SALES AND MARKETING

INTRODUCTION
Marketing is everywhere and it affects our day- to-day life in every possible manner. Formally or
informally people and organizations engage in a vast number of activities that could be called as marketing.
Good marketing is no accident, but a result of careful planning and execution. It is both an art and science.
Let’s discuss various concepts and issues in marketing.
1.1 DEFINITION
Marketing management is the art and science of choosing target markets and getting, keeping and growing
customers through creating, delivering and communicating superior customer value.
In short Marketing is “Meeting needs profitably”. Marketing has been defined by different authors in
different ways which can be broadly classified into three
Product Oriented Definition
The emphasis is given on products.
In1985 AMA redefined marketing as “Marketing is the process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual
and organizational goals.”
Customer- Oriented Definition
Here the emphasis is on customers and their satisfaction.
In the words of Philip Kotler “Marketing is the human activity directed at satisfying needs and wants
through an exchange process.”
Value Oriented Definition (Modern Definition)
In 2004 the American Marketing Association defined “Marketing is an organizational function and a set of
processes for creating, communicating and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders.”
1.2 SCOPE OF MARKETING
The scope of marketing can be understood by discussing what is marketing, how it works, what is
marketed and who doesthe marketing.
Peter Drucker, a leading management theorist, puts it this way, there will always, one can assume, be need
for some selling .But the aim of marketing is to make selling superfluous. The aim of marketing is to know
and understand the customer so well that the product or services fits him and sells itself. Ideally marketing
should result in a customer who is ready to buy. All that should be needed then is to make theproduct or
service available.
MARKETING CONCEPTS
Marketing people market 10 types of entities; let’s take a quick look at these;
GOODS physical goods constitute the bulk of most countries production and marketing efforts
SERVICES services include the work of airlines, hotels, cars rental firms, barber and beauticians,
maintenance and repair people, and accountants, bankers, lawyers ,engineers doctors, software
programmers, and management consultants.
EVENTS marketers promote time-based events, such as major trade shows, artistic performances, and
company anniversaries. Global sporting events such as the Olympics and the World cup are promoted
aggressively to both companies and fans.
EXPERIENCES by orchestrating several services and goods, a firm can create, stage and market
experiences. Veega land, Black Thunder etc represents this kind of experiential marketing.
PERSONS celebrity marketing is a major business, Artists, Musicians, CEOs, physicians, high- profile
lawyers and financiers, and other professionals all get help from celebrity marketers.
PLACES cities, states, regions, and whole nations compete actively to attract tourists, factories, company
headquarters, and new residents. Place marketers include economic development specialists, real estate
agents, commercial banks, local business associations, and advertising and public relations agencies.
PROPERTIES properties are intangible rights of ownership of either real property (real estate) or
financial property (stocks and bonds). Properties are bought and sold, and these exchanges require
marketing.
ORGANIZATIONS organizations actively work to build a strong, favorable, and unique image in the
minds of their target publics.
INFORMATION information is essentially what books, schools, and universities produce, market, and
distribute at a price to parents, students, and communities.
IDEAS Every market offering includes a basic idea. Social marketers are busy promoting such ideas as
“Friends Don’t Let Friends Drive Drunk” and “A Mind Is a Terrible Thing to Waste.”
Who markets?
MARKETERS AND PROSPECTS
A marketer is someone who seeks a response- attention, a purchase, a vote, a donation – from another
party, called the prospect. If two parties are seeking to sell something to each other, we call them both
marketers.
1.3 IMPORTANCE OF MARKETING
Marketing is important not only for organizations but for individuals, society and economy as a whole.
Financial success often depends on marketing ability. Finance, operations, and other business functions
will not really matter if there isn’t sufficient demand for products and services so the company can make a
profit. There must be top line for there to be a bottom line. Many companies have now created a Chief
Marketing Officer, or CMO, position to put marketing on a equal footing with other C-level executives,
such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Also marketing steps its
foot in every walk of life. Some of its importance can be discussed as follows.
IMPORTANCE OF MARKETING TO COMPANIES
Sound marketing is critical to the success of the organisation in the following ways:
Helps in income generation.
Helps in planning and decision-making.
Helps in distribution.
Helps in exchanging information.
Helps to adapt to changing environment.
Expands global presence.
Helps to earn goodwill.
IMPORTANCE OFMARKETING TO CONSUMERS
Provides quality products.
Provides variety of products.
Improves knowledge of consumers.
Helps in selection.
Consumer satisfaction.
IMPORTANCE OFMARKETING TO SOCIETY
Marketing bridges the gap between firm and society.
Provides employment.
Raises standard of living.
Creates utilities.
Reduces costs.
Solves social problems.
Makes life easier.
Enriches society.
IMPORTANCE OF MARKETING TO ECONOMY
It stimulates research and innovation
Saves the economy from depression.
Increase in national income.
Economic growth.
Ploughing back of resources
1.4 EVOLUTION OF MARKETING CONCEPT
Marketing concept has undergone a drastic change over years. Earlier it was production or later selling
which was key to marketing idea but moving ahead now these have given way to customer satisfaction
rather delight developing a modern marketing concept. Let’s review the evolution of earlier marketing
ideas;
THE PRODUCTION CONCEPT
It is one of the oldest concepts in business. It holds that consumers will prefer products that are widely
available and inexpensive. Managers of production- oriented business concentrate on achieving high
production efficiency, low costs, and mass distribution.
THE PRODUCT CONCEPT
It proposes that consumers favor products that offer the most quality, performance, or innovative features.
Managers in these organizations focus on making superior products and improving them overtime.
THE SELLING CONCEPT
It holds that consumers and businesses, if left alone, won’t buy enough of the organization’s product. The
organization must therefore undertake an aggressive selling and promotion effort.
THEMARKETING CONCEPT
It emerged in mid-1950s, instead of a product- centered, make- and –sell philosophy, business shifted to a
customer- centered, sense-and-respond philosophy.
The marketing concept holds that the key to achieving organizational goals is being effective than
competitors in creating, delivering, and communicating superior customer value to your chosen target
markets.
Theodore Levitt of Harward drew a perceptive contrast between the selling and marketing concepts. Selling
focuses on the needs of the seller, marketing on the needs of the buyer. Selling is preoccupied with the
seller’s need to convert his product into cash, marketing with the idea of satisfying the needs of the
customer by means of the product and the whole cluster of things associated with creating , delivering, and
finally consuming it.
Several scholars have found that companies that embrace the marketing concept achieve superior
performance. This was first demonstrated by companies practicing a reactive market
orientationunderstanding and meeting customers’ expressed needs.

HOLISTICMARKETING CONCEPT
The trends and forces defining the 21st century are leading business firms to a new set of beliefs and
practices. Today’s best marketers recognize the need to have a more complete, cohesive approach that goes
beyond traditional applications of the marketing concept.
This concept is based on the development, design, and implementation of marketing programs, processes
and activities that recognizes their breadth and interdependencies. Holistic marketing recognizes that
“everything matters” in marketing- and that a broad, integrated perspective is often necessary. Holistic
marketing is thus an approach that attempts to recognize and reconcile the scope and complexities of
marketing activities.
1.5 MARKETING MIX
In the words of Philip Kotler, “Marketing Mix is the set of controllable variables and their levels that the
firm uses to influence the target market.” Marketing mix is a combination of various elements, namely,
Product, Price, Place (replaced by Physical Distribution) and Promotion.

Fig: 1.5 Components of Marketing Mix

The various important elements of marketing mix are briefly discussed as follows;
PRODUCT: It is the thing possessing utility. It is the bundle of value the marketer offers to potential
customers. Today manufacturers are realizing that customer expects more than just the basic product.
Therefore the product must satisfy the consumers needs. The manufacturer first understands the consumer
needs and then decides the type, shape, design ,brand, package etc. of the goods to be produced. The
product is a marketer’s primary vehicle for delivering customer satisfaction.
PRICE: it is the amount of money asked in exchange for product. It must be reasonable so as to enable the
consumer to pay for the product. While fixing the price of a product, the management considers certain
factors such as cost, ability of the consumers, competition, discount, allowances, margin of profit etc.
PLACE (PHYSICAL DISTRIBUTION): It is the delivery of products at the right time and at the right place. It
is the combination of decision regarding channel of distribution (wholesalers, retailers etc. ), transportation,
warehousing and inventory control.
PROMOTION: It consist of all activities aimed at inducing and motivating customers to buy the product.
The selection of alternatives determine the success of marketing efforts. Some firms use advertising, some
others personal selling or sales promotion. Thus promotion includes advertising public relations, personal
selling and sales promotion.
Recently Packaging and People are two more elements of marketing mix that have been emerged. These
are discussed as follows.
PACKAGING: Packaging is the art, science and technology of preparing goods for transport, sale and
exchange. A well designed pack is invaluable in building brand loyalty with the customer. Packaging must
be such that a customer is impressed at the very moment he or she sees the product.
PEOPLE :It consists mainly of the people to whom goods are sold(consumer) and the people through whom
goods are sold(sales people, wholesalers, retailers etc.) people include competitors also. This factor will be
the reoson as well as resources for success in marketing.
1.6 MARKETING ENVIRONMENT
It includes all those factors which are external to a firm and which affect the Marketing process.
According to Philips Kotler, Marketing environment is constantly spinning out new opportunities and new
threats, and the firms find their marketing collapse. Therefore, the company’s Marketing executives must
constantly monitor the changing Marketing scene and observe the changing environment through
Marketing research. The Marketing Environment includes non- controllable variables that effects the
company’s ability to serve its markets.
CONTROLLABLE FACTORS
The controllable factors are well within the grip of the firm and easy to adjust them to suit the changes.
These consist of Marketing policies and Marketing strategies. Framing of marketing policies is the
responsibility of top management and marketing strategies are developed by middle level management.
The selection of target marketing, Marketing objectives and Marketing control are the other controllable
factors which also helps in framing Marketing strategies.
UNCONROLLABLE FACTORS
Controllable variables will have to be filtered through various uncontrollable environmental factors before
they reach to the customers. The uncontrollable environmental consist of two levels i.e., micro environment
and macro environment.
MICRO - ENVIRONMENT VARIABLES
It consists of elements or forces that influence marketing directly. It includes Supplier, Marketing
Intermediaries, Costumers, Competitiors and the General Public.

Fig : Micro- Environment Variables

SUPPLIER One who supply the resources to a company. Any shortage of Supply affect the Marketing
function and thus, should avoid dependence on any single supplier.
MARKETING INTERMEDIATES They are the middlemen who create place Utility, Time utility and
Quantity utility. These includes Physical Distribution Firms, Transport Companies, Marketing Consulting
Firms, Marketing Services Agencies and Assist the company in promoting the right products to the right
markets.
CUSTOMERS It refers to consumer markets, industrial markets, reseller markets, international markets
and govt. markets having its own characteristics.
PUBLIC The marketing decisions considerably influenced by public relations, govt. policies, the press, the
legislatures and the general public.
MACRO- ENVIRONMENT VARIABLES
Macro-environment consist of forces affecting the entire society or economy at large. Macroenvironment
influences entire industry as a whole.The various variables of Macro environment are as follows:
  Demographic environment.
 Social-Cultural environment.
 Economic environment.
 Ethical environment.
 Political environment.
 Physical environment.
 Technological environment.

DEMOGRAPHIC ENVIRONMENT
It includes factors such as population growth, change in age-group, marriages, family sizes, movement of
people from big cities to rural or sub urban areas, literacy etc. It is essential for the market to understand
the demographic forces in a country which helps him frame optimal marketing-mix.
SOCIO-CULTURAL ENVIRONMENT
Sociological Factors Consumers being social animal and their life style is deeply influenced by the
social set up. It is found to have deep influence on consumer taste, temperament, life and living. The needs,
desires, hopes and aspirations of the consumers are necessary to be understood.
Psychological The study about the behaviour, attitude, temperament, mentality and personality is must
and how there wants and needs can be best satisfied?
Anthropological these factors are vital in noting the national and regional characters, cultures and sub
cultures and the pattern of living.

ECONOMIC ENVIRONMENT
It comprises of economic system of the country, affects the demand structure of any industry/ product.
Changes in economic conditions provides marketers with new challenges and threats. Various economic
factors which directly affect the Marketing strategies are discussed below.
Role of Govt: Marketing in greatly influenced by the role of govt. through fiscal policies, industrial
regulations, economic controls, import-export policies etc. Monetary and Non-Monetary policies of the
Govt. also determine the tempo of economic development.
Consumers: Consumer welfare and interest should be taken into consideration while
preparingmarketing programme. The marketer is to make available quality products at reasonable prices, in
sufficient qualities, at required time interval.
Competition: Healthy competition is always in the interest of customers whereas unhealthy
competition is harmful and leads toward increasing cost and waste.
Price: It is determinant of the fate of any business. If the Price is too high, reduces the consumer and
consumption and if too low, the producers and marketers are left in the lurch.
ETHICAL ENVIRONMENT
In the race of earning more and more profits, business people disintegrate the ethical values from the
business. This leads to adulteration, limitation etc. resulting in socio-economic pollution of minds and
relations.
POLITICAL/ LEGALENVIRONMENT
The legal environment for marketing decision is characterized by various laws passed by Central or State
Govt. and even by local administration. Govt. agencies, political parties, pressure groups and laws create
tremendous pressure and constraints for marketer. Marketing managers required full knowledge and
understanding of political philosophy and ideologies of major political groups and legal environment for
framing marketing strategies and growth of business.
PHYSICAL ENVIRONMENT
It refers to the physical distribution of goods and services. It needs the in depth study of cost and
convenience involved in the process of physical distribution of products from producer to consumer end.
TECHNOLOGICALENVIRONMENT
It helps to shape changes in living style of the consumers. It has the responsibility of relating changing life-
style patterns, values and changing technology to market opportunities for profitable sales to particular
market segment.

