Program – M.

Com Program
Name: P.Thandapani Roll Number: 5222530002

Subject –Retail and Distribution Management

Semester – 4. AS2.

1. What are the internal and external factors affecting pricing decisions?

Answer:

Pricing decisions are influenced by a range of internal and external factors. Here’s a breakdown of the key
elements in each category:

Internal Factors

1. Cost Structure:
- Fixed Costs: These are costs that do not change with the level of output (e.g., rent, salaries).
- Variable Costs: These costs vary directly with the level of production (e.g., raw materials, direct labor).
- Understanding the cost structure is crucial as it sets the minimum price level to ensure profitability.

2. Company Objectives:
- Profit Maximization: Setting prices to achieve the highest possible profit.
- Sales Volume: Prioritizing high sales volume over high profit margins.
- Market Share: Pricing competitively to increase or maintain market share.
- Survival: In tough economic times, pricing to cover costs and stay afloat.

3. Product Strategy:
- Product Lifecycle: Different stages (introduction, growth, maturity, decline) may require different pricing
strategies.
- Product Positioning: How the company wants the product to be perceived in the market (e.g., premium,
budget).

4. Brand Image:
- Brand Equity: Strong brand equity can allow for higher pricing due to perceived value.
- Brand Positioning: The market segment targeted and the associated pricing strategy.

5. Production Capacity:
- Economies of Scale: Larger production volumes can reduce costs per unit, allowing for competitive
pricing.
- Capacity Utilization: High utilization can spread fixed costs over more units, impacting pricing strategies.

6. Marketing Strategy:
- Promotional Strategies: Discounts, sales, and promotional offers can affect pricing.
- Distribution Channels: Different channels may have different cost structures and margin requirements.

External Factors
1. Market Demand:
- Elasticity of Demand: Price sensitivity of customers. Inelastic demand allows for higher prices, while
elastic demand may require competitive pricing.
- Customer Perceptions: Value perception and willingness to pay influence pricing.

2. Competition:
- Competitive Pricing: Prices set by competitors can dictate the pricing strategy.
- Market Structure: The nature of the competition (monopoly, oligopoly, perfect competition) affects pricing
decisions.

3. Economic Environment:
- Economic Conditions: Inflation, recession, and economic cycles impact purchasing power and pricing
strategies.
- Currency Fluctuations: For international products, exchange rates can affect pricing.

4. Regulatory Environment:
- Government Policies: Taxes, price controls, and regulations can influence pricing.
- Trade Restrictions: Tariffs and trade barriers can impact the cost of goods sold and, consequently,
pricing.

5. Technological Changes:
- Innovation: Technological advancements can reduce costs and affect pricing.
- Disruption: New technologies can disrupt existing markets and necessitate price adjustments.

6. Socio-Cultural Factors:
- Consumer Trends: Changes in consumer preferences and cultural trends can impact pricing strategies.
- Demographics: Age, income levels, and other demographic factors affect purchasing behaviour and
pricing.

Integrating Factors

1. Globalization: Expanding into international markets introduces factors like varying costs, competitive
landscapes, and regulatory environments.
2. Supply Chain: Efficiency and reliability of the supply chain can impact costs and pricing flexibility.
3. Environmental Factors: Sustainability practices and environmental regulations can affect production
costs and pricing.

By carefully analysing these internal and external factors, companies can develop pricing strategies that align
with their overall business objectives, market conditions, and competitive landscape.

2.What are four of the factors that influence the selection of the promotional mix?
Answer:
The promotional mix refers to the combination of promotional tools or elements that a company uses to
achieve its marketing communication objectives. Several factors influence the selection of the promotional
mix. Here are four key ones:

1. Target Audience Characteristics:

 - Understanding the demographics, psychographics, behaviors, and preferences of the target audience is
crucial. Different segments may respond better to certain types of promotions. For instance, younger
audiences might engage more with social media promotions, while older demographics may prefer traditional
advertising channels like television or print media.

2. Nature of the Product or Service:

- The type of product or service being promoted plays a significant role in determining the promotional mix.
For example:
- Complex or technical products may require detailed explanations and demonstrations, making personal
selling or educational content more effective.
- Fashion or lifestyle products may benefit from visual promotion through platforms like Instagram or
Pinterest.
- High-end luxury products may rely on exclusivity and personalization in promotional efforts.

3. Budgetary Constraints:
- The available budget directly influences the choice of promotional tools. Companies with larger budgets
might afford extensive advertising campaigns across multiple channels, while those with limited resources
may focus more on cost-effective strategies like social media marketing or public relations. Budget allocation
must balance between reach, frequency, and impact.

4. Competitive Environment:
- Analyzing the promotional strategies of competitors is essential. Understanding what promotional tactics
competitors are using, and their effectiveness, helps in crafting a differentiated and competitive promotional
mix. If competitors heavily rely on a specific channel or tactic, it may be necessary to either match or
counteract their efforts.

These factors, among others such as regulatory constraints, technological advancements, and company
objectives, shape the promotional mix decisions. It's essential to continually evaluate and adjust the
promotional mix to adapt to changing market dynamics and ensure it effectively reaches and engages the
target audience.

