DBA 1652 Marketing Management UNIT -- I

Unit No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Unit Title Marketing management – an introduction Marketing environment Marketing with other functional areas of management Market segmentation Market targeting and positioning Product management Brand management Pricing Channel design and management Retailing and Wholesaling Integrated Marketing Communication Advertising management Sales promotion Personal selling Public relations Understanding individual consumer behaviour Understanding industrial consumer behaviour Customer satisfaction Customer relationship management Marketing of services Rural marketing Types of marketing research Process of marketing research Tools and Techniques of marketing research Applications of marketing research Preparation of marketing research report Online marketing E-commerce Trends in marketing Page No.

Marketing management – an introduction
Unit structure: 1. Introduction

2. Learning Objectives 3. Marketing Management 3.1. Evolution of marketing management 3.2. The Role of Marketing 3.3. Marketing concepts 3.4. The Marketing Mix (The 4 P's Of Marketing) 3.5. Corporate Social Responsibility (CSR) and Ethics in Marketing 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. INTRODUCTION: The apex body in United States of America for the Marketing functions, American Marketing Association (AMA) defines marketing as “Marketing consists of those activities involved in the flow of goods and services from the point of production to the point of consumption". The AMA has since amended its definition to read as: “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." Hence it can be surmised that marketing is basically meeting unmet needs for target markets, identifying those unmet needs and planning how to meet them through products, services, and ideas. Communicating the value to them along with pricing which is affordable and profitable and also distributing the products so that customers have appropriate accessibility and have quick and easy delivery. Marketing is thus the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges (with customers) that satisfy individual and organizational objectives. 2. LEARNING OBJECTIVES: After reading the unit, you will understand how: • • • To learn the evolution of marketing as a discipline To understand the reasons why marketing is considered important in this era To assess the various marketing approaches and principles

3. MARKETING MANAGEMENT: Marketing has evolved into a very important functional area in management basically due to the increasing supply and lower demand over the years. This is primarily through the competitive intensity in every sphere of the market. When competition increases, as you know, every firm wants to be heard in the market. This will make the

firms to be different than the competitors. Hence marketing becomes a very important functional area for every firm where the competition is very high. In a business firm, marketing generates the revenues that are managed by financial people and used by the productions people in creating products or services. The challenge of marketing is to generate that revenue by satisfying consumers wants at a profit and in a socially responsible manner. Marketing is not limited to business. Whenever you try to persuade somebody to do something you are engaging in marketing. Thus marketing has a broad societal meaning. In fact, the societal view is more truly descriptive of marketing today. Moreover, modern business marketing activities are to a large extent, a consequence of the societal view of marketing. The essence of marketing is a transaction, an exchange intended to satisfy human needs or wants. Consequently, marketing occurs any time on societal limit strive to exchange something of value with another social unit. Marketing consists of all the activities to facilitate the exchange. Within this societal perspective, then (1) the makers (2) what they are marketing and (3) their potential markets all assume broad dimensions. The category of marketers might include, in addition to business firms, such diverse social units as (a) a political party trying to market its candidate to the public (b) the director of an art museum providing new exhibits to generate greater attendance and financial support (c) a labor union marketing its idea to members and to company management; and (d) professors trying to make their courses interesting for students. In addition to the range of items normally considered as products and services, what is being marketed might include (a) ideas such as reducing air pollution or contributing to the red cross (b) people, such as new football coach or a political candidate and (c) places, such as industrial plant sites or a place to for a vocation. In a broad sense markets include more than the direct consumers of products services and ideas. Thus a state university’s market includes the legislators who provide funds, the citizens living near the university who may be affected by university activities and the alumni. A business firms market may include government regulatory agencies, environmentalists, and local tax assessors. Definition of Marketing As you already know there are many definitions for marketing. Some definitions focus on marketing as the process involved in satisfying the needs of a particular market, while other definitions lean more toward defining marketing in terms of its most visible functional areas, such as advertising and product development. There probably is no one best way to define marketing, though whatever definition is used should have an

