to the village collector. There is usually
more than one village collector and also sedentary and itinerant “blantiks” or livestock
traders who intercept farmer’s enroute to the market and strike a deal. Sedentary traders
work a single market whilst itinerant traders trade in several markets. Neither the seden-
tary nor the itinerant trader is as familiar to the farmer as the village collector.
Another player in the marketing system is the “makelar” or broker. There are 2
types of brokers; the commission broker and the floor-price broker. Commission bro-
kers charge a fixed selling fee. If the animal remains unsold then the farmer pays noth-
ing to the commission broker. Floor-price brokers agree a price for the animal with the
farmer. The broker then attempts to sell the animal above this price. If successful, he
keeps the difference between the floor-price and the actual price as his margin. Unsold
animals remain the property of the farmer.
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The system serves producers well. Smallholders’ supplies are erratic in that they
send animals usually one at a time at irregular intervals to the market. However, since 1
in 5 rural households keeps sheep and/or goats there is, in aggregate, a stable supply to
the market. The market itself is stable in that demand is fairly constant throughout the
year except during periodic religious feasts when demand and prices can increase
substantially. Thus the village collector makes an important contribution to the marketing
system for small ruminants. He buys, taking title and, of course he sells. He also helps
perform other marketing functions, including assembling, finance, transportation, storage
and risk bearing. In addition when he fattens the animals he adds value to the product.
Itinerant and sedentary traders represent an alternative marketing channel for
smallholders. The itinerant traders perform a similar range of marketing functions to
those undertaken by the village collector. Their only disadvantage is that they are not
generally as well known to smallholders as the village collector. Sedentary traders actually
have more in common with brokers than with either village or itinerant traders in that
they act more as an agent than a buyer. The sedentary trader offers fewer services to the
farmers and therefore his margin tends to be lower than that of other types of trader.
Arguably, brokers perform only two functions, i.e. selling and market intelligence.
However, their existence does extend the level of competition in the system. The low
level of services offered by brokers perhaps explains why 80% of the farmer’s trade in
small ruminants is through traders.
13.5 DISTRIBUTION CHANNEL INTERMEDIARIES

Intermediaries, also known as distribution intermediaries, marketing
intermediaries, or middlemen, are an extremely crucial element of a company’s product
distribution channel. Without intermediaries, it would be close to impossible for the
business to function at all. This is because intermediaries are external groups, individuals,
or businesses that make it possible for the company to deliver their products to the end
user. For example, merchants are intermediaries that buy and resell products. There are
four generally recognized broad groups of intermediaries: agents, wholesalers,
distributors, and retailers.
Agents/Brokers: Agents or brokers are individuals or companies that act as an
extension of the manufacturing company. Their main job is to represent the producer to
the final user in selling a product. Thus, while they do not own the product directly, they
take possession of the product in the distribution process. They make their profits through
fees or commissions/brokerage.
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Wholesalers: Unlike agents, wholesalers take title to the goods and services
that they are intermediaries for. They are independently owned, and they own the products
that they sell. Wholesalers do not work with small numbers of product: they buy in bulk,
and store the products in their own warehouses and storage places until it is time to
resell them. Wholesalers rarely sell to the final user; rather, they sell the products to
other intermediaries such as retailers, for a higher price than they paid. Thus, they do
not operate on a commission system, as agents do.
Distributors: Distributors function similarly to wholesalers in that they take
ownership of the product, store it, and sell it off at a profit to retailers or other
intermediaries. However, the key difference is that distributors ally themselves to
complementary products. For example, distributors of Coca Cola will not distribute
Pepsi products, and vice versa. In this way, they can maintain a closer relationship with
their suppliers than wholesalers do.
Retailers: Retailers come in a variety of shapes and sizes: from the corner gro-
cery store, to large chains like Wal-Mart and Target. Whatever their size, retailers pur-
chase products from market intermediaries and sell them directly to the end user for a
profit.
13.6 CHANNEL MANAGEMENT DECISION

Channel selection decisions usually are significantly affected by one or more of
the following factors: customer characteristics, product attributes, type of organization,
competition, marketing environmental forces, and characteristics of intermediaries.
An entrepreneur has to choose a suitable channel of distribution for his product
such that the channel chosen is flexible, effective and consistent with the declared
marketing policies and programmes of the firm. While selecting a distribution channel,
the entrepreneur should compare the costs, sales volume and profits expected from
alternative channels of distribution and take into account the following factors:-
 Product Consideration: The type and the nature of products manufactured is
one of the important elements in choosing the distribution channel. The major product
related factors are:-
 Products of low unit value and of common use are generally sold through middlemen.
Whereas, expensive consumer goods and industrial products are sold directly by
the producer himself.
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 Perishable products; products subjected to frequent changes in fashion or style as
well as heavy and bulky products follow relatively shorter routes and are generally
distributed directly to minimize costs.
 Industrial products requiring demonstration, installation and after sale service are
often solddirectly to the consumers. While the consumer products of technical
nature are generally sold through retailers.
 An entrepreneur producing a wide range of products may find it economical to set
up his own retail outlets and sell directly to the consumers. On the other hand,
firms producing a narrow range of products may sell their products/distribute
through wholesalers and retailers.
 A new product needs greater promotional efforts in the initial stages and hence
few middlemen may be required.
 Market Consideration: Another important factor influencing the choice of distri-
bution channel is the nature of the target market. Some of the important features in this
respect are:-
• If the market for the product is meant for industrial users, the channel of distribu-
tion will not need any middlemen because they buy the product in large quantities.
While in the case of the goods meant for domestic consumers, middlemen may
have to be involved.
• If the number of prospective customers is small or the market for the product is
geographically located in a limited area, direct selling is more suitable. While in
case of a large number of potential customers, use of middlemen becomes neces-
sary.
• If the customers place order for the product in big lots, direct selling is preferred.
But, if the product is sold in small quantities, middlemen are used to distribute such
products.
 Other Considerations:- There are several other factors that an entrepreneur must
take into account while choosing a distribution channel. Some of these are as fol-
lows:-
 A new business firm may need to involve one or more middlemen in order to pro-
mote its prod uct, while a well established firm with a good market standing may
sell its product directly to the consumers.
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 A small firm which cannot invest in setting up its own distribution network has to
depend on middlemen for selling its product. On the other hand, a large firm can
establish its own retail outlets.
 The distribution cost of each channel is also an important factor because it affects
the price of the final product. Generally, a less expensive channel is preferred. But
sometimes, a channel which is more convenient to the customers is preferred even
if it is more expensive.
 If the demand for the product is high, more number of channels may be used to
profitably distribute the product to maximum number of customers. But, if the
demand is low only a few channels would be sufficient.
 The nature and the type of the middlemen required by the firm and its availability
also affect the choice of the distribution channel. A company prefers middlemen
who can maximize the volume of sales of their product and also offers other ser-
vices like storage, promotion as well as after sale services.
When the desired types of middlemen are not available, the manufacturers will
have to establish their own distribution network.
All these factors or considerations affecting the choice of a distribution channel
are inter-related and interdependent. Hence, an entrepreneur must choose the most effi-
cient and cost effective channel of distribution by taking into account all these factors
as a whole in the light of the prevailing economic conditions. Such a decision is very
important for a business to sustain long term profitability.
13.7 SUMMARY
A distribution channel is the chain of individuals and organizations involved in
getting a product or service from the producer to the consumer. Distribution channels
are also known as marketing channels or marketing distribution channels. In this context,
the individuals and organizations are known as intermediaries; channels are categorized
according to the number of intermediaries between the producer and the end user. A
direct marketing channel, for example, which has no intermediaries between the producer
and the consumer, is known as a level zero channel. A distribution channel that has a
single intermediary (typically, a retailer) is known as a level one channel. Level three
and higher distribution channels have additional intermediaries, such as value-added
resellers (VARs), system integrators (SIs) and distributors or wholesalers. The
distribution channel is further broken down into component channels, such as the sales,
product and service channels, each of which may consist of several intermediaries.
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There are many factors to consider when selecting the appropriate distribution
channel for a given product or service. A channel strategy is the plan a producer develops
for distribution.