CONSUMER BEHAVIOUR

More than a century ago, the father of our nation, Mahatma Gandhi had made a visionary and deep
meaningful statement at Johannesburg, South Africa at 1890 – “A customer is the most important visitor on
our premises. He is not dependent on us. We are dependent on him. He is not an interruption on our work.
He is the purpose of it and not an outsider on our premises. He is the part of it. We are not doing a favour
by serving him. He is doing us a favour by giving us the opportunity to do so”.
Though this statement was not made in the marketing concept, there is a lot of wisdom and insight into
Mahatma’s words.
Today all the firms are engaged in the process of creating a life time value and relationship with their
customers. This chapter deals with studying consumer behavior as a related field of marketing.
2.1 BUYER, CUSTOMER AND CONSUMER

CONSUMER BEHAVIOUR
Behaviour is the interaction with the ambient surrounding environment, inherent in living creatures and
mediated by their external and inner activeness. Thus consumer behaviour is actions of consumers in the
market place and the underlying motives for those actions. Marketers expect that by understanding what
causes consumers to buy particular goods and services, they will be able to determine which products are
needed in the market place, which are obsolete and how best to present those goods to the consumer.
The study of consumer behaviour is the study of how individuals make decisions to spend their available
resources (time, money, effort ) on consumption related items.
In the words of Walters and Paul “ consumer behaviour is the process whereby individuals decide what,
when, where, how and from whom to purchase goods and services
NEED OR IMPORTANCE OF STUDY OF CONSUMER BEHAVIOUR
The modern marketing management tries to solve the basic problems of consumers in the area of
consumption. To survive in the market, a firm has to be constantly innovating and understand the latest
consumer needs and tastes. It will be extremely useful in exploiting marketing opportunities and in meeting
the challenges that the Indian market offers. It is important for the marketers to understand the buyer
behaviour due to the following reasons.
The study of consumer behaviour for any product is of vital importance to marketers in shaping the
fortunes of their organisations.
It is significant for regulating consumption of goods and thereby maintaining economic stability.
It is useful in developing ways for the more efficient utilisation of resources of marketing. It also helps
in solving marketing management problems in more effective manner.
Today consumers give more importance on environment friendly products. They are concerned about
health, hygiene and fitness. They prefer natural products. Hence detailed study on upcoming groups of
consumers is essential for any firm.
The growth of consumer protection movement has created an urgent need to understand how
consumers make their consumption and buying decision.
Consumers tastes and preferences are ever changing. Study of consumer behaviour gives information
regarding colour, design, size etc. which consumers want. In short, consumer behaviour helps in
formulating of production policy.
For effective market segmentation and target marketing, it is essential to have an understanding of
consumers and their behaviour.
2.4 TYPES OF CONSUMER BEHAVIOUR
There are four types of consumer behaviour. They are;
Complex Buying Behaviour: Consumers goes through complex buying behaviour when they are highly
involved in a purchase and aware of significant differences among brands. Consumers are highly involved
when the product is expensive, bought infrequently, risky and self-expensive. Here consumers go through a
rational/logical thinking process to collect as much information as possible about the available brands.
Behaviour exhibited while purchasing a car is an example of complex buying behaviour.
Dissonance Reduction Buying Behaviour: Sometimes consumers are highly involved in purchases but
see little difference in the brands. After the purchase they feel that the product does not perform to their
expectations. They may thing about alternative brand which has forgone in the brand selection process.
As a result, they feel some discomfort. This mental condition is known as Cognitive Dissonance.
Variety Seeking Buying Behaviour: Here consumers have a lot more brand options to choose. At the
same time there are significant brand differences. Unit price of product is low. Consumer involvement is
also low. But consumer show brand switching behaviour. They go on changing from one brand to another.
They like experiments for the sake of variety satisfaction. They exhibit variety seeking behavior in case of
products like soap, detergents, toothpaste etc.
Habitual Buying Behaviour : In this situation consumers buy their products on regular basis. Brand
switching behaviour is quite common here. Variations among brands are significant. Products are usually
low priced. Gathering product knowledge is not so important. Consumers show habitual buying behavior in
case of products like salt, matches etc

BUYING MOTIVES
It is the buying motives which induce a consumer to buy a particular product. A lady may buy a sari for
physical protection or for wearing something to look beautiful or as a status symbol. Thus buying motive is
a strong feeling, instinct, desire or emotion that make the buyer to buy a product. According to
D J DUNCAN, “ buying motives are those influences or considerations which provide the impulse to buy,
induce action or determine choice in the purchase of goods and services.” In short, a buying motive is the
reasons why buyers buy.
TYPES OF BUYING MOTIVES
Buying motives are of four types.
Emotional and Rational motives.
Product and Patronage motives.
Inherent and Learned motives.
Psychological and Social buying motives.

EMOTIONAL AND RATIONAL MOTIVES

EMOTIONAL MOTIVES
When a consumer decides to buy without much logical thinking, his decision is said to be emotional.
Emotional buying motives are the motives which are affected by the feeling of heart. The emotional
motives are of the following types.
Sex or Romance Motive: Fancy clothes, cosmetics, perfumes etc. are in great demand on account of
the instinct of sex or a desire to attract the opposite sex. Men dress in their best to appeal to women; and
women put attractive jewellery, fancy clothes, hairdos, pleasing perfumes and make-up in a modern style to
appeal to men. Some examples of appeals made are: “ Every woman has a right to look younger than she
is”
“It gives your face a sex appeal”
Love of Others( Affection Motives):This motives plays a important part when parents purchase all
kinds of things for their children like toy, fancy garments, and other presents and take insurance policies to
make provision for their future. Examples of its appeals are: “ Because you love them; protect them”
“Wise mothers give their family a nourishing breakfast”
Social Acceptance Motive: Every individual wants to have respect and acceptance from the group to
which he belongs. Taking advantage of this motive the marketers use appeals such as: “ Your neighbours
shops here- you should too” “ It makes you nice to be near all days”
Vanity Motive: People like to feel important in the society, among friends, in association and clubs, to
achieve status symbols. Hence ladies purchase costly costumes, jewellery or join expensive clubs, have
expensive home decoration object. Men purchases television, costly furniture, air conditioners, scooters,
cars, perfumes and other variety goods. Appeals are made as the following:
“ Be the first to own one”
“Designed exclusively with you in mind.”
Recreation and Relaxation Motive: People purchase sports and games materials, indoor game,
horse racing, tickets for cinema, record players, magazines etc. examples of appeals are:
“Quiet heaven for you to spend your holidays- come and stay at Ashoka.”
Curiosity Motive: Adolescent boys and girls and even adults are curious about certain things such
as old paintings, old coins, blue films, cabaret dancers etc. Examples of appeals are:
“For Adults only”
“Something new has been added- come and see”
Emulate Motive: Some people are motivated to buy what is reported to be used by great people
whose opinions matter. For Example; Sachin Tendulkar says, “ Boost is the secret of my energy.”
Comfort and Convenience Motive: Most people like to do everything in an easy way and in comfort.
Hence this motive may be well exploited by the marketers particularly for selling luxury items like washing
machine, vaccum cleaners, pressure cookers, electric irons, air conditioners, electric oven etc.
RATIONAL MOTIVES
When a buyer decides to buy after careful consideration or logical thinking, his decision is said to be
rational. Thus rational buying motives are motives where a consumer takes the decision of purchasing a
product by his head and mind. In making rational purchases, the consumer considers price, durability,
dependability, efficiency, convenience etc. Rational motives are of the following types:
Monetary Gain: Almost all buyers would like to get monetary benefits or to purchase better products
at a comparatively low cost. Some Examples of appeals made are: “ Shop at ours, get the choicest product
at the cheapest price”. “ A bumper sale at 20% discount.”
Efficiency in Operation and Use: Most buyers buy products which function efficiently and
effectively. For example, knife sharpeners, razors, grinders in the kitchen and in offices etc.
Examples of appeals made are:
“ Fabrics that never needs ironing”.
“ Push button control”.
Dependability Motive: It compels an individual to buy to satisfy his desire to obtain quality
goods of reliable and durable nature. Example of appeals made are:
“ A life partner”.
“ It is most dependable for health”.
PRODUCT AND PATRONAGE MOTIVES
PRODUCT MOTIVES:
It refers to those influences and reasons which make the consumer buy a certain product in preference to
another. Product motives are of two types:
Primary Product Motives: These motive induce a consumer to purchase general class of the product.
These motive relate to the basic needs of people like hunger, thirst, sleep etc.
Selective Product Motives: These motives determine particular brand or item will purchased from the
general class.
Suppose a professor wants to purchase a scooter but his wife decides to have a refrigerator. They may
decide to purchase a scooter. The decision to purchase a scooter is primary product motive. Once a decision
to purchase a scooter is made additional decision must be made regarding the brand, colour and model of
the scooter to be purchased. The factor which influences the decision to buy a particular scooter (eg. Bajaj)
from among various brands or models is known as Selective Product Motive.
PATRONAGE MOTIVE:
These are those motives which determine where or from whom products are purchased. These are the
considerations which induce a buyer to buy goods from specific shops. Following are the key patronage
motives:
Price: As income is limited, an individual would like to purchase cheap products or at discount.
Hence following price appeals attract him:
“ price slashed by 30%”.
“ old price Rs 350. Today’s price Rs.190 only”.
Location: Nearest to one’s residence may induce people to buy from a particular store which may say:
“ Location in the heart of the city, accessible from all sides”.
Quality: It appeals some customers to buy standard quality goods, even if costly, The usual
appeals are.
“ We guarantee price back, if quality is found inferior”.
“We guarantee every product we sell”.
Variety: Some people may buy products from a particular shop because of variety of goods available
there. Hence following appeal attracts buyers.
“We have the largest selection in town”.
Services: Services like home delivery, credit, goods gift, free services etc. may induce people to buy
products. Examples of appeals are:
“ Free home delivery within the town”
“We service what we sell”
Personality of the Owner or Salesmen: Even the personality of the owner or salesmen may induce
some people to buy goods from particular store.

INHERENT AND LEARNED MOTIVES

INHERENT MOTIVE:
These are those which come from the physiological or basic needs such as hunger, thirst, sleep, sex etc.
these are the motives for the satisfaction of which a consumer makes his best efforts and if these motives
are not satisfied he feels mental tension.
LEARNED MOTIVES:
Learned motives are those which are acquired or learned by a consumer from the environment and
education. These motives are social status, social acceptance, fear, security etc. while satisfying learned
motives, the consumer does not consider even the price of the product.
PSYCHOLOGICAL AND SOCIAL BUYING MOTIVES
PSYCHOLOGICAL BUYING MOTIVE:
These are those which are driven by internal psychological processes like learning, perception and attitude.
SOCIAL MOTIVE:
Man is a social being. He cannot live away from the influence of the society. His consumption motives are
shaped by his interactions with members of hi family and society. Thus social motives are those motives
which are influenced by the society in which consumers live.
CONSUMER BUYING PROCESS (CONSUMER DECISION MAKING PROCESS)
Buying is a mental process. A decision to buy a product is taken after passing through different stages.
According to Robinson, Faris and Wind ( in 1967) the buying decision process involve the following five
stages.
RECOGNITION OF AN UNSATISFIED NEED:
All buying decisions start with need recognition. When a need is not satisfied it creates tension.
This tension drives people to satisfy that need. Then need becomes motive. Thus motives arise from needs
and wants. The force that converts needs into motives is called motivation.
IDENTIFICATION OF ALTERNATIVES:
After recognizing a need or want consumers search for information about the various alternatives available
to satisfy it. If the need is usual, such as hunger, thirst etc. the consumer may rely on past experience of
what satisfies this need. If needs are unusual or unfamiliar, consumer may seek additional information from
friends, family, media, sales people etc. it is only through this information search that we can identify the
means of satisfying our need.
EVALUATION OF ALTERNATIVES:
By collecting information during the second stage, an individual comes to know about the brands and their
features. Now he compares the alternative products or brands in terms of their attributes such as price,
quality, durability etc. during the evaluation stage he may consider the opinion of others such as wife,
relatives and friends. Then he selects the brand that will give him the maximum utility (or that he thinks the
best)

PURCHASE DECISION:
Finally the consumer arrives at a purchase decision. Purchase decision can be one of the three, namely no
buying, buying later and buying now. If he has decided to buy now, he will decide the shop (dealer) to buy
it from, when to buy it, how much money to spend etc. After deciding these, he will go to the shop chosen
and buy the product of the brand chosen.
POST PURCHASE BEHAVIOUR:
It refers to the behaviour of a consumer after purchasing a product. After the consumer has actually
purchased the product/brand he will be satisfied or dissatisfied with it. If he is satisfied with the product he
would regularly buy the brand and develop a loyalty. He recommends the brand to his friends and relatives.
The negative feeling which arises after purchase causing inner tension is known as Cognitive Dissonance
(or Post Purchase Dissonance). The post purchase dissonance is also called Buyer’s Remorse.
FACTORS INFLUENCING CONSUMER BEHAVIOUR/ BUYING DECISIONS
(DETERMINANTS OF CONSUMER BEHAVIOUR)
All factors which determine the buying or consumer behaviour are broadly classified into six.
Psychological factors, Social factors, Cultural factors, Personal factors, Economic factors and
Environmental factors.
Psychological Factors
The following are the important psychological factors:
1) Consumer Needs and Motivation: All buying decisions start with need recognition. People always
seek to satisfy their needs. When need is not satisfied it drives people to satisfy that need. Then the need
becomes a motive. Thus motive arises from needs and wants. The force that converts needs into motives is
called motivation.
2) Perception: It is the process of selecting, organizing and interpreting information in order to give
meaning to the world or environment we live in. the way the consumers display selective attention,
distortion or retention motivates marketers to design the product, package, promotional themes etc. The
marketers should understand the consumer perception and convert perception into a buying response.
3) Learning: Learning is the process of acquiring knowledge. Generally, learning results in four ways-
Listening, Reading, Observing and experiencing. The importance of learning theory for marketers is that
they can create demand for a product by associating it with strong drives, using motivating cues and
providing positive reinforcement.
4) Belief and Attitude: A belief is a descriptive thought that a person holds about something. Such
thoughts are based on learning, opinion or faith. For example, A consumer believes that Maruti cars are
less costly and fuel efficient. Attitude means a person’s feelings towards a particular object or situation.
Social Factors
The major social factors are as follows
1) Reference Group: consumer behaviour is influenced by various groups within society known as
reference groups. We have several reference groups with whom an individual associate such as
friends, relatives, classmates, club memberships etc. In each groups there is an opinion leader
whose style is adopted by others. Marketers often identify such opinion leaders and develop
advertisement featuring them as endorsers.
2) Role and Status: A person takes up many roles in different situations in his /her life. He can be
son, father, husband, employee etc. Each role has a status. A person’s role and status influence his
general as well as buying behaviour.
3) Family: Family is one of the important factors influencing buying behaviour.