orientation that focuses on satisfying customers. Therefore, we will define marketing as follows: Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer. Let's examine this definition in a little more detail by focusing on a few of the key terms. Strategies and Tactics - Strategies are best explained as the direction the marketing effort will take over some period of time, while tactics are actionable steps or decisions made in order to follow the strategies established. For instance, if a strategy is to enter a new market, the tactics may involve the marketing decisions made to carry this out. Performing strategic and tactical planning activities in advance of taking action is considered critical for long-term marketing success. Identify - Arguably the most important marketing function involves efforts needed to gain knowledge of customers, competitors, and markets. We will see throughout this course material how marketing research is utilized in all decision areas. Create - Competition forces marketers to be creative people. When marketers begin new ventures, such as building a new company, it is often based around something that is new (e.g., new product, new way to distribute a product, new advertising approach, etc.). But once the new venture is launched innovation does not end. Competitive pressure is continually felt by the marketer, who must respond by devising new strategies and tactics that help the organization remain successful. Maintain - Today's marketers work hard to insure their customers return to purchase from them again. Long gone (see History below) are the days when success for a marketer was measured simply in how many sales they made each day. Now, in most marketing situations, marketing success is evaluated not only in terms of sales figures but also by how long a marketer can retain good customers. Consequently, marketers' efforts to attract customers does not end when a customer makes a purchase. It continues in various ways for, hopefully, a long time after the initial purchase. Satisfying Relationships - A key objective of marketing is to provide products and services that customers really want AND to make customers feel their contact with the marketer is helping to build a good relationship between the two. In this way the customer is made to feel as if she/he is a partner in the transaction not just a source of revenue for the marketer. In recent years this has lead to the concept of Customer Relationship Management (CRM), which has emerged as a strategic approach that insures that everyone in an organization, not just the marketer, understands the importance of customers. Maintaining close and consistent relationships with customers through all points of customer contact is crucial but difficult to do well. We'll see in later sections technology plays a key role in carrying out CRM, so that nearly anyone in a organization that comes into contact with a customer (e.g., sales force, service force,

customer service representatives, accounts receivable, etc.) has the necessary information and is well prepared to deal with the customer. Value for Both Customer and Marketer - Value refers to the perception of benefits received for what someone must give up. For customers value is most often measured by how much they feel they are getting for their money, though the value one customer feels she/he obtains may differ from the perception of value from another customer even though they purchase the same product. On the other side of the transaction, the marketer may measure value in terms of how much profit they are making for the marketing efforts and resources expended. For a successful marketing effort to take place both the customer and the marketer must feel they are receiving something worth while in return for the efforts. Without a strong perception of value it is unlikely a strong relationship can be built. Throughout this tutorial we will emphasize value and show ways in which the marketer builds value into the solutions they offer. Other definitions for marketing include:

American Marketing Association (AMA): "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." World Marketing Association (WMA): “Marketing is the core business philosophy which directs the processes of identifying and fulfilling the needs of individuals and organizations through exchanges which create superior value for all parties.” Chartered Institute of Marketing (CIMU) [United Kingdom]: “Marketing is the management process for identifying, anticipating and satisfying customer requirements profitably.”

The functions of marketers: In order to reach the goal of creating a relationship that holds value for customers and for the organization, marketers use a diverse set that includes (but is not limited to) making decisions regarding:
• Target Markets – those markets identified as possessing needs the

marketer believes can be addressed by its marketing efforts • Products/Services – a tangible or intangible solution to the market’s needs • Promotion – a means for communicating information about the marketing organization’s solution to the market • Distribution – means used to allow the market to obtain the solution • Pricing – ways for the marketer to adjust the cost to the market for the solution • Services – additional options that enhance the solution’s value

Each option within the marketer’s set is tightly integrated with all other options so that a decision in one area could and often does impact decisions in other areas. For instance, a change in the price of a product (e.g., lowering the price) could impact the distribution area (e.g., increases shipments, generates higher traffic). Additionally, options within the toolkit are affected by factors that are not controlled by the marketer. These factors include economic conditions, legal issues, technological developments, social/cultural changes, and many more. While not controllable, these external factors must be monitored and dealt with since these can potentially cause considerable harm to the organization. Ignoring outside elements also can lead to missed opportunities in the market especially if competitors are the first to take advantage of the opportunities. As part of the strategic and tactical planning process discussed above it would be wise for marketers to pay close attention to the environment outside the organization. 3.1. EVOLUTION OF MARKETING MANAGEMENT: The evolution of marketing is composed of a series of responses to major external challenges. Pre industrial marketing, based around craft production and personal relationships with local customers, was challenged by the urbanization and mechanization of the industrial revolution. The industrial era created expanding markets which required an emphasis on production, logistics and selling to get the goods to the customer. In the late 1950s, the challenge of increasingly saturated and competitive markets led to the birth of an explicit marketing philosophy. Marketing is a relatively latest discipline having emerged in the early 1900s. Prior to this time most issues that are now commonly associated with marketing were either assumed to fall within basic concepts of economics (e.g., price setting was viewed as a simple supply/demand issue), advertising (well developed by 1900), or in most cases were simply not yet explored (e.g., customer purchase behavior, importance of distribution partners). Lead by marketing scholars from several major universities, the development of marketing was in large part motivated by the need to dissect in greater detail relationships and behaviors that existed between sellers and buyers. In particular, the study of marketing lead sellers to recognize that adopting certain strategies and tactics could significantly benefit the seller/buyer relationship. In the old days of marketing (before the 1950s) this often meant identifying strategies and tactics for simply selling more products and services with little regard for what customers really wanted. Often this lead companies to embrace a “sell-as-much-as-we-can” philosophy with little concern for building relationships for the long term. But starting in the 1950s, companies began to see that old ways of selling were wearing thin with customers. As competition grew stiffer across most industries, organizations looked to the buyer side of the transaction for ways to improve. What they found was an emerging philosophy suggesting that the key factor in successful marketing is to understanding the needs of customers. This now famous “marketing concept”