1. What do you mean by Distribution? Explain the nature of distribotion
2. What are the functions of distribution channel?
3. Explain the types of distributions channel
4. Describe distribution channel intermediaries
5. Explain the channel management decision.
13.9 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
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UNIT - 14 : DIRECT MARKETING – RETAIL
MARKETING
STRUCTURE:
14.0 Objectives
14.1 Introduction
14.2 Direct Marketing
14.3 Benefits of Direct Marketing
14.4 Retail Marketing
14.5 Classification of Retail format
14.6 Summary
14.8 References
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14.0 OBJECTIVES
• Explain the concept of direct marketing
• Define retailing and discuss it’s importance;
• Identify the different types of retailers both in store and non store categories;
• Explore major decision areas in retail management; and
14.1 INTRODUCTION
Direct Marketing is a marketing process where companies market to carefully
targeted individual consumers with an appropriate, relevant and timely offer or message
using one or more advertising media to obtain an immediate and measurable response or
transaction.
Direct Marketers communicate directly with customers, often on a one-to-one,
interactive basis to build and cultivate long lasting customer relationships.
Direct Marketers use detailed databases where they understand customer’s
demographics, attitudes, preferences and purchasing behaviors. With this knowledge,
they tailor their marketing offers and communications to the needs of narrowly defined
segments or even individual buyers.
Direct Marketing is also referred to as Interactive Marketing or Database
Marketing, because it is expected to be two-way communication with the customer or
prospect and it is database driven, where the database contains customer demographics,
attitudes, preferences and purchasing history and behavior.
Beyond brand and image building, Direct Marketers usually seek a direct,
immediate, and measurable customer response. With digital advertising mediums and e-
commerce websites, it is possible to effectively track and measure customer responses,
if the customer looked at the offer, responded to the offer by seeking more information,
visited the marketer’s e-commerce website, or placed an order, etc.
Early direct marketers used catalogs, direct mailers and telephone calls. They
gathered customer names and sold goods mainly by mail and telephone. Today, with the
advance in database and computer technology, direct marketers are using new marketing
media – the internet. Internet provides several mechanisms - email, web advertisements
and affiliated websites to drive customers to marketer’s website or stores for sales.
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When should you consider direct marketing?
 When the goal is to increase customer lifetime value
 Highly targeted offer or unique value proposition
 Many different segments
 Need to generate a “specific” response
 Want to test in real world situations
 When you want to take a calculated risk
14.2 DIRECT MARKETING

1. Direct marketing is the use of the telephone and non-personal media to communi-
cate product and organizational information to customers who then purchase prod-
ucts by mail, telephone, or the Internet.
2. Direct marketing is one type of non-store retailing, the selling of products out-
side the confines of a retail facility.
Catalog Marketing
Catalog marketing occurs when an organization provides a catalog from which
customers make selections and place orders via mail, telephone, or the Internet.
a) Some organizations offer a broad array of products spread over multiple product
lines; some offer considerable depth in one major line of products, some specialize in
only a few products within a single line. Advantages are:
1. Customers benefit from efficiency and convenience.
2. The retailer benefits by being able to locate in remote, low-cost areas, save on
expensive store fixtures, and reduce both personal selling and store operating ex-
penses.
Disadvantage: Catalog retailing is inflexible, provides limited service, and is most
effective only for a selected set of products.
Direct-Response Marketing
Direct-response marketing occurs when a retailer advertises a product and makes
it available through mail or telephone orders.
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Telemarketing
Telemarketing is the performance of marketing-related activities by telephone.
1. Telemarketing can help generate sales leads, improve customer service, accelerate
payments on past-due accounts, raise funds for nonprofit organizations, and gather
marketing data.
2. The laws and regulations regarding telemarketing have become more restrictive,
and many states have established do-not-call lists of customers who do not want to
receive telemarketing calls from companies operating in their state.
Television Home Shopping
Television home shopping presents products to television viewers who can pur-
chase products through toll-free numbers and paying with credit cards.
1. This venue permits products to be easily demonstrated and allows for sufficient
time to make viewers well informed.
2. Another benefit is customers can shop at their convenience from the comfort of
their homes.
Online Retailing
Online retailing makes products available through computer connections.
1. The phenomenal growth and expansion of the Internet has created new retail oppor-
tunities. Many companies now have websites that disseminate information and al-
low for easy ordering.
2. Consumers can purchase hard-to-find items and upscale items from virtually any-
where in the world; they can even manage their bank accounts and credit cards online.
3. Security remains a serious issue, with most consumers concerned about online se-
curity.
14.3 BENIFITES OF DIRECT MARKEING

Direct Marketing can bring many benefits to both buyers and sellers, whether it
is employed as a complete business model (like in the case of Dell Computers) or as a
supplement to a broader integrated marketing mix (like in the case of Hewlett-Packard
of Sony).
For buyers, Direct Marketing provides convenience, easy to use, and private way
of interacting with Sellers. Buyers from the comfort of their homes or offices can browse
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mail catalogs or company websites at any time of the day or night. Direct Marketing
gives buyers ready access to a wealth of products and information, at home and around
the globe. Direct Marketing is immediate and interactive – buyers can interact with sellers
by phone, chat or emails or on the seller’s website to create exactly the configuration of
information, products, or services they desire, and then order them on the spot.
For sellers, direct marketing is a powerful tool for building customer relationships.
Using customer databases and insight into customer data, marketers can target small
groups or individual consumers, tailor offers for individual needs, and promote these
offers through personalized communications. Direct Marketing can also be timed to
reach prospects at just the right moment. The internet is a great tool for direct marketing
as it provides interactivity, one-to-one communication, access to global markets and
measurability.
Direct Marketing is a low cost, efficient alternative for reaching to customers
through its lower costs of media, and reaching to customers over internet, email and
web sites.
14.4 RETAIL MARKETING