Cultural Factors
Culture determines and regulates our general behaviour. The major cultural factors are as follows:
1) Culture: Culture simply refers to values and beliefs in which one is born and brought up. It is a set of
Ideas, Customs, Values, Art and Belief that are produced or shaped by a society and passed on from
generation to generation. Culture influence what we eat and wear, how we relax and where we live etc.
2) Sub-Culture: It is based on religion, language, geographic region, nationality, age etc. It is a segment
within a large culture that shares a set of beliefs, values or activities that differ in certain respects from
those of the main or overall culture. The food habits are different in different parts of India.
3) Social Class: A social class is a group of people with similar values, interest and behaviour within a
society. Consumers buying behaviour is determined by the social class to which they belong rather than by
their income alone. The social class is based on income, education, occupation, family history, wealth,
lifestyle, area of residence etc.
Personal Factors
Personal factors are unique to a particular person. These factors include demographic factors and are as
follows.
1) Age: Need and wants are determined by age. So buying changes with age, Taste for food, clothing and
recreation etc. changes with age.
2) Stages in the Life Cycle: People buy different goods during different life cycle stages. Life cycle of an
individual refers to the different phases of his or her life.
3) Occupation and Economic Status: Occupation influences product choice, brands beliefs etc. It
determines income, buying power and status.
4) Life Style: It indicates how people live, how they spend their time, how and what they choose and
where they shop. It is the way people eat, drink, spend leisure time, work and so on.
5) Personality: Personality refers to the unique psychological characteristics of an individual.
Personality of consumers influences brand preference and choice of products.
6) Self-Image: Self image implies what one thinks of himself/herself .It is the way one sees himself/herself
or wishes to see himself/herself or wants to be seen by others. Self-concept is an important factor to
marketers in planning advertising campaign.
Economic Factors
The various economic factors which determine consumer behaviour are as follows:
1) Personal Income: Gross income of a person is composed of disposable and discretionary income.
When disposable income rises, the expenditure on various items will increase and vice versa.
2) Family Income: It is the aggregate income of all members of a family. The family income
remaining after the expenditure on the basic needs of the family is made available for buying goods,
durables and luxuries
3) Income Expectations: If a person expects any increase in his income he will buy durables on hire
purchase etc, if his future income is likely to decline he will restrict his expenditure to bare necessities.
4) Savings: When a person decides to save more, he will spend less on comfort and luxuries.
5) Liquidity Position: If an individual has more liquid assets, he goes in for buying comfort and luxuries.
6) Consumer Credit: If Consumer Credit is available on liberal terms, expenditure on comfort and
luxuries will increase.
Environmental Factors
The various environmental factors which determine consumer behaviour are as follows:
1) Political Situation: In state monopolies, consumers have to be satisfied with a limited range of
products, but in market oriented economy like that of USA, consumers have wider choice.
2) Legal Forces: Consumers make purchases within the legal framework. All purchase dealings are carried
on within legal limits.
3) Technological Advancements: Technological advancements bring wide range of changes in products/
services and makes consumers go in for latest products.
4) Ethical Considerations: Buying behaviour is influenced by the sense of social morality and ethical
considerations.

MARKET SEGMENTION AND TARGET MARKET

MARKET SEGMENTATION –INTRODUCTION
Market consists of buyers, and buyers differ in one or more respects. Buyer’s behaivour is a complex
phenomenon. An understanding of the economic, psychological and socio-cultural characteristics of the
consumers and their motivations. Attitudes, cognitions.personalities and perceptions can help to discover
new market opportunities, clear and specific market segmentation. All markets are made up of segments
and these segments are made up of sub-segments.
MEANING AND DEFINITION
Segmentation is a consumer oriented marketing strategy. It is a process of dividing the market on the basis
of interest, need and motive of the consumer. Market segmentation simply means dividing market or
grouping of consumers. It refers to grouping of consumers according to such characteristics as income, age,
race, education, sex, geographic location etc.Therefore market segmentation is the strategy that subdivides
the target market into sub-groups of consumers with distinct and homogenous characteristics with a view to
develop and follow a distinct and differentiated marketing programmes for each sub-group in order to
enhance satisfaction to consumers and profit to the marketer.
According to Philip Kotler, “ Market segmentation is the sub-dividing of a market into homogenous sub-
sects of consumers where any sub-sects may conceivably be selected as a market target to be reached, With
a distinct marketing mix.”
CHARACTERISTICS OR CRITERIA OF EFFECTIVE SEGMENTATION
The main criteria’s of effective segmentation are
Measurability
Substantiality
Accessibility
Differentiability
Auctionable
Nature of Demand
General considerations
The main purpose of market segmentation is to measure the changing behaviour patterns of consumers.
The size, profile, and other relevant characteristics of the segment must be measurable and obtainable in
terms of data. Therefore, segments should be capable of giving accurate measurements.
Substantiality refers to the size of the segmented market. Segments must be large enough to be profitable.
For small segment, it may not be possible for the marketer to develop separate marketing mix for such non
profitable segments.
The segment must be accessible, which means marketers must be able to reach the market segments at
lower costs. Segments must be reachable by company’s sales persons, distributors advertising media etc.
The segment should be large enough to be considered as a separate market. Such segments must have
individuality of their own so that it leads to different segments.
The segments which the company wishes to pursue must be auctionable in the sense that there should be
sufficient finance, personnel and capability to take them all. Hence, depending upon the reach of the
company, the segments should be selected.
Segmentation is required only if there are marked differences in the nature of demand. Nature of demand
refers to the different quantities demanded by various segments. Each segmented market must exhibit
difference in consumption rates from another segment.
Apart from the above characteristics, the segment must have growth potential, be profitable, carries no
unusual risks and has competitors who do not fight directly with the product or brand.
NEED AND IMPORTANCE OF MARKET SEGMENTATION
According to Sheth, “Market segmentation is the essence of modern marketing.” It is advantageous to
firms as well as consumers.
A. ADVANTAGES TO FIRMS
Increases sale volume.
Helps to win competition.
Enables to take decisions.
Helps to prepare effective marketing plan.
Helps to understand the needs of consumers.
Makes best use of resources.
Expands markets.
Creates innovations.
Higher markets share.
Specialised marketing.
Achieves marketing goals.
B. ADVANTAGES TO CONSUMERS
Customer oriented.
Quality product at reasonable price.
Other benefits such as discounts, prize etc.
3.4 PATTERNS OF SEGMENTATION
Undifferentiated Marketing: Under this strategy, the producer or marketer does not differentiate between
different type of customers. One marketing mix is used for the whole market. Eg. Pepsi.
Differentiated Marketing: A number of market segments are identified and different marketing mix is
developed for each of the segments. Eg; consumer products.
Concentrated Marketing: It is concerned with the concentration of all marketing efforts on one selected
segment within the total market. Eg; Kid’s wear.
Customised or Personalised Marketing: In this case firms view each customer as a separate segment and
customised marketing programmes to that individuals specific requirements. Eg; civil engineers designing
flats, villas, bridges etc.
BASES OF MARKET SEGMENTATION
Different variables are used to segment the consumer markets. They can be broadly put into four
categories.
DEMOGRAPHIC SEGMENTATION: Demos means people and graphein means to measure or to
study. In Demography means study of people or population. In Demographic segmentation, the market is
segmented on the basis of demographic variables such as age, sex, family size, family life cycle, income,
occupation, education etc. Demographic variables or characteristics are the most popular bases for
segmenting the market.

(a) Age: Age is an important factor for segmenting the market. This is because demand and brand choice of
people change with age. On the basis of age, a market can be divided into four- Children, Teenagers,
Adults and Grown-ups. For consumers of different age groups, different types of products are produced.
Johnson and Johnson cater to the needs of children below 6 years by presenting baby powders, baby soaps,
oils etc.
(b) Sex: Sex based segmentation means grouping customers into males and females. The wants, tastes,
preferences, interests, choices etc, of men are different from that of women. For instance, women are more
fond of cosmetics and other fancy articles. Marketers use gender differences for marketing garments,
personal care products, bikes, cosmetics and magazines.
(c) Family Life Cycle: It refers to the important stages in the life of an ordinary family. Broadly divided
into the following stages.
Stage 1: Childhood.
Stage 2: Bachelorhood (unmarried).
Stage 3: Honeymooners- Young married couple.
Stage 4: Parenthood- (a) Couple with children. (b) Couple with grown up children.
Stage 5: Post- parenthood- Older married couple with children living away from Parents (due to job or
marriage of sons and daughters).
Stage 6: Dissolution- One of the partners is dead.
Wants, tastes, interests, buying habits etc vary over different life cycles stages.
(d)Religion: Religious differences have important effect on marketing. The male folk among the muslims
have a demand for striped lungis and the woman folk for pardhas.
(e) Income: Income segmentation is used for automobiles, clothing, cosmetics, travel, financial services
etc. For example, BMW (car manufacturer concentrates on high income segment)
(f) Occupation: Market segmentation is done also on the basis of occupation of consumers. For instance,
doctors may demand Surgical equipment, lawyers may demand coat etc.
(g) Family Size: A marketer launches different sizes of products in the market according to size of the
family. For example, shampoos and oil are available in 100 ml. 200ml. 500ml etc.
(h) Education: On the basis of education, market for books may be divided as high school, plus two,
graduate and post graduate.
GEOGRAPHIC SEGMENTATION: The marketer divides the market into different geographical units.
Generally international companies segment markets geographically. The theory behind this strategy is that
people who live in same area have some similar need and wants and that need and wants differ from those
of people living in other areas.
(a) Area: This type of segmentation divides the market into different geographical units such as country,
state, region, district, area etc. Some manufacturers split up their sales territories either state-wise or
district-wise. Markets may also be divided into urban and rural markets.
(b) Climate: Different types of climate prevail in different places. On the basis of climate, areas can be
classified as hot, cold, humid and rainy region. Climate determines the demand for certain goods.
(c) Population Density: The size and density of population affects the demand for consumer goods. In
those areas where size and density of population is high, there will be good demand for consumer goods.
BEHAVIOURAL SEGMENTATION: Behavioural segmentation is based on buyer behaviour i.e. the
way people behave during and after purchase.
(a) Attitude: Customers can be segmented on the basis of attitude such as enthusiastic, positive,
indifferent, negative, hostile etc. Fashionable and latest products are used by enthusiastic consumers.
Liquor, cigarette etc are used by negative consumers.
(b) Product Segmentation: The market segmentation is done on the basis of product characteristics that
are capable of satisfying certain special needs of customers.
(1) Prestige products, e.g., Automobiles, clothing, Home furnishing.
(2) Maturity products, e.g., Cigarettes, Blades etc.
(3) Status products, e.g., Most luxuries.
(4) Anxiety products, e.g., Medicines, soaps etc.
(5) Functional products, e.g., Fruits, vegetables etc.
(c) Occasion Segmentation: According to the occasions, buyers develop a need, purchase a product or use
a product. There can be two types of situations- regular and special. For example, for regular use, women
purchase cotton or polyester sarees or churidars. For attending marriage or reception(special occasion) they
buy silk sarees.
(d) Benefit Segmentation: Benefit segmentation implies satisfying one benefit group. The benefit may be
classified into Generic or Primary and Secondary or Evolved.
Product Generic or primary Secondary or Evolved
Utilities Utilities
Tooth paste Cleaning Breath freshing, brightness.
(e) Volume Segmentation: The market is segmented on the basis of volume or quality of purchase. The
buyers are grouped into categories like bulk buyers, moderate buyers, and small buyers. Heavy buyers are
often small percentage of the market but account for a high percentage of total consumption.
Marketers prefer to attract one heavy buyer rather than several small buyers.
(f) Loyalty Segmentation: Consumers have varying degree of loyality to specific brands. On the basis of
brand loyality, buyers can be divided into the following five groups. (1) Hard-core loyals (2) Softcore
loyals (3) Shifting loyals (4) Switchers (5) Consumer innovators.
PSYCHOGRAPHIC SEGMENTATION: It refers to grouping of people into homogeneous segments on
the basis of psychological make up namely personality and life style.
(a) Life Style:A person’s life style is the pattern of living as expressed in the person’s activities, interests
and opinions .They express their life styles through the products they use. For example, the life style of a
college student is different from that of an ordinary worker. Car, clothing, cosmetics, furniture, liquor,
cigarettes etc. are segmented by using life style
(b) Personality: Personality reflects a person’s traits, attitude and habits. It is in this background that a
person is classified as active or passive, rational or impulsive, creative or conventional, introvert or
extrovert. For example, Raymond’s advertisement says “Raymonds. The Complete Man”
(c) Social Class: On the basis of Social class, consumers may be grouped into lower class, middle class
and upper class.
Social class is determined by income, occupation and education.

TARGET MARKETING
Target marketing is the process of assessing the relative worth of different market segments and selecting
one or more segments in which to compete. These become the target segments. Titan is using the target
marketing strategy very effectively. German car manufacturer Mercedes target high status consumers with
experience and prestigious motor cars.
According to David Cravens and others “ Target market is a group of existing or potential customers within
a particular product market towards which an organisation directs its marketing efforts”.
TARGET MARKETING STRATEGIES
Total market approach: A company develops a single marketing mix and directs it at the entire market
for a particular product. This approach is used when an organisation defines the total market for a particular
product as its target market.
Concentration approach: An organisation directs its marketing efforts toward a single market segment
through a single marketing mix. The total market may consist of several segments, but the organisation
selects only one of the segments as its target market.
Multi-segment approach: An organisation directs its marketing efforts at two or more segments by
developing a marketing mix for each segment.

STEPS IN TARGET MARKETING

It involves the following four major steps:
1) Market segmentation: Markets are segmented on the basis of certain characteristic such as sex,
education, income, age etc.
2) Market targeting: It refers to evaluating each market segments attractiveness and selecting one or more
of the segments to enter. Thus target marketing and market targeting are not one and the same.
Market targeting is only a step in target marketing.
3) Designing the marketing mix: After selecting the segment, the next step is to design a suitable product
and other marketing mix elements for each segment selected.
4) Product Positioning: Market segmentation strategy and market positioning strategy are like two sides of
a coin. Target marketing begins with segmentation and ends with positioning.
PRODUCT POSITIONING
The act of creating an image about a product or brand in the consumers mind is known as positioning.
In the words of Kotler, “Positioning is the act of designing the company’s offer and image so that it
occupies a distinct and valued place in the target consumers minds.” In short, the process of creating an
image for a product in the minds of targeted customers is known as product positioning. Close-up tooth
paste is looked upon by the consumers more as a mouth wash than a teeth cleaner, while ‘pepsodent’ has
created an impression of germ killer in the consumers minds.

STEPS IN PRODUCT POSITIONING

1) Identifying potential competitive advantages: Consumers generally choose products and services which
give them greatest value. The key to winning and keeping customers is to understand their needs and
buying processes far better than the competitors do and deliver more values.
2) Identifying the competitors position: When the firm understands how its customers view its brand
relative to competitors, it must study how those same competitors position themselves.
3) Choosing the right competitive advantages: It refers to an advantage over competitors gained by offering
consumers greater value either through lower price or by providing more benefits.
4) Communicating the competitive advantage: The company should take specific steps to advertise the
competitive advantage it has chosen so that it can impress upon the minds of consumers about the
superiority claimed in respect of the product over its competing brands.
5) Monitoring the positioning strategy: Markets are not stagnant. They keep on changing. Consumer tastes
shift and competitors react to those shifts. After a desired position is developed, the marketer should
continue to monitor its position through brand tracking and monitoring.
ELEMENTS OF POSITIONING
It is concerned with the following four elements.
1) The Product: Design, special feature, attributes, quality, package etc. of product create its own image in
the minds of the consumers. Material ingredient of a product is also important in the process of product
positioning.
2) The Company: The goodwill of a company lends an aura to its brand. For example, Tata, Godrej, Bajaj
etc have very good reputation in the market
3) The Competitors: Product image is build in consumers mind in relation to the competing product. Thus a
careful study of competition is required.
4) The Consumer: Ultimate aim of positioning policy is to create a place for the product in consumers’
minds. Therefore, it becomes necessary to study the consumer behaviour towards the product.
TECHNIQUES OF PRODUCT POSITIONING
Following technique are used in positioning a product in the market:
Positioning by Corporate Identity: The companies that have become a tried and trusted household
name.For example, Tata, Sonyetc.
Positioning by Brand Endorsement: Marketers use the names of company’s powerful brands for line
extentions or while entering another product category. Lux, Surf, Dettol etc.
Positioning by Product Attributes and Benefits: It emphasize the special attributes and benefits of the
product.Close-up is positioned on fresh breath and cosmetics benefits.
Positioning by use, Occasion and Time: It is to find an occasion or time of use and sit on it. For
example, Vicks vaporub is to be used for child’s cold at night.
Positioning by Price and Quality: Company position its brand by emphasizing its price and quality. Eg.
Nirma detergent powder.
Positioning by Product Category: Brand is perceived to be another product category. Eg. Maruti
positioned its van as omni , family car.
Positioning by Product User: Positioning the product as an exclusive product for a particular class of
customers. Eg. Scooty as a two wheeler for teenagers.
Positioning by Competitor: An offensive positioning strategy and is often seen in cases of comparative
advertising. Eg. Tide and Rin
Positioning by Symbols: Some companies use some symbols for positioning their products.
Eg.vodafone symbol.