3.What is relationship marketing? Why is relationship marketing important to the success of an organisation
and its salespeople?
Answer:

Relationship marketing is a strategic approach that focuses on building and nurturing long-term relationships
with customers, rather than just focusing on one-time transactions. It emphasizes creating strong
connections, trust, and loyalty with customers through personalized interactions and on-going
communication. Relationship marketing recognizes that maintaining existing customers is often more cost-
effective than acquiring new ones and aims to foster loyalty and repeat business.

Relationship marketing is crucial to the success of an organization and its salespeople for several
reasons:

1. Customer Retention: Building strong relationships with customers leads to higher levels of satisfaction
and loyalty. Satisfied and loyal customers are more likely to continue doing business with the organization
over time, reducing customer churn and increasing customer lifetime value.

2. Increased Sales: Loyal customers are more likely to make repeat purchases and buy additional products
or services from the organization. They also tend to be less price-sensitive and more willing to pay premium
prices for quality and convenience, leading to higher sales revenues.
3. Word-of-Mouth Marketing: Satisfied customers are more likely to recommend the organization to friends,
family, and colleagues through positive word-of-mouth. Positive word-of-mouth marketing is highly influential
and can lead to new customer acquisitions at a lower cost compared to traditional advertising and marketing
efforts.

4. Reduced Marketing Costs: Acquiring new customers can be expensive, requiring investments in
advertising, promotions, and sales efforts. By focusing on building relationships with existing customers,
organizations can reduce their reliance on costly customer acquisition strategies and improve marketing
efficiency.

5. Feedback and Improvement: Building relationships with customers enables organizations to gather
valuable feedback and insights about their products, services, and overall customer experience. This
feedback can be used to identify areas for improvement, innovate new products or services, and enhance the
overall customer journey.

6. Competitive Advantage: Organizations that excel at relationship marketing can differentiate themselves
from competitors by providing superior customer service, personalized experiences, and tailored solutions.
This differentiation can lead to a competitive advantage in the marketplace and help the organization
maintain its market position.

For salespeople specifically, relationship marketing is important because it shifts the focus from transactional
selling to building trust and rapport with customers. Salespeople who prioritize relationship-building are better
positioned to understand their customers' needs, provide personalized recommendations, and ultimately
close more sales. Additionally, strong relationships with customers can lead to referrals, repeat business, and
increased sales commissions for salespeople.

4.What are the channel strategies? What are the factors kept in mind in selecting a channel of marketing?
Answer:

One of the important decisions of marketing involves the choice regarding which channel of distribution to opt
for. The following factors determine the choice of channels.

i) Product Type

The choice of channel of distribution is based on the type of the product that is produced. It is important to
check whether the product is perishable or non-perishable, whether it is an industrial or a consumer product,
whether its unit value is high or low and also, the degree of complexity of the product. For instance, if a good
is perishable then short channels should be used rather than the long ones. Similarly, if a product has a low
unit value then longer channel are preferred. In a similar manner, consumer products are distributed through
long channels while industrial products are distributed through short channels.

ii) Characteristics of the Company

The two important characteristics of a company that affect the choice of channel are its financial strength and
the degree of control that the company wishes to hold on the intermediaries. Shorter channels require greater
funds than longer channels and also offer greater control over the members of the channel (intermediaries).
Thus, companies that are financially strong or wish to command greater control over the channel of
distribution opt for shorter channels of distribution.

iii) Competitive Factors

The degree of competition and the channels opted by other competitors affect the choice of distribution
channel. Depending on its policies a company can adopt a similar channel as adopted by its competitors or
opt for a different channel. For example, if competitors of a company opt for sale through retail store, it may
also do the same or it can opt a different channel such as direct selling.

iv) Environmental Factors

Environmental factors such as economic constraints and legal policies play an important role in the choice of
channel of distribution. For example, requirement of complex legal formalities at each step of distribution
induces the companies to opt for shorter channels.

v) Market Factors

Various other factors such as size of the market, geographical concentration of buyers, quantity demanded,
etc. also affect the choice between the channels. For instance, if potential buyers are concentrated in a small
geographical area then, shorter channels are used. As against this, if the buyers are dispersed in a larger
area then longer channels of distribution may be used.
Channel strategies refer to the methods and approaches used by businesses to distribute and deliver their
products or services to customers. These strategies involve selecting the most effective channels of
marketing to reach target customers and achieve business objectives. Several factors are considered when
selecting a channel of marketing:

1. Customer Preferences:
- Understanding the preferences and behaviours of target customers is crucial. Different customer
segments may prefer to shop through various channels, such as online, in-store, or through direct sales
representatives.

2. Product Characteristics:
- The nature of the product or service being offered influences the choice of marketing channels. For
example:
- Complex or technical products may require direct sales channels with knowledgeable sales
representatives to provide detailed information and support.
- Fast-moving consumer goods (FMCGs) may be more suited to mass-market retail channels like
supermarkets or convenience stores.
- Digital products or services may be distributed primarily through online channels such as websites,
mobile apps, or digital marketplaces.