Retailers are the traders who buy goods from wholesalers or sometimes directly
from producers and sell them to the consumers. They usually operate through a retail
shop and sell goods in small quantities. They keep a variety of items of daily use.
Characteristics of Retailers
The following are the characteristics of retailers:
(i) Retailers have a direct contact with consumers. They know the requirements of the
consumers and keep goods accordingly in their shops.
(ii) Retailers sell goods not for resale, but for ultimate use by consumers. For ex-
ample, you buy fruits, clothes, pen, pencil etc. for your use, not for resale.
(iii) Retailers buy and sell goods in small quantities. So customers can fulfill their re-
quirement without storing much for the future.
(iv) Retailers require less capital to start and run the business as compared to wholesal-
ers.
(v) Retailers generally deal with different varieties of products and they give a wide
choice to the con sumers to buy the goods.
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(vi) Retailers purchase the goods on credit but normally sell them for cash.
(vii) Retailers give special attention towards the decoration and display of goods in their
shops. This is done to attract customers.
14.5 CLASSIFICATION OF RETAIL FORMAT
Regardless of the particular type of retailer (such as a supermarket or a depart-

ment store), retailers can be categorized by (a) Ownership, (b) Store strategy mix, and
(c) Non store operations.
Form of Ownership
A retail business like any other type of business can be owned by a sole propri-
etor, partners or a corporation. A majority of retail business in India are sole
proprietorships and partnerships.
dependent Retailer
Generally operates one outlet and offers personalized service, a convenient
location and close customer contact. Roughly 98% of all the retail businesses in India,
are managed and run by independents, including barber shops, drycleaners, furniture stores,
bookshops, LPG Gas Agencies and neigh bourhood stores. This is due to the fact that
entry into retailing is easy and it requires low investment and little technical knowledge.
This obviously results in a high degree of competition..Most independent retailers fail
because of the ease of entry, poor management skills and inadequate resources.
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Retail Chain
It involves common ownership of multiple units. In such units, the purchasing and
decision making are centralized.Chains often rely on, specialization, standardization and
elaborate control- systems. Consequently chains are able to serve a large dispersed target
market and maintain a well known company name. Chain stores have been successful,
mainly because they have the opportunity totake advantage of “economies of scale” in
buying and selling goods. They can maintain their prices, thus increasing their margins,
or they can cut prices and attract greater sales volume. Unlike smaller, independent
retailers with lesser financial means, they can also take advantage of such tools as
computers and information technology. Examples of retail chains in India are Shoppers
stop; West side and IOC, convenience stores at select petrol filling stations.
Retail Franchising
Is a contractual arrangement between a “franchiser” (which may be a manufac-
turer, wholesaler, or a service sponsor) and a “franchisee” or franchisees, which allows
the latter to conduct a certain form of business under an established name and according
to a specific set of rules. The franchise agreement gives the franchiser much discretion
in controlling the operations of small retailers. In exchange for fees, royalties and a
share of the profits, the franchiser offers assistance and very often supplies as well.
Classic examples of franchising are; McDonalds, PizzaHut and Nirulas.
Cooperatives
A retail cooperative is a group of independent retailers, that have combined their
financial resources and their expertise in order to effectively control their wholesaling
needs. They share purchases, storage, shopping facilities, advertising planning and other
functions. The individual retailers retain their independence, but agree on broad common
policies. Amul is a typical example of a cooperative in India.
Store Strategy Mix
Retailers can be classified by retail store strategy mix, which is an integrated
combination of hours, location, assortment, service, advertising, and prices etc. The
various categories are:
Merchandise offer Convienence Store:
Is generally a well situated, food oriented store with longoperating house and a
limited number of items.Consumers use a convenience store; for fill in items such as
bread, milk, eggs, chocolates and candy etc.
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Super markets:
Is a diversified store which sells a broad range of food and non food items. A
supermarket typically carries small house hold appliances, someapparel items, bakery,
film developing, jams, pickles, books, audio/video CD’setc. The Govt. run Super bazaar,
and Kendriya Bhandar in Delhi are good examples of a super market. Similarly in Mumbai,
we have Apna Bazar and Sahakari Bhandar.
Department Stores:
A department store usually sells a general line of apparel for the family, household
linens, home furnishings and appliances. Large format apparel department stores include
Pantaloon, Ebony and Pyramid. Others in this category are: Shoppers Stop and Westside.
Speciality Store:
Concentrates on the sale of a single line of products or services, such as Audio
equipment, Jewellery, Beauty and Health Care, etc. Consumers are not confronted with
racks of unrelated merchandise. Successful speciality stores in India include, Music
World for audio needs, Tanishq for jewellery and McDonalds, Pizza Hut and Nirula’s for
food services.
Hyper Markets:
Is a special kind of combination store which integrates an economy super market
with a discount department store. A hyper market generally has an ambience which attracts
the family as whole. Pantaloon Retail India Ltd. (PRIL) through its hypermarket “Big
Bazar”, offers products at prices which are 25% - 30% lower than the market price.
Catalog Retailing:
This is a type of non store retailing in which the retailers offers the merchandise
in a catalogue, which includes ordering instructions and customer orders by mail. The
basic attraction for shoppers is convenience. The advantages to the retailers include
lover operating costs, lower rents, smaller sales staff and absence of shop lifting. This
trend is catching up fast in India. Burlington’s catalogue shopping was quite popular in
recent times. Some multi level marketing companies like Oriflame also resort to
catalogue retailing.
Service Retailing Direct Response Retailing:
Here the marketers advertise these products/ services in magazines, newspapers,
radio and/or television offering an address or telephone number so that consumers can
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write or call to place an order. It is also sometimes referred to as “Direct response
advertising.” The availability of credit cards and toll free numbers stimulate direct
response by telephone. The goal is to induce the customer to make an immediate and
direct response to the advertisement to “order now.” Telebrands is a classic example of
direct response retailing. Times shopping India is another example.
Automatic Vending:
Although in a very nascent stage in India, is the ultimate in non personal, non
store retailing. Products are sold directly tocustomers/buyers from machines. These
machines dispense products which enable customers to buy after closing hours. ATM’s
dispensing cash at odd hours represent this form of non store retailing. Apart from all
the multinational banks, a large number of Indian banks also provide ATM services,
countrywide.
Electronic Retailing/E-Tailing:
Is a retail format in which retailers communicate with customers and offer
products and services for sale, over the internet. The rapid diffusion of internet access
and usage, and the perceived low cost of entry has stimulated the creation of thousands
of entrepreneurial electronic retailing ventures during the last 10 years or so.
Amazon.com, E-bayand Bazee.com HDFCSec.com are some of the many e-tailers
operating today.
14.6 SUMMARY
Retail marketing is the range of activities undertaken by a retailer to promote
awareness and sales of the company’s products. This is different from other types of
marketing because of the components of the retail trade, such as selling finished goods
in small quantities to the consumer or end user, usually from a fixed location. Retail
marketing makes use of the common principles of the marketing mix, such as product,
price, place and promotion. A study of retail marketing at university level includes
effective merchandising strategies, shopping and consumer behavior, branding and
advertising. Retail marketing is especially important to small retailers trying to compete
against large chain stores.
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1. What is meant by Direct marketing ?
2. Give four examples of services that are distributed through the direct channels.
3. Explain the different channels through which a product moves from producers to
ultimate consumers.
5. Give any four characteristics of retailers.
6. Explain the role of retailers in distribution of goods.
9. Write short note on: (1) Direct Marketing (2) Tele Marketing (3) Hyper Markets.
14.8 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
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UNIT - 15 : WHOLESALING
STRUCTURE:
15.0 Objectives
15.1 Introduction
15.2 Characteristics of wholesaler
15.3 Wholesale v/s Retail
15.4 Functions of wholesalers
15.5 Benefits of selling wholesale
15.6 Types of wholesalers
15.6.1 Merchant wholesalers
15.6.2 Full service wholesalers
15.6.3 Limited service wholesalers
15.6.4 Cash and carry wholesalers
15.6.5 Agents and Brokers
15.6.6 Manufacturer sales braches and offices
15.7 Summary
15.9 References
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15.0 OBJECTIVES