PRODUCT
INTRODUCTION
The marketing mix, which is the means by which an organisation reaches its target market, is made up of
product, pricing, distribution, promotion and people decisions. These are usually shortened to the an
acronym "5P's". Product decisions revolve around decisions regarding the physical product (size, style,
specification, etc.) and product line management.
DEFINITION
A product can be defined as a collection of physical, service and symbolic attributes which yield
satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say, size and
shape; and subjective attributes say image or "quality". A customer purchases on both dimensions
According to Jobber(2004), “ A product is anything that has the ability to satisfy a consumer need.” In the
words of Dibb et al ,” A product is anything, favourable and unfavourable that is received in exchange.”
CLASSIFICATION OF PRODUCTS
A product's physical properties are characterized the same the world over. They can be convenience or
shopping goods or durables and nondurables; however, one can also classify products according to their
degree of potential for global marketing:
i) Local Products - seen as only suitable in one single market.
ii) International Products - seen as having extension potential into other markets.
iii)Multinational Products - products adapted to the perceived unique characteristics of national markets.
iv) Global Products - products designed to meet global segments.-
Products and services fall into two broad classes based on the types of consumers that use them
A - (1) Consumer Product
B - (2) Industrial Product
CONSUMER PRODUCT:- “Product bought by final consumer for personal consumption”. Consumer
products divided into four classes.
Convenience product
Shopping Product
Specially Products
Unsought Product
i) Convenience Product:-Consumer product that the customer usually buys frequently,
immediately, and with a minimum of comparison and buying effort. Consumer products can be
divided further into staples, impulse products, and emergency products. Staples Products are
those product that consumers buy on a regular basis, such as ketchup, tooth path etc., Impulse
products are those product that purchased with little planning or search effort, such as Candy
bar, and magazine, Emergency product is those when consumer need is urgent, e.g. umbrellas
during a rainstorm etc.
ii) Shopping Product:-Consumer good that the consumer, in the process of selection and
purchase, characteristically compares as such bases as suitability, quality, price, and style.
Example: Furniture, clothing, used cars, major appliances and hotel and motel services.
iii) Specialty Products:-Consumer product with unique characteristics or brand identification for
which a significant group of buyers is willing to make a special purchase effort. e.g. Specific
brands and types of cars, high-priced photographic equipment, designer clothes etc.
iv)Unsought Products:-Unsought products are consumer products that the consumer either does not knows
about or knows about but does not normally think of buying. Most major new inventions are unsought until
the consumer become aware of them through advertising. E.g. Life Insurance and blood donations to the
Red Cross.
INDUSTRIAL GOODS It is meant for use in the production of other goods or for some business or
institutional purposes. Industrial goods are classified into four- production facilities and equipments,
production materials, production supplies and management materials. PRODUCT LINE
Product lining is the marketing strategy of offering for sale several related products. Unlike product
bundling, where several products are combined into one, lining involves offering several related products
individually. A line can comprise related products of various sizes, types, colors, qualities, or prices. Line
depth refers to the number of product variants in a line. Line consistency refers to how closely related the
products that make up the line are. Line vulnerability refers to the percentage of sales or profits that are
derived from only a few products in the line.If a line of products is sold with the same brand name, this is
referred to as family branding.
PRODUCT LINE MODIFICATION
When you add a new product to a line, it is referred to as a line extension. When you add a line extension
that is of better quality than the other products in the line, this is referred to as trading up or brand
leveraging. When you add a line extension that is of lower quality than the other products of the line, this is
referred to as trading down. When you trade down, you will likely reduce your brand equity.
You are gaining short-term sales at the expense of long term sales.
Product Line Contraction
Product Line Expansion
Changing Models or Styles of the Existing Products
PRODUCT SIMPLIFCATION
Product Simplification means limiting the number of products a dealer deals. Sometimes it becomes
necessary for a company to stop the production of unprofitable products.

PRODUCT DIVERSIFICATION
Product diversification means adding a new product or products to the existing product. It is a strategy for
growth and survival in the highly complex marketing environment.
PRODUCT DIFFERENTIATION
Product differentiation involves developing and promoting an awareness in the minds of customers that the
company’s products differ from the products of competitors. This is made by using trade mark, brand
name, packaging, labeling etc.
PRODUCT MIX
The number of different product lines sold by a company is referred to as width of product mix.
The total number of products sold in all lines is referred to as length of product mix.
FACTORS INFLUENCING PRODUCT MIX
Change in demand.
Marketing influences.
Production efficiencies.
Financial influence.
Use of waste.
Competitor’s strategy.
Profitability.

NEW PRODUCT DEVELOLOPMENT

New product development tends to happen in stages. Although firms often go back and forth between these
idealized stages, the following sequence is illustrative of the development of a new product:
New Product Strategy Development. Different firms will have different strategies on how to approach
new products. Some firms have stockholders who want to minimize risk and avoid investing in too many
new innovations. Some firms can only survive if they innovate frequently and have stockholders who are
willing to take this risk. For example, Hewlett-Packard has to constantly invent new products since
competitors learn to work around its patents and will be able to manufacture the products at a lower cost.
Idea Generation. Firms solicit ideas as to new products it can make. Ideas might come from customers,
employees, consultants, or engineers. Many firms receive a large number of ideas each year and can only
invest in some of them.
Screening and Evaluation: Some products that after some analysis are clearly not feasible or are not
consistent with the core competencies of the firm are eliminated.
Business Analysis. Ideas are now exposed to more rigorous analysis. Profit projections, risks, market
size, and competitive response are considered. If promising, market research may be done.
Development: The product is designed and manufacturing facilities are planned.

Market Testing: Frequently, firms will try to “test” a product in one region to see if it will sell in
reality before it is released nationally and internationally. There is a lesser risk if the firm only commits
money to advertising and other marketing efforts in one region. Retailers will also be more receptive in
other parts of the country and world if it has been demonstrated that the product sold well in one region.
The firm may also experiment with different prices for the product.
Commercialization: Facilities to manufacture the product on a larger scale are now put into operation
and the firm starts a national marketing campaign and distribution effort.

THE PRODUCT LIFE CYCLE

Products often go through a life cycle. Initially, a product is introduced.

Since the product is not well known and is usually expensive (e.g., as microwave ovens were in the late
1970s), sales are usually limited. Eventually, however, many products reach a growth phase—sales
increase dramatically. More firms enter with their models of the product. Frequently, unfortunately, the
product will reach a maturity stage where little growth will be seen. For example, in the United States,
almost every household has at least one color TV set. Some products may also reach a decline stage,
usually because the product category is being replaced by something better. For example, typewriters
experienced declining sales as more consumers switched to computers or other word processing equipment.
The product life cycle is tied to the phenomenon of diffusion of innovation. When a new product comes
out, it is likely to first be adopted by consumers who are more innovative than others-they are willing to
pay a premium price for the new product and take a risk on unproven technology. It is important to be on
the good side of innovators since many other later adopters will tend to rely for advice on the innovators
who are thought to be more knowledgeable about new products for advice. At later phases of the PLC, the
firm may need to modify its market strategy. For example, facing a saturated market for baking soda in its
traditional use, Arm & Hammer launched a major campaign to get consumers to use the product to
deodorize refrigerators. Deodorizing powders to be used before vacuuming were also created.
Product Introduction/ Development Stage
This is the first stage in product life cycle. Before a new product is introduced in the market place, it should
be created first. The processes involve in this stage include generation of idea, designing of the new
product, engineering of its details, and the whole manufacturing process. This is also the phase where the
product is named and given a complete brand identity that will differentiate it from the others, particularly
the competitors. Once all the tasks necessary to develop the product is complete, market promotion will
follow and the product will be introduced to the consumers. Product development is a continuous process
that is essential in maintaining the product’s quality and value to consumers. This means that companies
need to continuously develop or innovate their products to out ride new and existing competitors.
Product Growth StageThis is a period where rapid sales and revenue growth is realised. However, growth
can only be achieved when more and more consumers will recognize the value and benefits of a certain
product. In most cases, growth takes several years to happen, and in some instances, the product just
eventually died without achieving any rise in demand at all. Hence, it is important that while the product is
still in the development and introduction stages, a sound marketing plan should be put in place and a
market and primary demand should be established.
Product Maturity and Saturation Stage
In the maturity stage, the product reaches its full market potential and business becomes more profitable.
During the early part of this stage, one of the most likely market scenarios that every business should
prepare for is fierce competition. As business move to snatch competitor’s customers, marketing pressures
will become relatively high. This will be characterised by extensive promotions and competitive
advertising, which are aimed at persuading customer to switch and encouraging distributors to continue sell
the product.
In the middle and late phases of the maturity stage, the rate of growth will start to slow down and new
competitors will attempt to take control of the market. In most cases, many businesses falls and lose money
in these stages as they focus more on increasing advertising spending in hope of maintaining their grip of
the market.
Product Decline Stage
The decline stage is the final course of the product life cycle. This unwanted phase will take place if
companies have failed to revitalize and extend the life cycle of their products during the maturity stage’s
early part. Once already in this phase, it is very likely that the product may never again recover or
experience any growth, eventually dying down and be forgotten.
3.7 BRANDING
Branding means giving a name to the product by which it could become known and familiar among the
public. When a brand name is registered and legalised, it becomes a Trade mark. All trade marks are
brands but all brands are not trade marks. Brand , brand name, brand mark, trade mark, copy right are
collectively known as the language of branding.
TYPE OF BRANDS
In many markets, brands of different strength compete against each other. At the top level are national or
international brands. A large investment has usually been put into extensive brand building—including
advertising, distribution and, if needed, infrastructure support. Although some national brands are better
regarded than others—e.g., Dell has a better reputation than e-Machines—the national brands usually sell
at higher prices than to regional and store brands. Regional brands, as the name suggests, are typically sold
only in one area. In some cases, regional distribution is all that firms can initially accomplish with the
investment capital and other resources that they have. This means that advertising is usually done at the
regional level. Store, or private label brands are, as the name suggests, brands that are owned by retail store
chains or consortia thereof. (For example, Vons and Safeway have the same corporate parent and both
carry the “Select” brand). Typically, store brands sell at lower prices than do national brands. Co-
brandinginvolves firms using two or more brands together to maximize appeal to consumers. Some ice
cream makers, for example, use their own brand name in addition to naming the brands of ingredients
contained. Sometimes, this strategy may help one brand at the expense of the other. It is widely believed,
for example, that the “Intel inside” messages, which Intel paid computer makers to put on their products
and packaging, reduced the value of the computer makers’ brand names because the emphasis was now put
on the Intel component.
In order for a business organisation to successfully create an effective brand that is capable of enhancing a
product’s value, it needs to understand how the delivery of value differs across different types of brands.
This means that a company has to know the kind of brand suitable for its offering. So what are the different
kinds of brand? They are the following:
Manufacturer Brands: These are developed and owned by the producers, who are usually involved with
distribution, promotion and pricing decisions for the brands. For example, Apple computers.
Dealer Brands: These are brands initiated and owned by wholesalers or retailers.
Generic Brands: It indicates only the product category and do not includes the company name or other
identifying terms.
Family Brands: A single brand name for the whole line closely related items. For example, Amul for milk
products.
Individual Brands: Each product has a special brand name such as surf etc.
Co-Brands: It uses two individual brands on a single product.
Licensed Brands: It involves licensing of trade marks. For example, P&G licensed its camay brand of
soap in India to Godrej for a few years.
BRAND LOYALTY
It simply means loyality of a buyer towards a particular brand.Wilkie defined loyality as, “ A favourable
attitude and consistent purchase of a particular brand.” For example, If a customer has a brand loyality
towards ‘Pears’, he will buy and use only that soap. There are three levels of Brand Loyality.
1) Brand Recognition: This means that people are familiar with the product and they are likely to buy it.
2) Brand Preference: At this level people adopt the product- that is, they habitually buy it if it is available.
3) Brand Insistence: It is the stage at which people will not accept any substitute.
BRAND EQUITY
It simply refers to value associated with a brand. It is the Marketing and financial value associated with a
brand’s strength in a market. According to Aaker, “Brand equity is a set of assets and liabilities linked to a
brand’s name and symbol that add to or subtract from the value provided by a product or service to a firm
or that firm’s customers”.

PACKAGING AND LABELLING

Packaging and Labelling are among the most important areas in product management. Packing means
putting article into small packets, boxes or bottles for sale to ultimate consumers or for transport.
Labelling is defined as a slip or tag attached with the product or with its package which provides
necessary information about the product and its producer.
Contrary to common perception that these two processes are all about creating an image and
decent presentation of a product, packaging and labelling have more relevant purpose and objectives.
These include physical protection of product from destructive things that may spoil or ruin it, e.g.
temperature, shock, vibration, etc. Other purposes include containment convenience, marketing, security,
and dissemination of information about the use, transportation, storage or disposal of the product.
Designing the labels and packages of products require careful planning. Moreover, there are consumer
safety regulations that every businesses should follow. It is the responsibility of every product
manufacturer to respects these rules. Thus, before you start designing product labels and packaging, it
makes good business sense to know what laws will affect you and what kind of materials will best suit your
product.