3. Market Reach and Coverage:

- Assessing the geographic scope and distribution requirements of the target market is essential.
Depending on whether the market is local, regional, national, or international, different channels may be more
effective in reaching and serving customers.

4. Channel Economics:
- Evaluating the cost structure and profitability of different channels is crucial. This includes considerations
such as:
- Channel margins and commissions
- Distribution costs (e.g., transportation, warehousing)
- Inventory carrying costs
- Marketing and promotional expenses associated with each channel

5. Competitive Environment:
- Analysing the distribution strategies of competitors provides insights into industry norms and best
practices. Understanding how competitors reach and serve their customers can help in identifying
opportunities for differentiation and competitive advantage.

6. Channel Partnerships and Relationships:

 - Collaborating with channel partners, such as wholesalers, distributors, or retailers, can extend the reach
of the business and improve market penetration. Factors to consider include:
- Partner capabilities and resources
- Compatibility with the brand and product positioning
- Terms of partnership agreements and contractual obligations

7. Technological Trends:
- Technological advancements impact how products and services are distributed and consumed. Keeping
abreast of emerging technologies and digital trends can open up new opportunities for channel expansion
and innovation.

8. Regulatory and Legal Considerations:

- Compliance with regulations and laws governing distribution channels is essential. This includes
considerations such as:
- Licensing and permits
- Product safety and labelling requirements
- Trade restrictions and export regulations

By carefully considering these factors, businesses can develop channel strategies that optimize reach,
efficiency, and profitability while effectively serving the needs of their target customers. Regular monitoring
and evaluation of channel performance are essential for adapting strategies to changing market conditions
and maintaining competitiveness.

5.What is the purpose of a franchise agreement?

Answer:

What Is a Franchise?
A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business
knowledge, processes, and trademarks, thus allowing the franchisee to sell a product or service under the
franchisor's business name. In exchange for acquiring a franchise, the franchisee usually pays the franchisor
an initial start-up fee and annual licensing fees.

 KEY TAKEAWAYS
 A franchise is a business whereby the owner licenses its operations—along with its products,
branding, and knowledge—in exchange for a franchise fee.
 The franchisor is the business that grants licenses to franchisees.
 The Franchise Rule requires franchisors to disclose key operating information to prospective
franchisees.
 On-going royalties paid to franchisors vary by industry and can range between 4.6% and 12.5%.

Understanding Franchises
When a business wants to increase its market share or geographical reach at a low cost, it may franchise its
product and brand name. A franchise is a joint venture between a franchisor and a franchisee. The franchisor
is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the
franchisor's goods or services under an existing business model and trademark.

Franchises are a popular way for entrepreneurs to start a business, especially when entering a highly
competitive industry such as fast food. One big advantage to purchasing a franchise is you have access to
an established company's brand name. You won't need to spend resources getting your name and product
out to customers.
A franchise agreement is a legal contract between a franchisor (the owner of a brand or business concept)
and a franchisee (an independent business owner who operates under the franchisor's brand and business
model). The purpose of a franchise agreement is to establish the rights, responsibilities, and obligations of
both parties involved in the franchising relationship. Here are some key purposes of a franchise agreement:

1. Define the Franchise Relationship: The agreement outlines the terms and conditions under which the
franchisee is granted the right to use the franchisor's trademarks, trade secrets, business methods, and other
intellectual property. It clarifies the relationship between the franchisor and franchisee, establishing the legal
framework for their business partnership.

2. Specify Franchisee Rights and Obligations: The agreement details the rights and obligations of the
franchisee, including operational requirements, quality standards, marketing obligations, and financial
commitments. It outlines the scope of the franchisee's authority to operate the business and sets
expectations for compliance with brand standards and business practices.

3. Preserve Brand Integrity: The franchise agreement includes provisions to maintain brand consistency
and protect the franchisor's intellectual property. This may include requirements related to branding, signage,
uniforms, product quality, customer service standards, and other aspects of the franchise operation that
contribute to the brand's reputation and identity.

4. Establish Fees and Royalties: The agreement specifies the financial terms of the franchise arrangement,
including initial franchise fees, on-going royalties, advertising contributions, and other fees payable to the
franchisor. It outlines the payment schedule, calculation methods, and any conditions or incentives related to
fee structures.

5. Provide Legal Protection: The franchise agreement serves as a legal document that protects the
interests of both parties and mitigates risks associated with the franchise relationship. It includes provisions
related to dispute resolution, termination rights, non-compete clauses, confidentiality obligations, and other
legal matters relevant to the franchising arrangement.

6. Set Operational Standards: The agreement establishes operational standards and procedures that
govern the day-to-day management of the franchise business. This may include guidelines for inventory
management, purchasing practices, employee training, marketing activities, and other operational aspects
necessary to maintain consistency across franchise locations.

7. Facilitate Expansion and Growth: For franchisors, the agreement provides a framework for expanding
their business through franchising while maintaining control over brand standards and business operations. It
enables franchisors to replicate their successful business model through independent franchisees and grow
their presence in new markets more efficiently.

Overall, the franchise agreement serves as a cornerstone of the franchising relationship, providing clarity,
structure, and legal protection for both franchisors and franchisees as they collaborate to build and grow a
successful franchise business.