• Understand the roles of retailers and wholesalers in the marketing channel.
• Know the major types of wholesalers.
• Understand the marketing decisions facing wholesalers
15.1 INTRODUCTION
Wholesalers are one of the important middlemen in the channel of distribution

who deal with the goods in bulk quantity. They buy goods in bulk from the producers and
sell them in relatively smaller quantities to the retailers. In some cases they also sell
goods directly to the consumers if the quantity to be purchased is more. They usually
deal with a limited variety of items and also in a specific line of product, like iron and
steel, textiles, paper, electrical appliances, etc. Let us know about the characteristics of
wholesaler.
Wholesaling includes all activities involved in selling goods and services to those
buying for resale or business use. Wholesaling is the sale of goods or merchandise to
retailers to industrial. Commercial. Institutional or other professional business users.
Or to other wholesalers and related subordinated services
Wholesaler is those firms engaged primarily in wholesaling. Wholesalers are
someone who buys large quantities of goods and resells to merchants rather than to the
ultimate customers
Why would a producer use wholesalers rather than selling directly to retailers or
consumers? Because wholesalers are better at performing many channel functions.
According to the united nations statistics Division. “Wholesale” is the resale of
new and used goods to retailers, to industrial. Commercial, institutional or professional
users or to other wholesalers. Or involves acting as an agent or broker in buying mer-
chandise for or selling merchandise to. Such persons or companies. Wholesalers fre-
quently physically assemble sort and grade goods in large lots, break bulk, repack redis-
tribute in the smaller lots.
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15.2 CHARACTERISTICS OF WHOLESALER
The followings are the characteristics of wholesalers:

(i) Wholesalers buy goods directly from producers or manufacturers.
(ii) Wholesalers buy goods in large quantities and sell in relatively smaller quanti-
ties.
(iii) They sell different varieties of a particular line of product. For example, a whole-
saler who deals in paper is expected to keep all varieties of paper, cardboard,
card, etc.
(iv) They may employ a number of agents or workers for distribution of products.
(v) Wholesalers need large amount of capital to be invested in his business.
(vi) They generally provide credit facility to retailers.
(vii) They also provide financial assistance to the producers or manufacturers.
(viii) In a city or town they are normally seen to be located in one particular area of the
market.
15.3 WHOLESALE V/S RETAIL

The terms “wholesale” and “retail” themselves explain the difference. “Whole-
sale” means “selling in large quantities” and “retail” means “selling in small quantities.”
In wholesale, the goods are mainly sold to the retailer who sells it to the custom-
ers. A wholesaler might also sell the products directly to the customers.
One of the main differences between wholesale and retail is in the price of the
goods. The wholesale price is always lower than the retail price. This is mainly because
the retailer has to include many other costs while selling the goods. The retailer has to
add costs like the salaries of employees, rents of shops, sales tax, and advertising of the
goods that he buys from a wholesaler. A wholesaler does not worry much about all of
these aspects which prompts him to sell goods at a lower price.
The wholesaler has direct links with the manufacturer and buys products or goods
directly from him. On the other hand, a retailer has no direct contact with the manufac-
turer.
In choosing the quality, the retailer has an upper hand. A retailer can choose the
products with quality and discard the damaged ones as they only buy small amounts. On
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the contrary, the wholesaler will not have a say in the quality as he has to buy in bulk
from the manufacturer. This means that the retailer has the freedom to choose the prod-
ucts whereas the wholesaler does not have the freedom to choose the products.
It can also be seen that retailers have to spend more in maintaining the retail
space as they have to attract the consumers. On the other hand, a wholesaler need not
worry about the space as it is only the retailer who buys from him.
When comparing the profit margin, a wholesaler gets more profit than a retailer.
But even then, a wholesaler gets more money as he sells in bulk. A retailer just sells only
one product at a time.
15.4 FUNCTIONS OF WHOLESALERS

Services Provided by Wholesalers
1. Wholesalers provide essential services to both producers and retailers.
a) Services Provided to Producers
(1) By initiating sales contacts with a producer and by selling diverse products to re-
tailers, wholesalers serve as an extension of the producer’s sales force.
(2) Wholesalers often pay for transporting goods; they reduce a producer’s warehousing
expenses and inventory investment by holding goods in inventory; they extend credit
and assume losses from buyers who turn out to be poor credit risks; and when they
buy a producer’s entire output and pay promptly or in cash, they are a source of
working capital.
(3) Wholesalers serve as conduits for information within the marketing channel.
b) Services Provided to Retailers
(1) Wholesalers support retailers by assisting with marketing strategy, especially in
the distribution.
(2) They help retailers select inventory.
(3) They are often specialists on market conditions and experts at negotiating final
purchases.
(4) They can reduce a retailer’s burden of looking for and coordinating supply sources.
(5) If the wholesaler purchases for several different buyers, expenses can be shared
by all customers.
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2. The distinction between services performed by wholesalers and those performed
by other businesses has blurred in recent years because of changes in the competitive
nature of business and technological innovations.
A wholesaler is necessary because he performs several other marketing func-
tions which are also given below:
1. Assembling:
A wholesaler buys goods in bulk from different manufacturers and keeps them at
one place. He collects goods from several places much in advance of demand. He may
also import goods from foreign countries.
2. Warehousing or storage:
There is usually a large time gap between production and consumption of goods.
Goods must, therefore, be stored for a considerable time.
A wholesaler stores goods in his warehouse and makes them available to retailers
as and when demanded. He stabilizes prices of the goods by adjusting the supply with the
demand. He creates time utility.
3. Dispersion:
A wholesaler distributes the assembled goods among a large number of retailers
scattered at different places. He sells goods in small quantities according to the choice
of retailers. This is known as ‘breaking of bulk’.
4. Transportation:
A wholesaler arranges for the transport of goods from producers to his warehouse
and from the warehouse to retailers. He carries goods in bulk thereby saving costs of
transport.
Many wholesalers maintain their own trucks and tempos to carry goods far and
wide quickly. Thus, a wholesaler adds place utility to the goods.
5. Financing:
A wholesaler often provides advance money with orders to manufacturers. He
purchases goods in bulk on cash basis from them. In addition, he often sells goods on
credit basis to retailers. In this way, he provides finance to both producers and retailers.
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6. Risk -bearing:
A wholesaler assumes the risk of damage to goods in transit and in storage. He
also bears the risks arising from changes in demand and bad debts. He serves as the
shock absorber in the distribution of goods.
7. Grading and Packing:
Many wholesalers classify the assembled goods into different grades, pack them
into small lots and put their own trademarks or brand names. In this way, they perform
the functions of grading, packing and branding.
8. Pricing:
A wholesaler anticipates demand and market conditions. He helps to determine
the resale price of goods.
15.5 BENEFITS OF SELLING WHOLESALE