KINDS OF LABELS
There are four kinds of labels:
1) Brand Label: It gives the brand name or mark. For example, Britannia Biscuits, Vicks Vaporub etc.
2) Grade Label: It gives grade or quality of the product by a number, letter or words. For example, A grade,
B grade or 1and 2 category based on quality.
3) Descriptive Label: It gives details of product, its functions, price, warnings etc.
4) Information Label: It provides maximum information about the product. It contains fuller instructions on
the use and care of the product.
MARKETING MYOPIA
It has been introduced by Theodore Levitt. One of the main reasons for the failure of large business
enterprises is that they do not actually know what kind of business they are doing. This narrow minded
view of Marketing is called Marketing Myopia. Marketers suffer from marketing myopia when they view
their business as providing goods and services rather than as meeting customers needs and wants.
PRICING
Setting the right price is an important part of effective marketing . It is the only part of the marketing mix
that generates revenue (product, promotion and place are all about marketing costs).
Price is also the marketing variable that can be changed most quickly, perhaps in response to a competitor
price change.
DEFINITION
“Price is the amount of money or goods for which a thing is bought or sold”.
The price of a product may be seen as a financial expression of the value of that product. For a consumer,
price is the monetary expression of the value to be enjoyed/benefits of purchasing a product, as compared
with other available items.
The concept of value can therefore be expressed as:
(perceived) VALUE = (perceived) BENEFITS – (perceived) COSTS
A customer’s motivation to purchase a product comes firstly from a need and a want:e.g.
• Need: "I need to eat
• Want: I would like to go out for a meal tonight")
The second motivation comes from a perception of the value of a product in satisfying that need/want (e.g.
"I really fancy a McDonalds").
The perception of the value of a product varies from customer to customer, because perceptions of benefits
and costs vary.
Perceived benefits are often largely dependent on personal taste (e.g. spicy versus sweet, or green versus
blue). In order to obtain the maximum possible value from the available market, businesses try to
‘segment’ the market – that is to divide up the market into groups of consumers whose preferences are
broadly similar – and to adapt their products to attract these customers.
In general, a products perceived value may be increased in one of two ways – either by:
(1) Increasing the benefits that the product will deliver, or,
(2) Reducing the cost.
TYPES OF PRICING POLICIES
There are many ways to price a product. Let's have a look at some of them and try to understand the best
policy/strategy in various situations.
Cost Based Pricing Policies: Setting price on the basis of the total cost per unit.There are four methods
as follows:
1. Cost Plus Pricing- cost plus a percentage of profit
2. Target Pricing- cost plus a pre determined target rate of return
3. Marginal Cost Pricing- fixed plus variable costs
4. Break-Even Pricing- at break-even point i.e, where total sales=total cost{no profit,no loss point}
Demand Based Pricing Policies: Setting price on the basis of the demand for the product. There are two
methods as follows:
1. Premium Pricing-Use a high price where there is a uniqueness about the product or service. This
approach is used where a substantial competitive advantage exists. Such high prices are charged for
2. Differential Pricing-Same product is sold at different prices to different consumers.
Competition Based Pricing Policies: Setting price on the basis of the competition for the product. There
are three methods as follows:
1. Going Rate Pricing-Many businesses feel that lowering prices to be more competitive can be disastrous
for them (and often very true!) and so instead, they settle for a price that is close to their competitors.
2. Customary Pricing- Prices for certain commodities get fixed because they have prevailed over a long
period of time.
3. Sealed Bid Pricing-Firms have to quote less price than that of competitors. Tenders , winning contracts
etc.
Value Based Pricing Policies: It is based on value to the customer. The following are the pricing method
based on customer value.
1. Perceived- Value Pricing: This is the method of judging demand on the basis of value perceived by the
consumer in the product. This method is concerned with setting the price on the basis of value perceived by
the buyer of the product rather than the seller’s cost.
2. Value Of Money Pricing: Price is based on the value which the consumers get from the product they
buy. It is used as a competitive marketing strategy.
SKIMMING PRICING:
This is done with the basis idea of gaining a premium from those buyers who always ready to pay a much
higher price than others. It refers to the high initial price charged when a new product is introduced in the
market. For example, mobile phones which when introduced were highly priced.
PENETRATION PRICING:
The price charged for products and services is set artificially low in order to gain market share. Once this is
achieved, the price is increased. This approach was used by France Telecom and Sky TV.
Competitive pricing :
The producer of a new product may decide to fix the price at competitive level. This is used when market is
highly competitive and the product is not differentiated significantly from the competitive products.
PREDATORY PRICING:
When a firm sets a very low price for one or more of its products with the intention of driving its
competitors out of business.
ECONOMY PRICING :
This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets
often have economy brands for soups, spaghetti, etc.
Price Skimming .
Charge a high price because you have a substantial competitive advantage. However, the advantage is not
sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls
due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once
other manufacturers were tempted into the market and the watches were produced at a lower unit cost,
other marketing strategies and pricing approaches are implemented.
Psychological Pricing .
This approach is used when the marketer wants the consumer to respond on an emotional, rather than
rational basis. For example 'price point perspective' 99 cents not one dollar.
PRODUCT LINE PRICING.
Where there is a range of product or services the pricing reflect the benefits of parts of the range. For
example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.
Optional Product Pricing.
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras'
increase the overall price of the product or service. For example airlines will charge for optional extras
such as guaranteeing a window seat or reserving a row of seats next to each other.
CAPTIVE PRODUCT PRICING
Where products have complements, companies will charge a premium price where the consumer is
captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from
the sale of the only design of blades which fit the razor.
Product Bundle Pricing.
Here sellers combine several products in the same package. This also serves to move old stock. Videos and
CDs are often sold using the bundle approach.
PROMOTIONAL PRICING.
Pricing to promote a product is a very common application. There are many examples of promotional
pricing including approaches such as BOGOF (Buy One Get One Free).
Geographical Pricing.
Geographical pricing is evident where there are variations in price in different parts of the world. For
example rarity value, or where shipping costs increase price.
Value Pricing.
This approach is used where external factors such as recession or increased competition force companies to
provide 'value' products and services to retain sales e.g. value meals at McDonalds.
FACTORS INFLUENCING PRICING POLICIES
The factors that businesses must consider in determining pricing policy can be summarized in four
categories:
(1) Costs
In order to make a profit, a business should ensure that its products are priced above their total average
cost. In the short-term, it may be acceptable to price below total cost if this price exceeds the marginal cost
of production – so that the sale still produces a positive contribution to fixed costs.
(2) Competitors
If the business is a monopolist, then it can set any price. At the other extreme, if a firm operates under
conditions of perfect competition, it has no choice and must accept the market price. The reality is usually
somewhere in between. In such cases the chosen price needs to be very carefully considered relative to
those of close competitors.
(3) Customers
Consideration of customer expectations about price must be addressed. Ideally, a business should attempt
to quantify its demand curve to estimate what volume of sales will be achieved at given prices
(4) Business Objectives
Possible pricing objectives include:
• To maximize profits
• To achieve a target return on investment
• To achieve a target sales figure
• To achieve a target market share
• To match the competition, rather than lead the market

STRATEGIES FOR NEW AND ESTABLISHED PRODUCTS

Product pricing strategies frequently depend on the stage a product or service is in its life cycle; that is, new
products often require different pricing strategies than established products or mature products
NEW PRODUCT PRICING STRATEGY.
Marketers often rely on pricing strategies that allow them to capture market share quickly. When there are
several competitors in a market, entrants usually use lower pricing to change consumer spending habits and
acquire market share. To appeal to customers effectively, entrants generally implement a simple or
transparent pricing structure, which enables customers to compare prices easily and understand that the
entrants have lower prices than established incumbent companies.
Complex pricing arrangements, however, prevent lower pricing from being a successful strategy in that
customers cannot readily compare prices with hidden and contingent costs. The long-distance telephone
market illustrates this point; large corporations have lengthy telephone bills that include numerous
contingent costs, which depend on location, use, and service features. Consequently, competitors in the
corporate long-distance telephone service market do not use lower pricing as the primary pricing strategy,
as they do in the consumer and small-business markets, where telephone billing is much simpler.
Another example is the computer industry. Dell, Fujitsu, HP, and many others personal computer makers
offer bundles of products that make it more difficult for consumers to sort out the true differences among
these competitors.
ESTABLISHED PRODUCT PRICING STRATEGY
Sometimes established companies need not adjust their prices at all in response to entrants and their lower
prices, because customers frequently are willing to pay more for the products or services of an established
company to avoid perceived risks associated with switching products or services. However, when
established companies do not have this advantage, they must implement other pricing strategies to preserve
their market share and profits. When entrants are involved, established companies sometimes attempt to
hide their actual prices by embedding them in complex prices. This tactic makes it difficult for customers
to compare prices, which is advantageous to established companies competing with entrants that have
lower prices. In addition, established companies also may use a more complex pricing plan, such as a two
part pricing tactic. This tactic especially benefits companies with significant market power. Local telephone
companies, for example, use this strategy, charging both fixed and per-minute charges.

STRATEGIC IMPLICATIONS OF PRODUCT LIFE CYCLE

According to the product life cycle a product passes through 4stages, they are:
Introduction: Product has been just introduced to the market – so the price will typically be at the higher
end;
Growth: This is the stage in which a products sales increases rapidly – price is set high at the growth
phase to skim the market;
Maturity & saturation: Here the product reached optimal sales and plateaus out – price is gradually
reduced to maintain market share and meet the threat of competition;
Decline: The product ceases to be popular due to a variety of reasons and decline sets in – price cutting is
in full swing to make sure that all inventory is exhausted before market demand runs out, a type of
harvesting the market.
The importance of the product life cycle in pricing cannot be understated. Obviously the pricing strategies
at the different stages should differ to ensure that profits are maximized.

PRODUCT POSITIONING
The term product positioning has already been explained. It is a very important concept in setting the price
of the product. It is clearly very foolish to position a product as a high quality exclusive item, and then
price it too low.
Price is one of the clearest signals that the customer has about the value of the product being offered. So
there should always be a sensible relationship between the product and the price.
Competition and Potential Competition
Although the product has been well positioned there will always be competitors and it goes without saying
that the threat of the competition should be carefully considered. In a situation of high competition it is
important to note that competing purely on price is counter productive. The business should consider all
elements of the marketing mix and how they interact to create demand and value for the product should be
considered in setting the overall competing strategy.
Some firms launch new products at high prices only to find that they have made the market attractive to
competitors who will launch similar products at much lower prices. A lower launch price might make
diffusion in the market quicker and allow for greater experience and the margin for a competition enter the
market will be reduced.

COSTS
Another key variable in pricing is costing – this is not only the business cost but also the cost to
competitors. There are many cost concepts but the two main concepts are marginal cost pricing and full
absorption costing.
The conventional economists model of product pricing indicates that pricing should be set at the point
where marginal cost is equal to marginal revenues i.e. where the additional cost of production is equal to
the additional income earned. The theory is undisputed but considers only price as variable. In the real
world there are many more variables than only price.
In practice the cost of production provides key guidelines to many businesses in setting price. This is called
the ‘cost plus method‘ of pricing where a fixed mark up is added to the price.
CHANNELS OF DISTRIBUTION
The standard product pricing theory does not provide insight to what should be one’s policy toward
distributor margins. The distributor performs a number of functions on behalf of the supplier which enables
which enables the exchange transaction between the producer and the customer.
There are a number of devices available for compensating the trade intermediaries, most of which take the
form of discounts given on theretail selling price to the ultimate customer.
Trade discount – This is the discount made on the list price for services made available by the
intermediary. e.g. holding inventory, buying bulk, redistribution etc.
Quantity discount – A quantity discount is given to intermediaries who order in large lots
Promotional discount – This is a discount given to distributors to encoutage them to share in the
promotion of the products involved.
Cash discount - In order to encourage prompt payments of accounts, a small cash discount on sales price
can be offered.
Gaining Competitive Advantage
It is possible to use price as a strategic marketing tool. The aspects of competitiveness have been listed
below:
Reduce the life cycle/ alter the cost mix – customers are often willing to pay a considerably higher initial
price for a product with significantly lower post-purchase cost.
Expand value through functional redesign. E.g. a product that increases customers production
capacity or throughput, product that improves quality of the customers product, product that enhances end-
use flexibility.
Expand incremental value by developing associated intangibles. For example service, financing, prestige
factors etc.
PREPARING THE PRODUCT PRICING PLAN
We have considered some of the factors that affect the pricing decision. We now have to amalgamate all
these decisions into one framework. It has been demonstrated that as a firm develops expertise in
producing a particular product the cumulative cost of producing every additional unit falls.
This is demonstrated by the learning curve. The effect of the learning curve should be considered in pricing
of new products.
There are in principle only two main pricing policies they are price skimming policy and price penetration
policy. The factors that should be considered before implementing either policy are given below.
The factors that favour a price skimming policy are:
1. Demand is likely to be price inelastic;
2. There are likely to be different price market segments, thereby appealing to those buyers first who have a
higher rage of acceptable prices.
3. Little is known about the cost and marketing the product
The variables that favour a price penetration policy are:
1. Demand is likely to be price elastic;
2. Competitors are likely to enter the market quickly;
3. There no distinct price-market segments;
4. There is possibility if large savings in production and marketing costs if large sales volumes can be
generated.

PLACE:
PHYSICAL DISTRIBUTION
Meaning and Definition
Creating a customer is a major task of marketing but delivering the goods to the customer so created is the
most critical task. Physical distribution is a marketing activity that concerns the handling and the
movement of goods. It is a major component of marketing mix and cost area of business.
In the words of Phillip Kotler, “Physical distribution involves planning, implementing and controlling the
physical flow of materials, and final goods from the point of origin of use to meet customer needs at a
profit.”
It involves the coordination of activities to place the right quantity of right goods at the desired place and
time. Like any other marketing mix component, physical distribution has two broad objectives to attain,
namely, consumer satisfaction and profit maximization. Physical distribution is not only a cost but a
powerful tool of competitive marketing.
Meaning of Channel of distribution:
A channel of distribution is an organized network or system of agencies and institutions, which, in
combination, perform all the activities required to link producers with users and users with producers to
accomplish the marketing task.
According to Phillip Kotler,”It is a set of independent organizations involved in the process of making a
product or service available for use or consumption.” Thus, a channel of distribution is a path way directing
the flow of goods and services from producers to consumers composed of intermediaries through their
functions and attainment of the mutual objectives.

Difference between Physical distribution and Channel of Distribution

These are the two component of the distribution system. Physical distribution is a broader concept, it
includes channel of distribution. Physical distribution is concerned with transportation, storage,
warehousing, etc, where as channel of distribution refers to the process or intermediaries through which
goods move from the producer to the ultimate consumer.
ROLE/IMPORTANCE OF PHYSICAL DISTRIBUTION SYSTEM
The physical distribution system has a definite role. It provides a new orientation for marketing.
The following points will reveal the role of physical distribution system.
1. Creation of Utilities: Creation of or addition of utility is addition of value to a thing. The major
component of physical distribution are transportation and warehousing. It is transport system that creates
place utility, making goods more useful by bringing them from the places where they are not needed.
Warehousing system is known for creating time utility.
2. Improved consumer services: Customer service in physical distribution system consists of providing
products at the time and location corresponding to the customer needs. High level of customer satisfaction
can be possible through a viable distribution system that takes into account the factors that affect customer
service such as time, dependability, communication etc.
3. Cut in distribution cost: The prices paid by the customer consists of not only production costs but also
delivery cost. Delivery cost can be minimized by systematic planning in inventory levels, warehousing
location and operation, transportation schedule and modes, material handling, order processing and
communication.
4. Increased market share: There are definite ways in which an efficient physical distribution system can
contribute towards the objective of increased market share. It is possible by decentralizing its warehousing
operations, devise the combination of efficient and economic means of transport, planning inventory
operations to avoid stock outs etc.
5. Price stabilization: It can contribute considerably to the attainment of price stabilization. It is the best
use of available transport and warehousing facilities that can bring about amicable and matching
adjustment between the demand for and supply of goods thus preventing price fluctuations.