suggests marketing decisions should flow from first knowing the customer and what they want. Only then should an organization initiate the process of developing and marketing products and services. The marketing concept continues to be at the root of most marketing efforts, though the concept does have its own problems (e.g., doesn’t help much with marketing new technologies) a discussion of which is beyond the scope of this tutorial. But overall marketers have learned they can no longer limit their marketing effort to just getting customers to purchase more. They must have an in-depth understanding of who their customers are and what they want. 3.2 THE ROLE OF MARKETING As we’ve seen the key objective of an organization’s marketing efforts is to develop satisfying relationships with customers that benefit both the customer and the organization. These efforts lead marketing to serve an important role within most organizations and within society. At the organizational level, marketing is a vital business function that is necessary in nearly all industries whether the organization operates as a forprofit or as a not-for-profit. For the for-profit organization, marketing is responsible for most tasks that bring revenue and, hopefully, profits to an organization. For the not-for-profit organization, marketing is responsible for attracting customers needed to support the not-for-profit’s mission, such as raising donations or supporting a cause. For both types of organizations, it is unlikely they can survive without a strong marketing effort. Marketing is also the organizational business area that interacts most frequently with the public and, consequently, what the public knows about an organization is determined by their interactions with marketers. For example, customers may believe a company is dynamic and creative based on its advertising message. At a broader level marketing offers significant benefits to society. These benefits include:
• Developing products that satisfy needs, including products that enhance

society’s quality of life • Creating a competitive environment that helps lower product prices • Developing product distribution systems that offer access to products to a large number of customers and many geographic regions • Building demand for products that require organizations to expand their labor force • Offering techniques that have the ability to convey messages that change societal behavior in a positive way (e.g., anti-smoking advertising) 3.3 THE MARKETING CONCEPT

The marketing concept is the philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition. Today most firms have adopted the marketing concept, but this has not always been the case. In 1776 in The Wealth of Nations, Adam Smith wrote that the needs of producers should be considered only with regard to meeting the needs of consumers. While this philosophy is consistent with the marketing concept, it would not be adopted widely until nearly 200 years later. To better understand the marketing concept, it is worthwhile to put it in perspective by reviewing other philosophies that once were predominant. While these alternative concepts prevailed during different historical time frames, they are not restricted to those periods and are still practiced by some firms today. The Production Concept The production concept prevailed from the time of the industrial revolution until the early 1920's. The production concept was the idea that a firm should focus on those products that it could produce most efficiently and that the creation of a supply of low-cost products would in and of itself creates the demand for the products. The key questions that a firm would ask before producing a product were: Can we produce the product? Can we produce enough of it? At the time, the production concept worked fairly well because the goods that were produced were largely those of basic necessity and there was a relatively high level of unfulfilled demand. Virtually everything that could be produced was sold easily by a sales team whose job it was simply to execute transactions at a price determined by the cost of production. The production concept prevailed into the late 1920's. The Sales Concept By the early 1930's however, mass production had become commonplace, competition had increased, and there was little unfulfilled demand. Around this time, firms began to practice the sales concept (or selling concept), under which companies not only would produce the products, but also would try to convince customers to buy them through advertising and personal selling. Before producing a product, the key questions were: Can we sell the product? Can we charge enough for it? The sales concept paid little attention to whether the product actually was needed; the goal simply was to beat the competition to the sale with little regard to customer satisfaction. Marketing was a function that was performed after the product was developed and produced, and many people came to associate