Many designers and makers shy away from the idea of wholesale because they
worry about giving away half their profits. But the truth is, if your products are
appropriately priced, you can generate more revenue through wholesaling. Some of the
benefits of wholesaling include:
 Predictable schedule and revenue stream. When you write orders, whether through
a trade show or independently, you determine a ship date for the order. This allows you
to space out both your production schedule and revenue stream to suit your needs. While
store owners and buyers will have some input on when they’d like an order to ship, you
will have the flexibility to schedule ship dates so that they work with your schedule.
 No more guessing as to which products will sell – you only need to produce
items you have written orders for. Perhaps, like me, you’ve had the experience of pre-
paring for a retail craft show where you need to build up inventory, but you have no way
of knowing which products will sell the best. In wholesale, after making your initial
samples, you only need to produce the products after you’ve written an order. This means
you don’t waste time making products that may not sell – products that you may have to
discount later to clear inventory.
 Increased exposure to a larger audience. Wholesale introduces your work to a much
larger audience who may never have found you through your online shop or retail shows.
If you wholesale to a major online retailer, you have the benefit of a much higher level
of traffic than you might see on your own site.
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 Sell your work in more locations than you would ever be able to reach doing
retail shows. If you did a full circuit of retail craft fairs every season, there are still
plenty of cities and states you would never see. Wholesale brings your work to new
locations that may be out of your reach through other methods.
15.6 TYPES OF WHOLESALERS

15.6.1 Merchant Wholesalers
a) Merchant wholesalers are independently owned businesses that take title to goods,
assume risks associated with ownership, and generally buy and resell products to
other wholesalers, business customers, or retailers.
b) A producer will rely on a merchant wholesaler when selling directly to customers
is not feasible economically.
c) They are also called “wholesaler,” “jobber,” “distributor,” “assembler,” “exporter,”
and “importer.”
15.6.2 Full-Service Wholesalers
a) Full-service wholesalers perform the widest possible range of wholesaling func-
tions.
b) Customers rely on full-service wholesalers for product availability,
suitable assortments, breaking large quantities into smaller ones,
financial assistance, and technical advice and service.
c) Types of Full-Service Wholesalers
(1) General-merchandise wholesalers carry a wide product mix but offer limited
depth within product lines.
(2) General-line wholesalers carry only a few product lines but offer an extensive
assortment of products within those lines.
(3) Specialty-line wholesalers offer the narrowest range of products, usually a single
product line or a few items within a product line.
(4) Rack jobbers are full-service, specialty-line wholesalers that own and maintain
display racks in supermarkets, drugstores, and discount and variety stores.
15.6.3 Limited-Service Wholesalers
a) Limited-service wholesalers provide fewer marketing services than full-service
wholesalers and specialize in just a few functions, passing on the rest of the functions to
customers or other intermediaries.
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b) Limited-service wholesalers take title to merchandise but often do not deliver
merchandise, grant credit, provide marketing information, store inventory, or plan ahead
for customers’ future needs.
15.6.4 Cash and Carry Wholesalers
a) Cash-and-carry wholesalers are intermediaries whose customers—usually small
businesses—pay cash and furnish transportation.
b) Truck wholesalers, sometimes called ‘truck jobbers,” transport a limited line of
products directly to customers for on-the-spot inspection and selection.
c) Drop shippers, also known as “desk jobbers,” take title to goods and negotiate
sales but never take actual possession of products.
d) Mail-order wholesalers use catalogs instead of sales forces to sell products to
retail and business customers.
15.6.5 Agents and Brokers
a) Agents and brokers negotiate purchases and expedite sales but do not take title
to products. They are sometimes called “functional middlemen.”
(1) Agents represent either buyers or sellers on a permanent basis.
(2) Brokers are intermediaries temporarily employed by buyers or sellers.
b) Although agents and brokers perform even fewer functions than limited-
service wholesalers, they are usually specialists in particular products or types
of customers and can provide valuable sales expertise.
c) Types of Agents
(1) Manufacturers’ agents are independent intermediaries who represent two
or more sellers and usually offer customers complete product lines.
(2) Selling agents market either all of a specified product line or a manufacturer’s
entire output.
(3) Commission merchants receive goods on consignment from local sellers and
negotiate sales in large, central markets.
d) A broker’s primary purpose is to bring buyers and sellers together. Thus
brokers perform fewer functions than other intermediaries.
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15.6.6 Manufacturers’ Sales Branches and Offices
a) Sales branches are manufacturer-owned intermediaries that sell products
and provide support to the manufacturer’s sales force.
b) Sales offices are manufacturer-owned operations that provide services
normally associated with agents.
c) Manufacturers may set up these branches or offices to reach their customers
more effectively by performing wholesaling functions themselves.
CASE STUDY - GROCERY INDUSTRY
This privately-owned company supplies wholesale foods to grocery stores from
the Mid Atlantic to the deep South. It runs a fleet of more than 240 tractors and 500
trailers and employs more than 1,700 people.
Since implementing Syntelic’s Transportation Solution in 1998, the company has
improved the visibility of its transportation operations in all of its complexity.
Business Challenge
The grocery industry is fiercely competitive. A privately held Syntelic wholesale
grocery distributor customer points to its 95% on-time delivery rate within a 30-minute
window as its key measure of success and a definite competitive advantage. Routes to
grocery stores are a combination of straight frozen food runs and mixed runs of dry,
refrigerated and frozen products. Trailers are equipped with onboard computers from
Cadec Global, Inc., and its transportation division employs a dynamic routing and driver
pay system that calculates deliveries by components (per pallet delivered).
As a leader, testing new cost management techniques is a must to remain
competitive; thus the management team demands a distribution tracking solution that
can quickly and easily crunch all the numbers to provide any variance between plans and
actual performance for every route and driver.
Solution
“I don’t see how we could get by without Syntelic,” says the company’s
Transportation Systems Supervisor. Without Syntelic, supervisors would not be able to
evaluate driver logs efficiently to make needed payroll adjustments and route changes
based on what they did compared with the initial route plan. “We would be limited to
word-of-mouth check-ins with no more than one in ten of our drivers,” says the
Supervisor. “Changes would be a manual process and obviously very time consuming.”
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Syntelic is considered to be a valuable tool for solving problems and answering
questions. Driver managers can guide drivers and give them incentives to improve their
performance by viewing route histories vs. plan using a visual timeline graphic. “I can
easily pick out if a driver has moved off his planned route and find out why.”
Results
Given the day-to-day demands on the current system, and the company’s good
relationship with Syntelic, the Syntelic web-based and scalable Enterprise Platform
represents the next logical step in leveraging the company’s investment since the web-
based solution offers additional functionality, dashboard analysis and further reporting
and security benefits.
Different roles in the organization today use Syntelic in different ways, and each
user can access system information using their own custom view of the information
they need in order to do their job effectively.
 Executive management receives regular updates on key performance indicators
such as on time delivery rates.
 Route managers can look at outbound routes to calculate optimal backhauls.
 Driver managers can look at driver attendance, punch-in times, and route perfor-
mance.
 Payroll can make adjustments based on actual performance.
 The Transportation Systems Supervisor can evaluate equipment utilization and rec-
ommend capital investments.
If any manager or executive poses a new question or needs a more information,
Syntelic offers the flexibility to pull information into customized dashboards and filter
out whatever is less than relevant.
The company has continued to grow in a tough economy by successfully promot-
ing its stellar track record for on-time deliveries to win new business and keep satisfied
customers. “The grocery store business has narrow profit margins,” says the company’s
Transportation Systems Supervisor. “When we say we are going to be at a store at a
certain time, they depend on that. They can’t afford to keep personnel standing around
waiting for the delivery truck.”
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15.7 SUMMARY
Wholesalers have been the big thing in this past era. They are the prime route for
manufactured products to arrive at the retail market. They act as a bridge between the
manufacturer and the retailer. Wholesalers buy goods from the manufacturers in large
quantities and their major clients are retailers who buy products in bulk. But they do not
necessarily sell only to retailers. They also sell to distributors or to other smaller sellers.