LEVELS OF CHANNEL
This indicates the number of intermediaries between the manufactures and consumers. Mainly there are
four channel levels. They are:
1. Zero level channel:- Here the goods move directly from producer to consumer. That is, no intermediary
is involved. This channel is preferred by manufactures of industrial and consumer durable goods.
2. One level channel: In this case there will be one sales intermediary ie, retailer. This is the most common
channel in case of consumer durable such as textiles, shoes, ready garments etc.
3. Two level channel: This channel option has two intermediaries, namely wholesaler and retailer.
The companies producing consumer non durable items use this level.
4. Three level channel: This contains three intermediaries. Here, goods move from manufacture to agent
to wholesalers to retailers to consumers. It is the longest indirect channel option that a company has.

FACTORS DETERMINING THE LENGTH OF THE CHANNEL:

The following factors will determine the length of the channel of distribution.
1. Size of the market: The larger the market size, longer the channel. Conversely the smaller the market,
smaller the channel.
2. Order lot size: If the average order lot size is small, it is better to have a longer channel and vice–versa.
3. Service requirements: If the product and market require a high level of service, and it a major factor in
the buying decision, it is better to keep a shorter channel.
4. Product variety: If a wide variety of the same type of product available in the market, then it is
advisable to select a wider channel.

TYPES OF INTERMEDIARIES
Marketing intermediaries are the individuals and the organizations that perform various functions
to connect the producers with the end users. These middlemen are classified into three:
1. Merchant middlemen, who take title to the goods and services and resell them.
2. Agent middlemen, who do not take title to the goods and services but help in identifying
potential customers and even help in negotiation.
3. Facilitators, to facilitate the flow of goods and services from the producer to the consumer,
without taking a title to them. Eg. Transport companies.

MERCHANT MIDDLEMEN
Merchant middlemen are those who take title to the goods and channelize the goods from previous step to
the next step with a view to making profit. They buy and sell goods in their own risk and the price for their
effort is profit. They act as an intermediaries between producers and consumers. These merchant
middlemen are broadly classified into wholesalers and retailers.
Wholesalers:
Wholesaler is a trader who deals in large quantity. He purchases goods from the producers in bulk quantity
and sell it to the retailers in small quantity. According to American Management
Association, “ wholesalers sells to retailers or other merchants and/or individual, institutional and
commercial users but they do not sell in significant amounts to ultimate consumers.”
Functions of wholesalers
1. Assembling and buying: It means bringing together stocks of different manufactures producing same
line of goods, and making purchases in case of seasonal goods.
2. Warehousing: The warehousing function of the wholesalers relieves both the producers and the retailers
from the problem of storage.
3. Transporting: In the process of assembling and warehousing, the wholesaler do undertake
transportation of goods form producers to their warehouse and back to retailers
4. Financing: They grant credit on liberal terms to retailers and taking early delivery of stock from the
manufacturers to reduce their financial burden.
5. Risk bearing: Wholesaler bear the risk of loss of change in price, deterioration of quality, pilferage,
theft. Fire etc.
6. Grading, Packing and packaging: By grading they sort out the stocks in terms of different size, quality
shape and so on.
7. Dispersing and selling: Dispersing the goods already stored with them to the retailers.
8. Market information: Finally providing the market information to the manufactures
Services of wholesalers:
A. Services to Manufacturers:
1. The wholesaler helps the manufacture to get the benefit of economies of large scale production.
2. Wholesalers helps the manufactures to save his time and trouble by collecting orders from large number
of retailers on behalf of the manufactures.
3. The wholesaler provides market information to the manufactures which will helps him to make
modifications in his product.
4. The wholesaler buys in large quantities and keeps the goods in his warehouses. This relieves the
manufacturer the risk of storage and obsolescence.
5. The wholesales helps to maintain a steady prices for the product by buying the product when the prices
are low and selling when the prices are high.
B. Services to Retailers:
1. He gives valuable advices to the retailers on his business related matters.
2. He helps the retailer to get the goods very easily and quickly.
3. He render financial assistance to the retailer by granting credit facilities.
4. The wholesalers bears the risk associated with storage and distribution of goods to a certain extend.
5. The wholesaler helps the retailers to keep price steady.
Retailers:
The term ‘retail’ implies sale for final consumption. A retailer is the last link between final user and the
wholesaler or the manufacturer. According to Professor William Standton, ”retailing includes all activities
directly related to the sale of goods and services to the ultimate consumers for personal or non business
use.” In other words retailer is one whose business is to sell consumers a wide variety of goods which are
assembled at his premises as per the needs of final consumers. In India, Most of the Indian retail outlets are
owner managed and have few or no sales assistant. Most important issues of these outlets are those of
inventory management and funds management.
Functions of retailers:
1. Buying and Assembling:- A retailer buys goods from the best and most dependable wholesalers and
assemble the goods in a single shop.
2. Warehousing: It helps the retailer to ensure adequate and uninterrupted supply of goods
3. Selling: A retailer sells the products in small quantities to the needy consumers.
4. Risk bearing: It is the basic responsibility of a retailer to bear the risk arising out of physical
deterioration and changes in prices.
5. Sales promotion: Retailer undertakes some sales promotion through displaying of goods in the shop,
distribution of sales literature, introduction of new product etc.
6. Financing: A retailer granting credit in liberal terms to the consumer and it helps the consumers a lot to
purchase the required goods.
7. Supply of market information: As being in close and constant touch with the consumers, a retailer can
supply the market related information to the wholesalers and manufactures at the earliest.
8. Grading and Packing: Retailers undertake second round grading and packing activities left by the
manufacturers and wholesalers.
Services rendered by Retailers:
A retailer render a number of services to the manufacturers, wholesalers and to the final users. These
services are outlined below:-
A. Services to the manufactures and wholesalers:
(1). Providing information: Retailer do provide the wholesalers and manufactures the information about
the latest consumer movements and it helps the manufactures to produce goods according to the needs of
consumers.
(2) Looks after the distribution process: A retailer, in general, looks after the entire distribution process
and it helps the manufactures to concentrate on production.
(3 )Creation of demand: By giving local ad and display of goods, retailers helps to create demand for the
goods.
(4)A big relief: A retailer gives a relief to the manufacturers and wholesalers from the problem of selling
goods in small quantities.
B. Services to the consumers:
(1)No need to store goods: A retailer holds goods on behalf of the customers at a convenient place and in
convenient lot. Hence, the consumer need not buy and stock in large quantity.
(2)Largest choice: Retailers collects products of different manufactures and it enables the consumers to
have a largest choice at cost, quality and so on.
(3) Providing information: A retailer supplies information about the introduction of a new product in the
market and its features.
(4)Granting credit: Most of the retailers granting credit facilities to regular customers.
(5) After sale services: In certain cases a retailer provides after sales services to the ultimate consumers to
ensure the customers shop loyalty.
TYPES OF RETAILERS
The retailers can be classified in to Small scale retailers and large scale retailers:
1. Small Scale Retailers: It includes
(a) Unit stores: These are the retail stores run on proprietory basis dealing in general stores or single line
stores.
(b) Street traders: They are the retailers who display their stock on foot paths or the side walks of the
busy street.
(c) Market traders: These retailers open their shops on fixed days or dates in specified areas. The time
interval may be week, or a month.
(d) Hawkers and pedlars: This type of retailers do not have any fixed place of business. They carry goods
from one place to another. They keep on moving from locality to locality.
(e) Cheap-jacks: Cheap jacks is retailer who has fixed place of business in a locality but goes on changing
his place to exploit the market opportunities.
2. Large scale retailers: It includes
(a)Departmental stores: A departmental stores carries several product line, invariably all that is required
by a typical house hold. It includes food, clothing, appliances, other house hold goods, furnishings and gifts
etc. It is a central location and a unified control. In a typical department store each product line is managed
independently by specialist buyers.
(b)Multiple shops: It is a chain of retail store dealing in identical and generally restricted range of articles
operating in different localities under central ownership and control. It works on the principles of
centralized buying and administration and decentralized selling. It is also known as chain store.
(c)Mail order houses: Here, the customers do not visit the seller’s premises and there is no personal
inspection of goods before the purchase. Orders are received from customers through post and the goods
are also sold through post. The transaction is settled through postal medium. Eg. Leather goods, ready
made garments etc.
(d)Consumer co-operatives: These are the stores owned by a group of consumers themselves on
cooperative principles. Here the store purchasing in bulk quantity and sells it to the consumers at a
reasonable price. It is formed to eliminate the exploitation of middlemen.
(e)Super markets: This is a large, low cost, low margin, high volume, self service operation designed to
serve customer’s need for food laundry and house hold products. The wide range of product mix carried by
these stores make them a favorite retail outlet.
(f) Discount stores: Discount stores are the ones that sell standard merchandise at lower prize than
conventional merchants by accepting lower margins but pushing for higher sales volume.
(g)Convenience store: These are generally food stores that are much smaller in size than in supermarkets.
They are conveniently located in residential areas. Due to a high degree of personalized service and home
delivery by store clerk, these stores fill in a very important need of a house wife.
(h) Speciality store: These are ones that carry a narrow product line with a deep assortment within that
line. According to some marketing thinkers, the future scenario belongs to super speciality store as they
provide increasing opportunities for market segmentation, focused marketing, and creation of brand equity.

FACTORS INFLUENCING CHOICE OF DISTRIBUTION CHANNEL:

It is very important to select a channel for the distribution of goods and services to the ultimate consumers
in an effective way. The marketer has to select the most suitable channel. While selecting the channel of
distribution, the marketer has to consider the following factors:
1. Nature of Product: The selected channel must cope up perish ability of the product. If a commodity is
perishable, the producer prefer to employs few middlemen. For durable and standardized goods, longer and
diversified channel may be necessary. If the unit value is low , intensive distribution is suggested. If the
product is highly technical, manufacture is forced to sell directly, if it is not highly technical, intensive
distribution can be selected. Seasonal products are marketed through wholesalers.
2. Nature of market: If the market is a consumer market, then retailer is essential. If it is an industrial
market, we can avoid retailer. If consumers are widely scattered large number of middlemen are required.
When consumers purchase frequently, more buyer seller contacts are needed and middlemen are suggested.
3. Competitors’ Channel: The distribution channel used by the competitors will influence the channel
selection. There is nothing wrong in copying the channel strategy of the competitor if it is a right one.
4. The financial ability of channel members: Before selecting the channel, the manufacture has to think
about the financial soundness of the channel members. In most of the case financial assistance are required
to the channel members in the form of liberal credit facilities and direct financing.
5. The Company’s financial position: A company with a strong financial background can develop its own
channel structure. Then there is no need to depend other channel intermediaries to market their product.
6. Cost of Channel: The cost of each channel may be estimated on the basis of unit sale. The best type of
channel which gives a low unit cost of marketing may be selected.
7. Economic factors: The economic conditions prevailing in he country have bearing on channel selection
decision. During the period of boom, it is better to depend channels directly. During the periods of
deflation direct relation with the consumers are desirable.
8. The legal restrictions: Before giving the final shape to channels of distribution, we have to consider the
existing legal provisions of the various Acts. For eg. MRTP Act prevent channel arrangements that tend to
lessen competition, create monopoly and those are objectionable to the very public interest.
9. Marketing policy of the company: The marketing policy of the company have a greater and deeper
bearing on the channel choice. The marketing policies relating to channels of distribution are advertising,
sales promotion, delivery, after sale service and pricing. A company has a heavy budget on advertising and
sales promotion, the channel selected is bound to be direct as it requires a few layers of people to push the
product.
PROMOTION
Meaning and Definition.
Promotion is a term taken from Latin word promovere . It means ‘move towards’. In marketing,
promotion means all those tools that a marketer uses to take his product from the factory to the customer
and hence it involves advertising, sales promotion, personal selling, and public relation. It is necessary
to flow the information about the product from the producer to the consumer either along with the product
or well in advance of the introduction of the product. This role is played by promotion.
In the words of Masson and Ruth, ”Promotion consists of those activities that are designed to
bring a company’s goods or services to the favorable attention of customers”.
Importance of Promotion:
It may be studied in the following heads:-
1. Importance to Business:- Now a days, it is very necessary to communicate information regarding
quality, features, price uses etc. of the product to the present and potential customers. Then only the
consumers will select the product from a wide range of competing products. Most modern institutions
cannot survive in the long run without performing promotion function effectively.
2. Economic importance: In economic sense, it helps to generate employment opportunities to thousands
of people. As a result of promotion sales will increase and it brings economies in the production process
and it reduces the per unit cost of product.
3. Social importance: Promotion has become an important factor in the campaign to achieve some socially
oriented objectives. For eg. Ad against smoking, drinking etc. It also helpful to provide informative and
educational service to the society
4. Importance to non business organizations: The non business organizations like govt. agencies,
religious institutions, educational institutions etc also realized the importance of promotion and they are
using the various elements of promotion mix very widely.
PROMOTION MIX
Firms select a mix of promotional tools to effectively communicate with their target customer group.
The different elements of this group are:
1. Advertising
2. Personal selling
3. Sales Promotion
4. Public relations and
5. Direct Marketing
FACTORS TO BE CONSIDERED WHILE SELECTING A PROMOTION MIX:
1. Nature of the Product:- The product may be consumer product or industrial product, convenient goods
or specialty goods, simple or technical goods etc. In each case, the promotion mix element may vary.
2. Overall marketing strategy:- It means, whether the firm wishes to “push” the product or create “pull”
for the product. Depending upon the strategy, the elements of promotion mix will vary.
3. Buyer readiness stage:- The choice of different elements of promotion mix is depend on the buyer’s
readiness and awareness of the brand.
4. Product life cycle stages:- Different elements of promotion mix were used in different stages of product
life cycle.
5. Market size: -In narrow market, direct marketing is more effective. For a market having large number of
buyers the promotion tool is mainly advertising.
6. Cost of Promotion elements:- The cost of different tools is very important while selecting the
Promotion mix.
ADVERTISING
It is a paid form of mass communication and can be traced to an identified sponsor. Now a day s
Advertising plays a significant role in awareness creation and attitude formation. In a macro concept, it
stands for the managerial function of an organization intending to send information to the other members of
the society.
American Marketing Association defined it as, “Any paid form of non –personal presentation of ideas,
goods, or services by an identified sponsor.”
In the words of Albert Lasker,” Advertising is salesmanship in print, driven by a reason why?”.
Features of Advertising:
1. It is a mass communication medium.
2. It is a salesmanship in print.
3. It is a paid form of communication by an identified sponsor.
4. It is a non personal communication.
5. It helps to stimulate sales.
6. It may be written or spoken.