marketing with hard selling. Even today, many people use the word "marketing" when they really mean sales. The Marketing Concept After World War II, the variety of products increased and hard selling no longer could be relied upon to generate sales. With increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs, and these needs were not immediately obvious. The key questions became: What do customers want? Can we develop it while they still want it? How can we keep our customers satisfied? In response to these discerning customers, firms began to adopt the marketing concept, which involves: Focusing on customer needs before developing the product Aligning all functions of the company to focus on those needs Realizing a profit by successfully satisfying customer needs over the long-term when firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. Since the entire organization exists to satisfy customer needs, nobody can neglect a customer issue by declaring it a "marketing problem" - everybody must be concerned with customer satisfaction. The marketing concept relies upon marketing research to define market segments, their size, and their needs. To satisfy those needs, the marketing team makes decisions about the controllable parameters of the marketing mix. 3.4 THE MARKETING MIX (THE 4 P'S OF MARKETING) The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below: Marketing decisions generally fall into the following four controllable categories: • Product

• • •

Price Place (distribution) Promotion

The marketing mix Product


Target Market



These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. Product/Service
• • • • • • • • • • •

What does the customer want from the product/service? What needs does it satisfy? What features does it have to meet these needs? Are there any features you’ve missed out? Are you including costly features that the customer won’t actually use? How and where will the customer use it? What does it look like? How will customers experience it? What size(s), color(s), and so on, should it be? What is it to be called? How is it branded? How is it differentiated versus your competitors? What is the most it can cost to provide, and still be sold sufficiently profitably? (See also Price, below).

• • • •

Where do buyers look for your product or service? If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or online? Or direct, via a catalogue? How can you access the right distribution channels? Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or send samples to catalogue companies?

What do you competitors do, and how can you learn from that and/or differentiate?

• • •

• •

What is the value of the product or service to the buyer? Are there established price points for products or services in this area? Is the customer price sensitive? Will a small decrease in price gain you extra market share? Or will a small increase be indiscernible, and so gain you extra profit margin? What discounts should be offered to trade customers, or to other specific segments of your market? How will your price compare with your competitors?

• •

Where and when can you get across your marketing messages to your target market? Will you reach your audience by advertising in the press, or on TV, or radio, or on billboards? By using direct marketing mailshot? Through PR? On the Internet? When is the best time to promote? Is there seasonality in the market? Are there any wider environmental issues that suggest or dictate the timing of your market launch, or the timing of subsequent promotions? How do your competitors do their promotions? And how does that influence your choice of promotional activity?

Limitations of the Marketing Mix Framework The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it. 3.5CORPORATE MARKETING SOCIAL RESPONSIBILITY (CSR) AND ETHICS IN

Corporate Social Responsibility defines as “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources”. Some of the benefits of being socially responsible include

(a) Enhanced company and brand image (b) Easier to attract and retain employees (c) Increased market share (d) Lower operating costs and (e) Easier to attract investors. A socially – responsible firm will care about customers, employees, suppliers, the local community, society, and the environment. CSR can be described as an approach by which a company:(a) Recognizes that its activities have a wide impact on the society and that development in society in turn supports the company to pursue its business successfully . (b) Actively manages the economic, social, environmental and human rights. This approach is derived from the principles of sustainable development and good corporate governance. Marketing managers within different firms will see some social issues as more relevant than others. The relevance of a given social issue is determined by the company’s products, promotional efforts, and pricing and distribution policies but also by its philosophy of social responsibility. Ethical Conflict faced by the Marketers Marketers must be aware of ethical standards and acceptable behavior. This awareness means that marketers must recognize the viewpoints of three key players: the company, the industry, and society. Since these three groups almost always have different needs and wants, ethical conflicts are likely to arise. Ethical conflicts in marketing arise in two contexts : First, when there is a difference between the needs of the three aforementioned groups ( the company, the industry, and society) a conflict may arise. Second and ethical conflict may arise when one’s personal values conflict with the organization. In either case, a conflict of interest is a possible outcome. An example of the first type of conflict is the tobacco industry. Cigarettes have for many decades been a lucrative business. So, cigarette and tobacco marketing have been for companies and good for the tobacco industry. Many thousands of people around the world are employed in the tobacco industry. So, the world economy has been somewhat dependent on cigarettes and tobacco. However, cigarettes are harmful to society. There is documented proof that cigarette smoking is harmful to health. This is an ethical conflict for cigarette marketers. An example of the second type of conflict, when one’s personal values conflict with the organizations occurs when a leader in the company seeks personal gain (usually financial profit) from false advertising. “Cures” for fatal diseases are one type of product that falls into this category of ethical conflict: In their greed to make a profit, a marketer convinces those who may be dying from an incurable