1. Define wholesaler. How do they serve as an important link in the channel of distri-
bution?
2. State any five differences between wholesalers and retailers.
3. Explain the functions of wholesalers.
4. Describe the types of wholesalers
5. What are the benefits of selling wholesale
15.9 REFERENCES
New Delhi, 2013.
Irwin,2009.
India, 2014.
223
UNIT - 16 : PROMOTION DECISION
STRUCTURE:
16.0 Objectives
16.1 Introduction
16.2 Objectives of Sales Promotion
16.3 Tools of sales Promotion
16.3.1: Free samples
16.3.2: Premium or Bonus offer
16.3.3: Exchange Schmes
16.3.4: Price- off offer
16.3.5: Coupons sometimes
16.3.6: Fairs and Exhibitions
16.3.7: Trading stamps
16.3.8: Scratch and win offer
16.3.9: Money back offer
16.4 Importance of sales promotion
16.5 Promotion Mix
16.6 Steps to developing optimal promotionad mix
16.7 Measuring the effectiveness of Promotional mix
16.8 Summary
16.10References
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16.0 OBJECTIVES
• Explain the meaning of sales promotion
• State the objectives of sales promotion
• Describe the various tools used in sales promotion; recognize the role of each
tool in promoting sales and describe the importance of sales promotion in busi-
ness.
16.1 INTRODUCTION
Every businessman wants to increase the sale of goods that he deals in. He can
adopt severalways for that purpose. You might have heard about “lakhpati bano”, “win a
tour to Singapore”,“30% extra in a pack of one kg”, “scratch the card and win a prize”
etc. You might also haveseen gifts like lunch box, pencil box, pen, shampoo pouch etc.
offered free with some products.
There are also exchange offers, like in exchange of existing model of television
you can get a newmodel at a reduced price. You may have also observed in your
neighbouring markets notices of “winter sale”, “summer sale”, “trade fairs”, “discount
upto 50%” and many other schemes to attract customers to buy certain products. All
these are incentives offered by manufacturers or dealers to increase the sale of their
goods. These incentives may be in the form of free samples, gifts, discount coupons,
demonstrations, shows, contests etc. All these measures normally motivate the customers
to buy more and thus, it increases sales of the product. This approach of selling goods is
known as “Sales Promotion”.
You have learnt about advertising and personal selling in the earlier lessons.
Personal selling involves face-to-face contact with specific individuals, while advertising
is directed towards a large number of potential customers. They also help in increasing
sales of goods. Thus, advertising can be used as means of communication to inform
potential customers about the incentives offered for sales promotion. Personal selling
can as well include communication of the incentives to individual customers. But, sales
promotion differs from advertising and personal selling in terms of its approach and
technique. Sales promotion adopts short term, non-recurring methods to boost up sales
in different ways. These offers are not available to the customers throughout the year.
During festivals, end of the seasons, year ending and some other occasions these schemes
are generally found in the market.
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Thus, sales promotion consists of all activities other than advertising and per-
sonal selling that help to increase sales of a particular commodity.
16.2 OBJECTIVES OF SALES PROMOTION