ROLE/ ADVANTAGES /IMPORTANCE OF ADVERTISING

Advertising is an integral part of our social and economic system,. As a powerful technique of promoting
sales, it has been doing wonders in the domain of distribution. The role of advertising can be analysed from
five distinct angles.
1. Manufactures and Advertising(Advantages to Manufactures):
a. It maintains the existing market and explores the new.
b. It increases the demand for the product
c. It helps to build up or increase goodwill of the company.
d. It controls product price.
e. It helps to introduce a new product into the market .
2. Middlemen and Advertising(Advantages to Middlemen):
a. It guarantees quick sales
b. It acts as a salesman.
c. It increases the prestige of the dealers.
d. It makes retail price maintenance possible.
e. It enables the dealers have a product information.
3. Sales-force and Advertising(Advantages to salesmen)
a. It creates a colourful background for a salesmen to begin his work.
b. It reduces his burden of job.
c. It helps to develop self confidence and initiative among the salesmen.
4. Consumers and Advertising(Advantages to consumers):
a. It ensures better quality product at reasonable price.
b. It provides product related information to the customers and thereby makes the purchasing an easy task.
c. It helps the consumers to save time by providing information related to the availability of product.
d. Helps the consumers in intelligent buying.
5. Society and Advertising(Advantages to society):
a. It helps to uplifts t he living standards
b. It helps to generate gainful employment opportunities.
c. It provides new horizons of knowledge.
d. It up-holds the culture of a nation.
THE ADVERTISING COPY
Ad Copy is the soul of any advertisement. An advertisement copy is all the written or spoken matter in an
advertisement expressed in words or sentences and figures designed to convey the desired messages to the
target consumers. A good ad copy has the following attributes:
1. It is brief: Being brief is not dropping words or chopping sentences, It is the work of eliminating and
substituting the words with out jeopardizing the meaning.
2. It is clear: A clear copy is one which is easily and quickly read and grasp by the readers.
3. It is apt: Writing an apt copy is the art of putting in the words that create strong desire to possess the
product where the product features satisfy the consumer’s desire to possess.
4. It is honest: Credibility of an ad message is decided by the extend of honesty.
5. It is conforming: Every ad copy is to conform to standards, rules and regulations acceptable to the
advertisement media and the laws of the land.

UNIQUE SELLING PROPOSITION(USP)

It is that central idea around which the advertising campaign is built. The big selling idea is
known as USP. It is the heart of advertising campaign. It is an offer that an advertiser makes to his
consumers which is unique in relation to the competing offer or offers and promises to deliver a certain
distinctive package of satisfaction. Eg. MRF company says about its tyres as, ‘the tyre with muscles’ , “The
beauty soap of film stars”(Lux soap).

PRODUCT POSITIONING
It refers to the placement of company product or products in the minds of target consumers
relative to the competitive products , as having certain distinctive benefits and want satisfying potential.
Positioning represents more a state of mind or image than different ingredients or attributes; such a state of
mind is derived from advertising. Advertising is an instrument positioning or repositioning a product or
products in the minds of consumers.
PERSONAL SELLING
Personal selling is the art of convincing the prospects to buy the given products and services.
Though it is basically a method of communication, it is two way as it involves direct face to face contact
between the salesman and the prospect. It is the ability to convert human needs into wants. It is the process
of contacting the prospective buyers personally and persuading them to buy the products.
According to American Marketing Association,” Personal selling is the oral presentation in a conversation
with one or more prospective purchasers for the purpose of making sales; it is the ability to persuade the
people to buy goods and services at a profit to the seller and benefit to the buyer”.
In the words of Garfield Blakde, ”Salesmanship consists of winning the buyers confidence for the seller’s
house and goods, thereby winning the regular and permanent customer.”
FEATURES OF PERSONAL SELLING
1. It is one of the important tools for increasing sales.
2. It is a two way communication between salesmen and the prospect.
3. It is a persuading process to buy the goods and services.
4. The objective of personal selling is to protect the interest of both seller and buyer.
5. The essence of personal selling is interpretation of product and service features in terms of benefit and
advantages.
PROCESS OF PERSONAL SELLING
Selling is the sequence of steps involved in the conversion of human desire into demand for a product or
service. Personal selling process involves the following stages.
1. Prospecting: It is the work of collecting the names and addresses of persons who are likely to buy the
firm’s product of services. While collecting the details, ‘suspects’ must be separated from ‘prospects’ to
avoid waste of time.
2. Pre approach: Pre approach is to get more detailed facts about a specific individual to have effective
sales appeal on him or her. It is closer look of prospects like habits, financial status, social esteem, family
background, material status, tastes and preferences etc.
3. Approach: Approach means the meeting of the prospect in person by the salesmen. It is a face to face
contact with the prospect to understand him better.
4. Presentation and demonstration: A good sales presentation is one that not only gives all the benefits
that the prospect gets but also proves to the latter that he or she will better off after the product is bought
and used. An effective sales presentation demands the sales person use skills like presentation and
explanation.
5. Managing objections: This is the most important stage of personal selling. For every action of salesman
there is prospect’s pro action or reaction, ie, approval or disapproval. An efficient sales man has the ability
to identify the reasons for raising objections by the prospects and the ways to overcome these objections.
6. Sale: If all the above stages have been concluded successfully, then the next stage is ultimate sale of the
product.

MERITS OF PERSONAL SELLING

1. Flexibility and adaptability: It is capable of providing more flexibility and adaptability.
2. Minimum waste: The chances of wastage is minimum in case of personal selling while comparing to
other methods of sales promotion.
3. Acts as feedback: Being in direct contact with the consumers, he can understand the feeling and
reactions of the customers. It helps to modify the product according to the requirements of
customers.
4. Creates lasting impression: It helps to create a long lasting relationship with the customers through the
personal contact of salesmen.
LIMITATIONS OF PERSONAL SELLING:
1. It is expensive: Personal selling as a method of promotion is quite expensive. Getting salesmen and
retaining him for a long period is very difficult and expensive.
2. Difficulty of getting right kind of salesman: In practice, it is very difficult to get a trained
salesmen from company’s point of view.
3. More administrative problems: Personal selling involves more administrative problems than
impersonal selling.
SALES PROMOTION
Sales promotion is another major component of promotion mix. The phrase sales promotion has a distinct
meaning. It stands for all those activities that supplement, co-ordinate and make more effective the efforts
of personal selling and advertising. It collectively comprises of the tools used to promote sales in a given
territory and time. It consists of short term incentives designed to achieve a specific marketing goal in the
immediate future.
According to American Marketing Association,” those marketing activities other than personal selling,
advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display,
shows and exhibitions, demonstrations and various non-recurrent selling effort in the ordinary routine.”

ROLE/ADVANTAGES OF SALES PROMOTION

The role or advantages of sales promotion to various parties like manufactures, middlemen and consumers
are given below:
1. Manufacturers and sales promotion:
(i) It helps to retains the existing customers
(ii) It helps to create new customers.
(iii) It promote sales
(iv) It helps to enhance the goodwill of the firm
(v) It helps to slashes down the cost
(vi) It helps to face the competition.
2. Middle men and sales promotion:
(i) It reduces strain of the middlemen to a greater extend.
(ii) It helps to increase the sales of middlemen
(iii) It builds and enhance the goodwill of the shop
(iv) It gives some personal benefits to the middle men.
3. Consumers and sales promotion:
(i) It helps to improve the standard of living of people by making available goods and services at least cost.
(ii) It gives knowledge of new products available in the market.
(iii) It gives both cash and non cash incentives.
(iv) It helps to get more credit facility and special concession because of his brand and store loyalty.
DISADVANTAGES OF SALES PROMOTION.
1. It has the shortest life impact as promotion tool like advertisement..
2. It is only a supplementary device of personal selling and advertising
3. In most of the cases, too much sales promotion may damage the brand image.
4. Sales promotion techniques are non-recurring in their nature.
SALES PROMOTION TOOLS (TYPES/KINDS OF SALES PROMOTION)
The sales promotion tools can be seen from the angle of dealers, consumers and sales force.
1. Dealer promotion/Trade promotion: Trade promotion objectives are to motivate market
intermediaries to invest in the brand and aggressively push sales. It includes
(a) Price deals: Under this method, special discounts are offered over and above the regular
discounts.
(b) Free goods: Here, the manufactures give attractive and useful articles as presents to the
dealers when they buy a certain quantity.
(c) Ad Materials: In this case, the manufacturer distributes some ad materials for display
purpose.
(d) Trade allowance: It includes buying allowance, promotional allowance and slotting
allowance.
(e) Dealer contests: It is a competition organized among dealers or salesmen.
(f) Trade shows: Trade shows are used to familiarize a new product to the customers.
2. Consumer Promotion: The broad objective of consumer promotion is to create pull for the brand and it
includes-
(a) Rebates: Simply it is a price reduction after the purchase and not at the retail shop.
(b) Money refund offer: Here, if the customer is satisfied with the product, a part or whole of the money
will be refunded.
(c) Samples: While introducing a new product, giving samples to the customers at their doorstep.
(d) Price packs: In this method the customer is offered a reduction from the printed price of
product.
(e) Premium offer: Here goods are offered at a lower price or free as an incentive to purchase a
special product.
(f) Consumer contests: Various competitions are organized among the customers. The winners
are given prizes.
(g) Free trials: In this case, inviting the buyers to try the product without cost.
3. Sales force promotion: It includes
(a) Sales force contests: Sales contests are declared to stimulate the sales force increase their
selling interest.
(b) Bonus to sales force: Bonus is the extra incentive payment made for those who cross the sales quota
set for a specific period.
(c) Sales meeting conventions and conferences: Sales meeting and conferences are conducted with a
view to educate, train and inspire the salesmen.
PUBLIC RELATION
It is the actions of a corporation, store, government, individuals, etc. in promoting goodwill
between itself and the public, the community, employees, customers, etc. It can be defined as the practice
of managing communication between an organization and its public. Public relation is used to build rapport
with employees, customers, investors, or the general public. This method of marketing does not aim at
promoting a single product/service but the company as a whole.
This is done by spreading a positive feel about the company through various stories and articles or positive
feedback from customers about the company in different media channels. In comparison to advertising, PR
is a very cost effective method of marketing. A full page advertisement of a product may fail to attract
customers attention, but a positive response about the same from a satisfied customer when appears in the
form of an article in the same news paper will work wonders for the company. PR is quite understandably
considered as a very genuine method of marketing. It creates a favorable atmosphere for conducting
business of the firm.
According to UK Institute of Public relation, “ It is the deliberately planned and sustained efforts
to establish and maintain mutual understanding between the organisation and its public.”
Advantages of Public relations:
1. Credibility: The information communicated through public relation department is more reliable and it
has more credibility. For eg.an article in newspapers or magazines discussing the virtues of aspirin may be
perceived very much as more credible than an ad for a particular brand of aspirin.
2. Cost: In both absolute and relative terms, the cost of PR is very low, especially when the possible effects
are considered. While a firm can employ advertisement agencies and spend millions of dollars on
advertisements, for smaller companies, this form of communication may be the most affordable alternative
available.
3. Lead Generation : Information about the technological innovations, medical break-through and the like
results almost immediately in a multitude of inquiries. These inquiries may give the firm some quality sales
lead.
4. Ability to reach specific groups: Because some products appeal to only small market segments, it is not
feasible to engage in advertising and / or promotions to reach them. If the firm does not have the financial
capabilities, to engage in promotionalexpenditures, the best way to
communicate to these groups is through PR.
5. Image Building: Effective PR helps to develop positive image for the organization. A strong image is
insurance against later mis-fortunes.
6. Stimulate awareness: Public relation techniques helps to stimulate awareness among the customers
regarding the products of the company and thereby creating demand for your product.

Functions of public relations

The functions of public relations is given below:-
1. Creating awareness for a company or client and building a positive image for them through
articles and stories in the various channels of media.
2. Keeping an eye on all media channels for any public feedback on the client company or its
products.
3. Crisis management in cases where the company may be endangered.
4. Building goodwill and rapport with customers through special events, charity and community
work.
Types of public relation tools:
The important types of tools available to carry out the public relations function include:
1. Media Relations
2. Media Tours
3. Newsletters
4. Special Events
5. Speaking Engagements
6. Sponsorships
7. Employee Relations
8. Community Relations and Philanthropy

FACTORS AFFECTING PROMOTION MIX DECISIONS

Promotion mix includes all those activities undertaken to promote sales. There are two types of promotion
blend – Push blend and Pull blend. A push blend is related to personal selling and an Pull blend give
emphasis on impersonal selling. There are many factors which influence the promotion mix. The important
factors among them are briefly explained below:-
1. Nature of the Market: It is an important factor which affect the promotion mix. Depending up on the
customers the promotion strategy may vary. For individual customers the strategy may vary according to
the age, sex, income etc. For industrial customers it directly depends up on size of the company, bargaining
power etc.
2. Nature of the Product: Depending up on the nature of product, the promotion mix may vary. For
marketing consumer goods, a mass advertisement is necessary. But at the same time marketing of industrial
goods and speciality goods requires personal selling. Complex and complicated products are also require
personal selling.
3. Market size: If the market size is comparatively very small, then direct selling is used. For a market
having large number of
buyers, advertising is the most suitable promotion tool.
4. Buyer readiness stage: The choice of different elements of the promotion mix is also dependent on the
buyer’s readiness and
awareness of the brand. Advertising will play a major role in creating awareness, while demonstration and
samples will helps to bring about a change in the behavioral level.
5. Overall marketing strategy: It means, whether the firm wishes to “push “the product or create a “pull”
for the product. Often the marketing strategy of a firm is a combination of both these strategies.
6. Product life cycle stages: This will also play a role in deciding on the promotion mix. For eg. In the
introduction stage,
advertising and publicity are very important. But in the maturity stage, sales promotion and personal selling
are very necessary.
7. Cost : Cost of promotion element is also very important. If the total cost incurred for using a particular
element of promotion tool is not affordable to the manufacturer, then it is better to select the next best
promotion mix.
DIRECT MARKETING
Direct marketing is a channel-agnostic form of advertising that allows businesses and non profits
organisation to communicate
straight to the customer, with advertising techniques such as mobile messaging, email, interactive
consumer websites, online display ads, fliers, catalog distribution, promotional letters, and outdoor
advertising. Direct marketing is practiced by businesses of all sizes — from the smallest start-up to the
leaders on the Fortune 500. A well-executed direct advertising campaign can prove a positive return on
investment by showing how many potential customers responded to a clear call-to-action. Direct marketing
is concerned with establishing an individual relationship between the business offering a product or service
and the final customer.
Direct marketing has been defined by the Institute of Direct Marketing as “The planned recording, analysis
and tracking of
customer behaviour to develop a relational marketing strategies”