disease to buy a product that may not be a cure, but which a desperately ill person (or members of his or her family) may choose to purchase in an effort to save the dying family member suffering. Promoting and marketing such products violates rules of marketing ethics. Ethical dilemmas facing marketing professionals today fall into one of three categories: tobacco and alcohol promoting, consumer privacy, and green marketing. Standards for ethical marketing guide business in efforts to do the right thing. Such standards have four functions: To help identify acceptable practices, foster internal control, avoids confusion, and facilitates a basis for discussion. Consumerism Consumerism is concerned with broadening the rights of consumers. The concepts of social responsibility and consumerism go hand-in-hand. If every organization practiced a high level of social responsibility the consumer movement might never have begun. Consumerism is a struggle for power between buyers and sellers; specifically, it is a social movement seeking to increase the rights and powers of buyers in relation to sellers. Seller’s rights and powers are presented in the following list: To introduce any product in any size and style they wish into the marketplace, so long as it is not hazardous to personal health or safety or if it is hazardous, to introduce it with the proper warnings and controls To price the product at any level they wish, provided there is no discrimination among similar classes of buyers To spend any amount of money they wish to promote the product, so long as the promotion is not defined as unfair competition To formulate any message they wish about the product provided that it is misleading or dishonest in content or execution To introduce any buying – incentive schemes they wish In contrast, here are buyers’ rights and power: To refuse to buy a product that is offered to them To except the product to be safe To expect the product to essentially match how the seller represented it To receive adequate information about the product It is in the best interest of marketers to understand the level of consumer standards and the nature

of consumer perceptions, as well as what is required to foster realism and accuracy among consumers. Marketing and the Natural Environment Another significant area of social concern is the environment. Marketing is ultimately dependent on the use of scarce resources to fulfill human needs, without harming or unnecessarily using care resources. Marketing managers should help to determine which products are produced, and which products are indirectly affecting the environment: • The natural resources and materials used • The amount of energy required in the production process • The residuals (e.g., waste water) that result from production • The consumption of resources and energy that is required to use products (cars, air conditioners) • The generation of pollutants (e.g., exhaust fumes) in using products • The amount of packaging material that may have to be discarded. (packaging comprises less than 14 percent of collectible solid waste, but consumers often estimate its share of that waste at 40 to 80 percent) Relationship Marketing and Ethics Nowadays, most ethicists believe that Relationship Marketing is a reasonable practice leading to positive relationships between buyers and sellers. Relationship marketing requires that rules are not necessarily contractual. Relationship marketing allows buyers and sellers to work together. However, there are disadvantages to this approach that means relationship marketing requires time to develop a list of expected conduct or “rules of behavior.” Green Marketing and Ethical Issues The next important area the marketer need to know about what is the relevance of Social Marketing in order to protect the environment and to improve the quality of life and are concerned with issues that include conservation of natural resources, reducing environmental pollution, protecting endangered species, and control of land use. Many companies are finding that consumers are willing to pay more for a green product. The last three decades have seen a progressive increase in worldwide environmental consciousness. This has been driven by a number of factors from increased media coverage to rising evidence of environmental problems such as the depletion of the ozone layer, acidification of rivers and forest degradation, global warming, the rise of pressure group activity, tougher legislation and major industrial disasters. Concern has moved from the local scale to a national and increasingly global scale.