You have learnt that the main objective of sales promotion is to increase sales.
However, there are also some other objectives of sales promotion. The objectives are:
i. To introduce new products
ii. To attract new customers and retain the existing ones
iii. To maintain sales of seasonal products
iv. To meet the challenge of competition
Let us learn about these objectives in details.
(i) To introduce new products: Have you ever heard about distribution of free
samples? Perhaps you know that many companies distribute free samples while
introducing new products. The consumers after using these free samples may
develop a taste for it and buy the products later for consumption.
(ii) To attract new customers and retain the existing ones: Sales promotion measures
help to attract or create new customers for the products. While moving in the
market, customers are generally attracted towards the product that offers discount,
gift, prize, etc on buying. These are some of the tools used to encourage the
customers to buy the goods. Thus, it helps to retain the existing customers, and at
the same time it also attracts some new customers to buy the product.
(iii) To maintain sales of seasonal products: There are some products like air
conditioner, fan, refrigerator, cooler, winter clothes, room heater, sunscreen
lotion, glycerin soap etc.,which are used only in particular seasons. To maintain
the sale of these types of products normally the manufactures and dealers give
off-season discount. For example, you can buy air conditioner in winter at a
reduced price. Similarly you may get discount on winter clothes during summer.
(iv) To meet the challenge of competition: Today’s business faces competition all the
time. New products frequently come to the market and at the same time
improvement also takes place. So sales promotion measures have become
essential to retain the market share of the seller or producer in the product-market.
226
16.3 TOOLS OF SALES PROMOTION
To increase the sale of any product manufactures or producers adopt different
measures like sample, gift, bonus, and many more. These are known as tools or tech-
niques or methods of sales promotion. Let us know more about some of the commonly
used tools of sales promotion.
16.3.1:Free samples:
You might have received free samples of shampoo, washing powder, coffee pow-
der, etc. while purchasing various items from the market. Sometimes these free samples
are also distributed by the shopkeeper even without purhasing any item from his shop.
These are distributed to attract consumers to try out a new product and thereby create
new customers. Some businessmen distribute samples among selected persons in order
to popularize the product. For example, in the case of medicine free samples are distrib-
uted among physicians, in the case of textbooks, specimen copies are distributed among
teachers.
16.3.2:Premium or Bonus offer:
A milk shaker along with Nescafe, mug with Bournvita, toothbrush with 500 grams
of toothpaste, 30% extra in a pack of one kg. are the examples of premium or bonus
given free with the purchase of a product. They are effective in inducing consumers to
buy a particular product. This is also useful for encouraging and rewarding existing
customers.
16.3.3:Exchange schemes:
It refers to offering exchange of old product for a new product at a price less than
the original price of the product. This is useful for drawing attention to product
improvement. ‘Bring your old mixer-cum-juicer and exchange it for a new one just by
paying Rs.500’ or ‘exchange your black and white television with a colour television’
are various popular examples of exchange scheme.
16.3.4:Price-off offer:
Under this offer, products are sold at a price lower than the original price. ‘Rs. 2
off on purchase of a lifebouy soap, Rs. 15 off on a pack of 250 grams of Taj Mahal tea,
Rs. 1000 off on cooler’ etc. are some of the common schemes. This type of scheme is
designed to boost up sales in off-season and sometimes while introducing a new product
in the market.
227
16.3.5:Coupons: Sometimes
coupons are issued by manufacturers either in the packet of a product or through
an advertisement printed in the newspaper or magazine or through mail. These coupons
can be presented to the retailer while buying the product. The holder of the coupon gets
the product at a discount. For example, you might have come across coupons like, ‘show
this and get Rs. 15 off on purchase of 5 kg. of Annapurna Atta’. The reduced price under
this scheme attracts the attention of the prospective customers towards new or improved
products.
16.3.6:Fairs and Exhibitions:
Fairs and exhibitions may be organised at local, regional, national or international
level to introduce new products, demonstrate the products and to explain special features
and usefulness of the products. Goods are displayed and demonstrated and their sale is
also conducted at a reasonable discount. ‘International Trade Fair’ in New Delhi at Pragati
Maidan, which is held from 14th to 27th November every year, is a well known example
of Fairs and Exhibitions as a tool of sales promotion.
16.3.7:Trading stamps:
In case of some specific products trading stamps are distributed among the cus-
tomers according to the value of their purchase. The customers are required to collect
these stamps of sufficient value within a particular period in order to avail of some
benefits. This tool induces customers to buy that product more frequently to collect the
stamps of required value.
16.3.8:Scratch and win offer:
To induce the customer to buy a particular product ‘scratch and win’ scheme is
also offered. Under this scheme a customer scratch a specific marked area on the package
of the product and gets the benefit according to the message written there. In this way
customers may get some item free as mentioned on the marked area or may avail of
price-off, or sometimes visit different places on special tour arranged by the
manufacturers.
16.3.9: Money Back offer:
Under this scheme customers are given assurance that full value of the product
will be returned to them if they are not satisfied after using the product. This creates
confidence among the customers with regard to the quality of the product. This tech-
nique is particularly useful while introducing new products in the market.
228
16.4 IMPORTANCE OF SALES PROMOTION
The business world today is a world of competition. A business cannot survive if
its products do not sell in the market. Thus, all marketing activities are undertaken to
increase sales. Producers need to be offered to attract customers to buy the product.
Thus, sales promotion is important to increase the sale of any product. Let us discuss
the importance of sales promotion from the point of view of manufacturers and
consumers.
From the point of view of manufacturers
Sales promotion is important for manufacturers because
i. it helps to increase sales in a competitive market and thus, increases profits;
ii. it helps to introduce new products in the market by drawing the attention of poten-
tial customers
iii. when a new product is introduced or there is a change of fashion or taste of con-
sumers, existing stocks can be quickly disposed off
iv. it stabilizes sales volume by keeping its customers with them. In the age of compe-
tition it is quite much possible that a customer may change his/her mind and try
other brands. Various incentives under sales promotion schemes help to retain the
customers.
From the point of view of consumers
Sales promotion is important for consumers because
i. the consumer gets the product at a cheaper rate;
ii. it gives financial benefit to the customers by way of providing prizes and sending
them to visit different places;
iii. the consumer gets all information about the quality, features and uses of different
products;
iv. certain schemes like money back offer creates confidence in the mind of custom-
ers about the quality of goods; and
v. it helps to raise the standard of living of people. By exchanging their old items
they can use latest items available in the market. Use of such goods improves their
image in society.
229
16.5 PROMOTION MIX
The ‘promotional mix’ is a term used to describe the set of tools that a business
can use to communicate effectively the benefits of its products or services to its cus-
tomers.
Why it is important?
If customers don’t know what products and services you provide, then your business
will not survive in today ís competitive marketplace. Effective communication with your
customers is vital to ensure that your business generates sales and profits. By taking the
time to develop and implement an appropriate promotional mix, you will stimulate your
target audience to buy your products or services - and manage this within a budget you
can afford.
What you should do?
A successful promotional mix uses a balance of its five tools in a planned and
structured way ñ a single tool rarely works well in isolation. The challenge is to select
the right mix of promotional activities to suit your particular business at a particular
time ñ and to then use it correctly to achieve a result. The combination of tools you use
will depend on the target audience, the message you wish to communicate and the budget
you make available. There would be little point in advertising new gas boilers in a fashion
magazine ñ much more appropriate to advertise in a trade magazine for builders and gas
fitters.
Here is a 10-step checklist for developing and managing your promotional mix.
1. Decide how the products and services you provide can be ‘packaged’ together. The
image of your business is formed by the way you promote the elements of the
marketing mix ñ your products, prices and the places through which you sell. It is
often helpful to think about promoting the business as opposed to a single product
or service. If you need to think more about the marketing mix before going any
further, take a look at the 10-minute Marketing Mix briefing.
2. Develop a profile of the target audience for the message you will communicate.
Who is the target audience? This goes beyond a simple customer list. Is it consumers,
businesses or members of the channel (such as distributors) you are using to get
your product to the end customer? Is it the wider stakeholder audience?
3. Decide on the message to use. Are you trying to differentiate, remind, inform or
persuade? Set an objective for what should be achieved. Be clear about the benefits
that you want to promote.
230
4. Decide what image of the product/service/business you want your audience to re-
tain.
5. Decide on a budget. This is often how much you can afford given projected sales
for the product or service.
6. Decide how the message should be delivered. To help you to decide what aspects
of the promotional mix to use, think about taking your customers on a journey that
starts by creating awareness about your business, through obtaining information
about the products and services you provide, and ends by generating a sale. Each
component of the mix will achieve a different result, so your choice must be based
on real objectives for your business. What promotional tools should be used? When
should communications happen? How often? Is the message consistent?
7. Decide what actions you want your audience to take as a result of receiving your
communication. It is not always place an order
8. Put in place a means of measuring and controlling the plan once it is developed.
Who will be responsible for dealing with the agency or media? Who will be respon-
sible for checking that promotional activity happens as planned?
9. Undertake your promotional plan. Be consistent in what you say and how you say
it.
10. Measure what you have achieved against the original objectives that you set.
The promotional mix includes the following tools -
 Advertising
 Publicity and Public relations
 Sales promotion
 Direct marketing
 Personal selling
 Advertising: Involves non-personal, mostly paid promotions often using
mass media outlets to deliver the marketer’s message. While historically advertising
has involved one-way communication with little feedback opportunity for the customer
experiencing the advertisement, the advent of computer technology and, in particular,
the Internet has increased the options that allow customers to provide quick feedback.
231
 Sales Promotion: Involves the use of special short-term techniques, often in
the form of incentives, to encourage customers to respond or undertake some activity.
For instance, the use of retail coupons with expiration dates requires customers to act
while the incentive is still valid.
 Publicity and Public Relations: Also referred to as publicity, this type of pro-
motion uses third-party sources, and particularly the news media, to offer a favorable
mention of the marketer’s company or product without direct payment to the publisher
of the information.
 Personal Selling: As the name implies, this form of promotion involves per-
sonal contact between company representatives and those who have a role in purchase
decisions (e.g., make the decision, such as consumers, or have an influence on a deci-
sion, such as members of a company buying center). Often this occurs face-to-face or
via telephone, though newer technologies allow this to occur online via video
conferencing or text chat.
16.6 STEPS TO DEVELOPING OPTIMAL PROMOTIONAL MIX