Direct Marketing Channels

Any medium that can be used to deliver a communication to a customer can be employed in direct
marketing and it includes:
1. Email Marketing: Sending marketing messages through email is one of the most widely used direct-
marketing methods.
According to one study email is used by 94% of marketers, while 86% use direct mail.
2. Mobile Marketing: Through mobile marketing, marketers engage with prospective customers and
donors in an interactive manner through a mobile device or network, such as a cell phone, smart phone , or
tablet. Types of mobile marketing messages include: SMS: (short message service) — marketing
communications are sent in the form of text messages, also known as texting. MMS: (multi-media message
service)
3. Direct Mail: The term "direct mail" is used to refer to communications sent to potential customers or
donors via the postal service and other delivery services. Direct mail is sent to customers based on criteria
such as age, income, location, profession, buying pattern, etc.
Direct mail includes advertising circulars, catalogs, free-trial CDs, pre-approved credit card applications,
and other unsolicited merchandising invitations delivered by mail to homes and businesses.
4. Telemarketing: Another common form of direct marketing is telemarketing in which marketers contact
customers by phone.
The primary benefit to businesses is increased lead generation, which helps businesses increase sales
volume and customer base.
5. Voicemail Marketing: Voicemail marketing emerged out of the market prevalence of personal voice
mailboxes, and business voicemail systems. Voicemail marketing presented a cost effective means by
which to reach people directly, by voice
6. Direct Response TV : Direct marketing via television (commonly referred to as DRTV) has two basic
forms: long form (usually half-hour or hour-long segments that explain a product in detail and are
commonly referred to as infomercials) and short form, which refers to typical
30-second or 60-second commercials that ask viewers for an immediate response (typically to call a phone
number on screen or go to a website).
7. Catalogue marketing: In catalogue marketing , an organisation provides a catalogue from which
customers make selection and place orders by mail or telephone. It involves selling of products through
catalogues mailed to selected customers.
EMERGING TRENDS IN SALES AND MARKETING
NEW TRENDS IN INTERNET MARKETING
Things happen fast on the internet and if you want to stay competitive you need to keep up with the latest
trends. This is especially true for marketing. For almost every market, there are lots of online businesses
competing, so you need to keep abreast of the latest internet marketing trends if you want your business
to thrive. The barriers to entry on the internet are lower than in physical markets because of the reduced
overhead and this means lots of competition is the popular business fields. The key is to use the latest
marketing trends to make sure that your business will stand out.
There are plenty of websites offering marketing trends and advice, but you have to choose carefully
because many are not updated often enough so the information is older and not very useful.
What you want is up to date information that will put you on the cutting edge. A lot of the marketing ideas
are good ones, but once lots of people start using them then they no longer serve to make your business
stand out. And that is the goal.
Online classifieds and article marketing are two examples of trends that have been around and are quite
useful at getting your site into the search engine rankings. Of course, your website had better be good and
ready to go as the links are gradually created and people come to visit and see what your business has to
offer. These marketing tools are ones that you should still take advantage of, but they are not the most
critical current trends.
The most recent important trend is social networking. With the rise of Facebook, as well as
MySpace, LinkedIn, and Twitter, people are focusing their internet experience around these social
networking sites. To market successfully, you need to go to where the customers are, and right now that
means on social networks. This makes advertising a little more difficult than on a normal commercial
website because you cannot just buy advertising space. There are some innovative ways to advertise on
Facebook however, many of them tied into features people want to add.
Another marketing trend that all sorts of companies are starting to take advantage of is blogging.
Blogs are free and relatively easy to maintain and keep current and people like them. They are a great way
to put your information out there in a way that is more casual and seemingly more personal than traditional
advertising. This fits the current trend that seems to be a result of push back against very forceful, in your
face type advertising.
Today’s consumers do not want to have advertising right in their face because they see so much of every
day and they get immune. The blog puts information in a very non-pushy way that appeals to lots of
people. And a blog is a great way to get your most up to date information out there. Blogs also allow the
public to make comments which is a great way to foster communication that creates a bond between you
and your customer. This creates loyalty and will likely result in peat business and good word of mouth
advertising which is always the best kind, and not just because it is free.
The last major marketing trend happening now is the use of video. More and more people have high speed
internet connections now so they can watch videos without it being a hassle. Younger people are apt to
start any search on the internet by looking for videos on the subject. So you want your business’s products
or services represented in this medium. The most effective videos are ones that offer useful information
that the customer might be seeking and make the product advertising secondary.
For example, a bicycle company might produce a series of how to videos with bike riding tips and bike
tuning tips. These are subjects that people will be searching for even if they are not looking for a new bike.
They see the video and appreciate the information. They might not run out and buy a new bike right then,
but when the time comes; they already have a good opinion of the company that created the videos.
Name recognition and a positive reputation can be created in a lot of ways that are not traditional forms of
advertising. These trends are apt to continue to be more important as consumers get more and sophisticated
and demanding. Consumers have so many choices because of the internet that businesses must use all the
latest trends to create and maintain their reputation.
E- BRANDING
Business have now started the potential of electronic means for building brand awareness. By using trade
and service marks as their domain names, business attract potential customers to their websites and
increase their market visibility.
E-branding simply means using electronic channels to support brands. In other words, e-branding means
supporting the brand by developing an online experience of the brand.
E-PAYMENT SYSTEMS
Electronic Payment is a financial exchange that takes place online between buyers and sellers. The content
of this exchange is usually some form of digital financial instrument (such as encrypted credit card
numbers, electronic cheques or digital cash) that is backed by a bank or an intermediary, or by a legal
tender. The various factors that have lead the financial institutions to make use of electronic payments are:
Decreasing technology cost:
The technology used in the networks is decreasing day by day, which is evident from the fact that
computers are now dirt-cheap and Internet is becoming free almost everywhere in the world.
Reduced operational and processing cost:
Due to reduced technology cost the processing cost of various commerce activities becomes very less. A
very simple reason to prove this is the fact that in electronic transactions we save both paper and time.
Increasing online commerce:
The above two factors have lead many institutions to go online and many others are following them.
We began E-Commerce with EDI, this was primarily for large business houses not for the common man.
Many new technologies, innovations have lead to use of E-Commerce for the common man also. We will
now briefly enumerate these innovations based on whom they affected:
Affecting the consumers:
Credit cards, Debit Cards, ATMs (Automated Teller Machines), Stored value cards, E-Banking.
Enabling online commerce:
Digital Cash, E-Cash, Smart cards (or Electronic Purse) and encrypted Credit cards.
Affecting Companies:
The payment mechanisms that a bank provides to a company have changed drastically. The
Company can now directly deposit money into its employee’s bank account. These transfers are done
through Automated Transfer Houses.
PROBLEMS OF TRADITIONAL PAYMENT SYSTEMS
There are also many problems with the traditional payment systems that are leading to its fade out.
Some of them are enumerated below:
Lack of Convenience:
Traditional payment systems require the consumer to either send paper cheques by snail-mail or require
him/her to physically come over and sign papers before performing a transaction. This may lead to
annoying circumstances sometimes.
Lack of Security:
This is because the consumer has to send all confidential data on a paper, which is not encrypted, that too
by post where it may be read by anyone.
Lack of Coverage:
When we talk in terms of current businesses, they span many countries or states. These business houses
need faster transactions everywhere. This is not possible without the bank having branch near all of the
companies offices. This statement is self-explanatory.
Lack of Eligibility:
Not all potential buyers may have a bank account.
Lack of support for micro-transactions:
Many transactions done on the Internet are of very low cost though they involve data flow between two
entities in two countries. The same if done on paper may not be feasible at all.
METHODS OF ONLINE PAYMENTS
We will now focus attention on the various ways available to pay online these methods of
payment are still new even when seen as a technology. Each has its own benefits and shortcomings:
1.Electronic Tokens:
An electronic token is a digital analog of various forms of payment backed by a bank or financial
institution. There are two types of tokens:
Real Time: (or Pre-paid tokens) - These are exchanged between buyer and seller, their users pre-pay for
tokens that serve as currency. Transactions are settled with the exchange of these tokens. Examples of these
are DigiCash, Debit Cards, Electronic purse etc.
Post Paid Tokens – are used with fund transfer instructions between the buyer and seller. Examples –
Electronic cheques, Credit card data etc.

2.Electronic or Digital Cash:

This combines computerized convenience with security and privacy that improve upon paper cash.
Cash is still the dominant form of payment as: The consumer still mistrusts the banks. The non-cash
transactions are inefficiently cleared. In addition, due to negative real interests rates on bank deposits.
Now we will enumerate some qualities of cash:
Cash is a legal tender i.e. payee is obligatory to take it.
It is negotiable i.e. can be given or traded to someone else.
It is a bearer instrument i.e. possession is proof of ownership.
It can be held & used by anyone, even those without a bank certificate.
It places no risk on part of acceptor.
The following are the limitations of Debit and Credit Cards:
They are identification cards owned by the issuer & restricted to one user i.e. cannot be given away.
They are not legal tender
Their usage requires an account relationship and authorization system.
Properties of Digital Cash
Must have a monetary value: I t must be backed by cash (currency), bank authorized credit or a
bank certified cashier’s check.
Must be interoperable or exchangeable as payment for other digital cash, paper cash, goods or
services, lines of credit, bank notes or obligations, electronic benefit transfers and the like.
Must be storable and retrievable: Cash could be stored on a remote computer’s memory, in smart cards,
or on other easily transported standard or special purpose devices. Remote storage or retrieval would allow
users to exchange digital cash from home or office or while traveling.
Should not be easy to copy or tamper with while it is being exchanged. This is achieved by using the
following technologies, these are nothing but new and very efficient versions of the old art of
cryptography.
Digital cash is based on cryptographic systems called "Digital Signatures" similar to the signatures used
by banks on paper cheques to authenticate a customer.
Purchase of digital cash from an online currency server (or bank) involves 2 steps:
Establishment of an account in this step we are given a unique digital number which also becomes our
digital signature. As it is a number known only to the customer and the bank, forgery, which may be done
in paper cheques becomes very difficult.
Maintenance of sufficient money in the account is required to back any purchase.
3. Electronic Cheques
The electronic cheques are modeled on paper checks, except that they are initiated electronically.
They use digital signatures for signing and endorsing and require the use of digital certificates to
authenticate the payer, the payer’s bank and bank account. They are delivered either by direct transmission
using telephone lines or by public networks such as the Internet.
Benefits of electronic Cheques:
Well suited for clearing micro payments. Conventional cryptography of e-cheques makes them
easier to process than systems based on public key cryptography (like digital cash).
They can serve corporate markets. Firms can use them in more cost-effective manner.
They create float and the availability of float is an important requirement of Commerce.
SECURITY FEATURES IN INTERNET
Security fear are a major barrier ti internet adoption, by both businesses and consumers. The
customer may lose the amount, if the credit card issuer does not cover them.
SECURITY RISKS IN INTERNET
The business organisation need to acquire technology solutions to overcome the risks of Internet
based transaction. The following are the major risks faced in Internet based transactions.
1) Spoofing: It involves someone masquerading as someone else.
2) Unauthorized disclosure: Hackers can catch the transmissions to obtain customers sensitive
information.
3) Unauthorized action: Altering a website so that it refuses service to potential clients.
4) Eavesdropping: The private content of a transaction if unprotected can be intercepted, when
it goes through the route over the internet.
5) Data alteration: The content of a transaction may be altered either maliciously or accidently.
6) Phishing: It is a specialized form of online identity theft. It means obtaining personal details
online through sites and e-mails masquerading as legitimate business.
AREAS OF SECURITY RISKS
The areas that contain security risks are as follows:
1) Business practices: The retailer may disappear with the money without sending the goods.
This is a risk for the customer.
2) Information privacy practices; Sometimes the website owner do not keep the privacy of sensitive
information of customer.
3) Transaction integrity: Electronic transactions and documents may get lost, changed,
duplicated or incorrectly processed. Dispute may arise regarding terms of transactions or
billing issues.
4) Information protection: The people behind website should take appropriate steps to protect
customer information in connection to disruption, destruction, disaster and unauthorized
access.
5) Consumer recourse: They are concerned about how their rights are protected.
SECURITY TOOLS
There are numerous threats that appear on the internet or are spread through the internet. Such
threats include viruses, worms, Trojans, hackers, denial of services and information theft. The following
methods can be used for managing the risks in Internet marketing;
Anti-Virus Programme: It scans the computer for signatures of a virus. Good anti-virus will find viruses
that have not yet infected your PC and eliminate the ones that have.
Integrity Checking Software: It should be installed on the server to face many threats. The integrity
checker will run at regular intervals to ascertain whether data have been changed by a hacker.
Audit Logs: The audit logs along with the firewall logs are examined on a semi-regular basis with the
aim of detection of abnormal activity. It will be used to identify the source of some hacking attempts or
denial of service attacks.
Firewalls: It can be used to minimize the risk of security breaches and viruses. It is a software mounted
on a separate server at the point the company is connected to the internet.
Backups: In order to protect the data in the system we take backups of all critical files on the web server.
Hardware and software can be used for backups.
Encryption: It is a process that conceals meaning by changing messages into unintelligible messages. It
is the scrambling of information into a form that cannot be readable. There are two main methods as
follows:
Symmetric encryption: Both parties have identical key that is known only to them.
It is used to encrypt and decrypt messages.
Asymmetric encryption: A pair of keys namely a public key(known to everyone) and private key
(known only to the owner). One key is used to encrypt and the other to decrypt messages.
Digital Signature: It is used not only to verify the authenticity of the message and claimed identity of the
sender but also to verify message integrity. A message is encrypted by sender’s private key to generate the
signature and the recipient decrypts the signature using sender’s public key.
Digital Certificates: It is issued by Certification Authorities to users who wish to engage in secure
communication. Once sender has provided proof of identity, the Certification Authority creates a message
containing sender’s name and his Public key. This message is digitally signed by the Certification
Authority is known as digital certificate.
Secure Sockers Layer Protocol: It enables a private link to be set up between customer and
merchant. The main facility the SSL provides is security and confidentiality.
Secure Electronic Transaction: SET is a security protocol based on digital certificates. It allows parties
to confirm each other’s identity.
Hardware Technologies: The hardware technologies include network intrusion hardware, physical
security measures and virtual private network and smart cards.
HACKING
It is a computer crime in which the criminal breaks into a computer system for exploring details of
information etc. It means destroying, deleting or altering any information residing in a computer resource
or diminishing its value or utility or affecting it injuriously by any means with the intent to cause wrongful
loss or damage to the public or person.

Reference Books:
1. S.A. Sherlakar - Marketing Management, Himalaya.
2. Fundamentals of Marketing, William J Stanton, Mc Graw Hill Publishing Co,
New York
3. Marketing by Lamb, Hair, Mc Danniel – Thomson.
4. Marketing by Evans & Berman, 2/e, Biztantra.
5. Marketing – Concepts, strategies byWilliam M Pride, O C Fewell,
Biztantra.
6. Marketing Management, Ramaswamy & Namakumari, Macmillan.
7. Marketing Management, Arun Kumar & Meenakshi, Vikas.
8. Principles of Marketing, Philip Kotler, Armstrong,Pearson Education.