The rate of environmental degradation has intensified. The nineteenth century brought the first large scale pollution as companies geared themselves to produce goods as fast as possible, with virtual disregard for human or environmental well-being. Nations battled for industrial supremacy using raw materials and creating pollution at a staggering rate. As countries became economically stronger, competition also grew. More efficient production methods were employed, and few companies, if any, gave a thought to the impact they were having on their surroundings. With the increase in water pollution from the chemical works, and air pollution from the iron and steel industry, towns and cities began to pay the price for high industrial productivity. The seventies saw a resurgence of environmental concern. In 1972 the historic United Nations Conference on the Human Environment took place in Stockholm, leading to the creation of the United Nations Environment Programme (UNEP). In 1972 the ‘Limits to Growth Report’ of the Club of Rome projected a catastrophic future if growth continued at the same rate, and many groups called for ‘zero growth’. The reaction of companies, governments and academics to such gloomy environmental prophecies varied widely. In 1987 the United Nations World Commission on Environment and Development recognized that zero growth was no longer a viable option if the needs and aspirations of the industrializing nations were to be fulfilled. As a result, 1987 saw the publication of ‘Our Common Future (The Brundtland Report)’ which concluded that economic growth had a role to play in improving the standards in the less industrialized world and also in reducing environmental destruction. It suggested that growth had to be of a different order, and had to move the world away from viewing the environment as an unlimited resource to be exploited by each incumbent generation. Ass the 1980s progressed, it became increasingly clear that, although the starkest predictions of resource depletion and population explosion had failed to materialize, all was far from well with the planet. A number of published analyses of the environment showed that according to a wide range of indicators, the environment was coming under increasing stress. Concern among consumers and the electorate began to mount, with the inevitable consequence being that environmental issues moved from the fringes to the center of the business and political agenda. The environment’s role in business is profoundly obvious, but easy to overlook. It provides every business with its inputs, and a destination for all its outputs. It also provides the business with the physical space within which its operations occur. For businesses dealing directly with environmental resources, such as agriculture, tourism or oil, the importance of the physical environment has always been apparent. Society in its present form and on its current trajectory of development, however, cannot be sustained indefinitely. The physical environment has limited resources and limited capacity to absorb pollution and

waste. The underlying cause of society’s current unsustainability relates to the way in which economics and technology have come to dominate our thinking about business and the environment. Conventional marketing within industry is very much a product of this techno-economic perspective. This has created a ‘grey’ culture which is not sustainable and is therefore terminal. To transform this into a ‘green’ sustainable culture, there is a need to balance consideration of the economic and technical impacts and aspects of businesses with understanding of their social and physical implications. It is now widely accepted that societies, economies, and the businesses within them need to find a more sustainable path to for future development. In the business world the vocabulary of management was suddenly expanded by the discussion of ‘green consumers’, ‘green markets’ and ‘green products’ and the practice of ‘environmental’ or ‘green marketing’. For majority of the companies improving environmental performance has, until recently, been a question of legislative compliance and occasional reactions to external events and pressures. It has only been companies in the front-line sectors such as oil, chemicals, power and cars that have gone beyond a reactive and tactical approach to green issues. However, by early 1990s a shift away from a technical-compliance oriented approach towards a more proactive green strategy orientation was noticed. Companies were increasingly pursuing competitive advantage and product differentiation by increasing investment in environmental marketing, green design and improving overall corporate eco-performance. In addition to these externally motivated changes, the realization is dawning within industry that sustainability will not be reached simply by demand-pull from the market and compliance-push from the regulators. The changes that are needed to safeguard the future of the environment and the economy must partly be driven from the business community, which means they must proactively integrate eco-performance into the strategies, systems and cultures of the organization. Eg: Toyota has become quite successful with their hybrid cars. The three R s of environmentalism are: Reduce Reuse and Recycle. Green marketing refers to the development and distribution of ecologically-safe products. It refers to products and packages that have one or more of the following characteristics: (1) Are less toxic (2) Are more durable (3) Contain reusable materials