An organization must make sure that is promotional mix is effective, if it will
benefit from it. The following are the steps involves in having an optimal promotional
mix.
Step 1; identify the audience: a marketing promotion starts with clear target
audiences in mind. The audience may be potential buyers or current users, it may be
individuals, group, special public or the general public. The target audiences are one of
the major determinants of what mix is to be used?
Step 2; determine the needs: after having identified the target audience, the next
thing to do is to know what their basic needs are and is the product relevant for the
audience?
Step 3; determine the promotional objectives: the promotional activities should
have a target to be meant which is referred to as objective. Is it to increase sales? Or is
it to just create awareness? It should be clearly stated.
Step 4; choose the mix: after the expected response is determined, then the mar-
keter can look critically at all mix and identify which can best satisfy their objectives.
232
cannot say precisely if the activities had been successful. For an organization to measure
the effectiveness of it promotional activities, this can be done in either of the following
cannot say precisely if the activities had been successful. For an organization to measure
the effectiveness of it promotional activities, this can be done in either of the following
ways;
• Direct sales result; this method reveals the sales revenue for each amount input
into promotion. That is, it measures the rate of sales to the expense on promotion.
• Indirect evaluation; this method focus on quantitatiable indicators of effectiveness.
For instance, the effectiveness is measured based on the organization study of the
number of audience that actually heard about the product during the promotional
activities.
• Returns method; this method is the work of Professor Don Schutz. He said
promotional effectiveness should be measured based on the returns of the period
of promotion. What is the profit like during promotion and when there is no
promotion?
• Direct response method; this method is concentrating on having a way of getting
response from the targeted audience and this response should be used to measure
the effectiveness of promotion.
16.7 MEASURING THE EFFECTIVENESS OF PROMOTIONAL MIX

If an oganisation cannot measure it’s effectiveness in terms of promotion, it cannot
say precisely if the activities had been successful. For an organisation to measure the
effectiveness of it promotional activities, this can be done in either of the following
ways;
• Direct sales result; this method reveals the sales revenue for each amount input
into promotion. That is, it measures the rate of sales to the expenses on promotion.
• Indirect evaluation; this method focus on quantitatiable indicators of effectiveness.

For instance, the effectiveness is measured based on the organisation study of the number
of audience that actually heard about the product during the promotional activities.
• Returns method; this method is the work of Professor Don Schutz. He said
promotional effectiveness promotion and when there is no promotion?
• Direct response method; this method is concentrating on having a way of getting
233
response from the targated audience and this response should be used to measure the
effectiveness of promotion.
16.8 SUMMARY
Every organization that must continue to survive in its operating environment must
be able to adequately promote its product. For the organization to achieve its aim of
profit making as a manufacturing organization, it must make sure that, its promotional
activities achieve its aim of making the product acceptable and bought by the targeted
market. The promotion of any product must be accessible to the people that the product
will be useful for and at the same time, must be able to encourage new customers to
purchase and repurchase the products.
In conclusion, every organization must have a proper and well monitor promo-
tional activities and must be able to tailor it in such a way that it will increase it sales
thereby increasing the profit of the organization.
1. Define Sales Promotion.
2. State the importance of Sales Promotion from the point of view of manufacturers.
3. State the importance of Sales Promotion from the point of view of consumers.
4. List any six tools used in Sales Promotion
5. State the objectives of Sales Promotion
6. Explain the meaning of ‘Sales Promotion’. Why is Sales Promotion necessary?
7. Explain any two techniques of Sales Promotion, with example.
8. State any two objectives of Sales Promotion.
9. Explain – “Price off offer” and “Free-Samples” as techniques of Sales Promotion.
10. Explain how Sales Promotion techniques help in promoting sales.
16.10 REFERENCES
New Delhi, 2013.
Irwin,2009.
4. William. J. Stanton. Fundamentals of234
marketing, USA: McGraw-Hill Inc.,1987
India, 2014.

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KARNATAKA STATE OPEN UNIVERSITY

Mukthagangothri, Mysore - 570 006.

DEPARTMENT OF STUDIES AND RESEARCH IN MANAGEMENT

Course Name : Marketing Management Credit : 04 Units No: 1 to 16

Prof. Kamble Ashok

Prof. C. Mahadevamurthy Internal Dr. Savitha P Department

Prathibha Jenefier Block - 2 Sri. Siraj Basha R.

Prof. Mustrairy Begum Block - 3 Sri. Siraj Basha R.

Dr. P. Renuka Murthy Block - 4 Sri. Siraj Basha R.

This block is comprises of four units. They are,

1.9 SELF ASSESSMENT QUESTIONS

2.2 MEANING/DEFINITION OF MARKETING MANAGEMENT

2.8 KEY WORDS

2.9 SELF ASSESSMENT QUESTIONS

3.2 MARKETING CONCEPTS

3.3 COMPONENTS OF MARKETING CONCEPT

3.6 SELF ASSESSMENT QUESTIONS

4.2 MARKETING MYOPIA

4.3 DIGITALIZATION OF MARKETING

4.4 EMERGING TRENDS IN MARKETING

4.5 SOCIAL MARKETING

DEFINITIONS OF SOCIAL MARKETING

4.6 ETHICAL AND LEGAL ASPECTS OF MARKETING

4.7 MEANING OF GREEN MARKETING

4.9 CYBER MARKETING/INTERNET MARKETING

4.11 TYPE OF AREAS IN INTERNET MARKETING

14.12 INTRODUCTION TO VIRAL MARKETING

MEANING OF GUERRILLA MARKETING

4.14 NEURO MARKETING

4.15 INTRODUCTION TO CUSTOMER RELATIONSHIP MARKETING

Figure 1, CRM process

4.17 SELF ASSESSMENT QUESTIONS

5.2 Meaning and Definitions of Strategic Marketing Planning

5.3 Characteristics of Marketing Planning

5.4 Importance of marketing Planning

5.5 Marketing planning process

5.6 Concept of Marketing environment

5.7 Environmental Factors affecting marketing firm

5.9 Self Assessment Questions

5.3 CHARACTERISTICS OF MARKETING PLANNING

5.4 IMPORTANCE OF MARKETING PLANNING

5.5 MARKETING PLANNING PROCESS

6.2 MEANING AND DEFINITIONS OF CONSUMER BEHAVIOUR

6.3 CHARACTERISTICS OF CONSUMER BEHAVIOUR

6.4 BUYER BEHAVIOUR

6.6 FACTORS AFFECTING CONSUMER BEHAVIOUR/

6.9 SELF ASSESSMENT QUESTIONS

7.2 MEANING AND DEFINITIONS OF MARKETING RESEARCH

7.3 CHARACTERISTICS OF MARKETING RESEARCH

7.4 IMPORTANCE OF MARKETING RESEARCH

Determination of Research Objectives

Planning and conduct formal investigation

Collection of Primary Data or Techniques of Marketing Research

8.2 MEANING OF MARKET SEGMENTATION

8.4 FACTORS AFFECTING MARKET SEGMENTATION

8.5 TARGET MARKET

8.7 LIFESTYLE MARKETING

8.8 MARKETING MIX

A product is seen as an item that satisfies what a consumer demands. It