(4) Are made of recyclable material. In short, these are products considered “environmentally responsible”. Research based studies on green marketing are very scanty. Whatever studies available are those carried out in the West. Zinkhan & Carlson (1995) in a study titled ‘Green Advertising and the Reluctant Consumer’ analyses the advertiser’s dilemma from different perspectives of consumers having negative attitudes about business and negative impressions of the advertising industry. The nature of green marketing is clarified by Kilbourne (1995) in ‘Green Advertising: Salvation or Oxymoron’, demonstrating that the concept is far more complex than the existing marketing literature suggests. Green is characterized in this study as a two dimensional concept with political and human dimensions. Banerjee et al (1995) in a study on multi dimensional analysis of environmental advertising suggests that environmental appeals are becoming increasingly common in advertising. The results of a content analysis designed to uncover the underlying structure of green advertising are presented. A majority of advertisers in the sample attempted to project a green corporate image rather than focusing on the environmental benefits of their product or service. Most of the studies focus on the communication aspect of green marketing and studies that cover the entire gamut of green marketing are woefully lacking and more so studies conducted in an Indian context. In the early to mid 1960s created concern about the social responsibility of businesses and their impact on the natural environment and the health and welfare of the planet. This concern was heightened during the early 1970s in response to Limits to Growth and resulted in the emergence of both the ‘societal marketing concept’ and the ‘ecological marketing concept’. In response to the new green challenge that emerged during the early 1980s, these early concepts have amalgamated to create an environmental marketing concept. Green marketing is thus a form of socio-ecological marketing whereby the goods and services sold, and the marketing practices involved in their sale take into account the environmental ramifications of society as a whole. The marketing process essentially involves matching the controllable internal variables of the marketing mix with the demands of the marketing environment. Environmental marketing is no different, in principle, although the internal variables and external demands that must be reconciled are a little different. Green marketing takes account of the wider relationship of the organization and its products to the surroundings. It is about a more aware, open, targeted and sensitive approach that integrates the strategic link between the company, the environment, and marketing, rather than being primarily concerned with tactical communications opportunities. The prime emphasis is on, developing relationships and satisfying separate Stakeholders needs in an environmentally and socially responsible manner. The key stakeholders are customers, investors, parent company, directors, employees, the community, legislators, pressure groups, suppliers, and the media

Green marketing differs from its societal and ecological predecessors in it’s intertwining of ecological and social concerns, in the breadth of the ecological agenda that it tackles, and in its potential application across all types and sectors of business. Green marketing goes beyond societal marketing in four key ways: It is an open-ended rather than a long-term perspective. It focuses more strongly on the natural environment. It treats the environment as something which has an intrinsic value over and above its usefulness to society. It focuses on global concerns rather than those of particular societies. The key elements of green marketing can be summarised as under: A balanced approach to the social, technological, economic and physical aspects of businesses and societies. An emphasis on long term sustainable qualitative development rather than short-term unsustainable quantitative growth. A holistic approach aimed at reversing the reductionalist and fragmented approach of previous business theory and practice. A consideration of consumers as real human beings rather than as hypothetical ‘rational economic’entities. An emphasis on meeting the genuine needs of consumers, rather than on stimulating superficial desires. A recognition that consumers and society have multiple and sometimes conflicting wants and needs. A view of the company and all its activities as part of the ‘product’ that is consumed. A recognition that the large scale long distance nature of the current economy is not sustainable, and that in the future small and local will be beautiful. Embracing the concept of eco-performance which incorporates the nonmarket outputs of the company, with performance of the product during and after use and the environmental impact of companies which contribute to the creation and marketing of the product elsewhere in the supply chain. The pursuit of added socio-environmental value as well as added technoeconomic value. Cause – Related Marketing and Ethics Cause-related marketing should not be confused with social marketing. A key difference is that a major purpose of cause-related marketing is to help a business. It might be used to improve the image of the firm or to increase market share. The technique involves associating a business with a cause. Social marketing, on the other hand, is generally not associated with any company and

issued solely to help society by dealing with a social problem. Cause-related marketing has to be done correctly or it can hurt a company. A firm may look like it is exploiting a charity. It is important for the firm to be transparent and honest about what it is doing. There should also be a fit between the company and the cause. Social Marketing and Ethics Social Marketing is defined as the use of marketing principles and techniques to influence a target audience to voluntarily accept, reject, modify, or abandon a behavior for the benefit of individuals, groups or society as a whole. Social marketing is usually done by a non-profit organization, government, or quasigovernment agency. The goal is either to steer the public away from products that are harmful to them and / or society (e.g., illegal drugs, tobacco, alcohol, etc.) or to direct them towards behaviors or products that are helpful to them and / or society (e.g., having family meals, praying together, etc.). 4. Have you understood type questions? 1. State whether true or false? Marketing is defined as both a philosophy and set of activities. 2. KY Systems is a company that uses computers to generate new product prototypes. It has generated loyal business clients by providing the best customer support in the industry. The company also provides direct sales consultation that gives its salespeople intimate knowledge about what exactly its customers want. This partnership between KY Systems and its customers entails relationship marketing. State whether true or false? 3. Which one of the following statements by a company chairman best reflects the marketing concept? A. We have organised our business to make certain that we satisfy customer needs B. We believe that the marketing department must organise to sell what we produce. C. We try to produce only high quality, technically efficient products D. We try to encourage company growth. 4. Which of the following is an example of a problem that may arise in the implementation of the marketing concept? A. By satisfying one segment in society, a firm contributes to the dissatisfaction of other segments. B. Consumers do not understand what the marketing concept is. C. Dealers do not support the marketing concept. D. A product may fit the needs of too many segments. 5. The marketing concept is a philosophy that states that an organisation should try to satisfy customers' needs and at the same time:

A. B. C. D.

increase market share. increase sales. achieve the organisation's goals. always produce high quality products

5. Summary In the current context, there is very high competition among the marketers in India and that has been necessitated due to the fact that consumerism is on the high and the importance of marketing is known to people. An interaction between business and industry in a global perspective has become imperative because of the need to upgrade regional technologies and maintain the competitive edge in the international markets. Today's consumer is more demanding than yester-years'. He is not content with the second best in technology and is reluctant to pay for a product or a service just because it comes from a particular region or a country. This, understandably, has led to business and industry across the world to make use of technologies and resources worldwide to upgrade their products and services. In this Liberalisation-Privatisation-Globalisation era to become an integral part of the global system, nations are opening up their economies at a rapid rate, which were hitherto protected from world markets. The removal of artificial barriers to trade has and should made it possible for innovative companies to go in search of new markets across borders with improved efficiency and greater competitive strength. This has forced the Indian companies to be competitive on the marketing front. 6. Exercises 1. Today we have an unmanageable surplus of food grains, but regrettably, no integrated approach to agriculture, procurement & food processing, to take advantage of such bounty or capabilities. More worrying is the fact that public investment in Agriculture has been declining in real terms through the 1980s & most of the 1990s. Enhancement of public investment in agriculture is a catalyst for private sector investment, but cash strapped state Govts. look to the centre for financial support & policy directives. Public investment must go on a priority basis to non green revolution products & dryland areas. The private sector has watched passively from the sidelines. Well known solutions to the problems of Indian agriculture require political will & a commitment to increase productivity beyond subsistence. Do you agree? Is there any scope for marketing? 2. Researchers at Rohan Industries spent considerable time, effort, and money developing a bluish windshield that would let in filtered sunlight but block out the heat. Little market research was done, but the scientists were convinced this new product would be significantly better than existing windshields even though they were more expensive and of a different color than the current models on the market. What do you think is the orientation of the company? Do you think it is right? Justify. 3. Kumar owns a small laboratory that makes bifocal contact lenses. His company is growing fast, and there are many things he does not understand about his

customers. Should Kumar who is 25, take a marketing course? State yes or no? justify your answer. 7.References: 1. Milestones of Marketing by George Burton Hotchkiss, The MacMillan Company, New York, 1938, page vii 2. "Dictionary of Marketing Terms" from marketingpower.com. 3. Zinkhan, George. M; Carlson, Les: Green Adversting and the Reluctant Consumer, Journal of Advertising, 1995 4. Kilbourne, William E: Green Advertising: Salvation or Oxymoron, Journal of Advertising, 1995 5. Banerjee, Subhabrata: Gulas, Charles S; Iyer, Easwar: Shades of Green: A multi-dimensional Analysis of Environmetnal Advertising, journal of Advertising, 1995 6. Kumar, Krishna; “Meeting the Challenges of a Borderless Economy: Needed a Paradigm Shift?”: Working Paper No. 2001/4, Indian Institute of Management, Lucknow (India), presented in Seminar on WTO & Allied Issues held at Indian Institute of Management, Lucknow , February 24-25, 2001. 7. Donovan R; Henley N. Social Marketing: Principles and Practice. Melbourne: IP Communications, 2003.

Marketing environment Unit structure:
1. Introduction 2. Learning Objectives 3. Marketing Environment 3.1 Social environment 3.2 Cultural environment 3.3 Economic environment 3.4 Politico-legal environment 3.5 Lessons for marketers 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction: The Business environment surrounds and impacts upon the organization. There are three key perspectives on the environment, namely the 'macro-environment,' the 'micro-environment' and the 'internal environment'. Micro environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and

customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship. It is a more local relationship, and the firm may exercise a degree of influence. Macro environment includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology. Keeping this in mind the environmental influences needs to be studied and you will have the inputs in all the forces that influence the organization in its quest for effective marketing. 2. Learning objectives: After reading the unit, you will understand how: • • • To learn the need for scanning the environment To understand the environmental influences and why marketing proactive To assess the impact created by each influence on the organizations has to be

3. MARKETING ENVIRONMENT: Environmental scanning helps in assessing the impact the environment could create the business. Observation played a minor, but non-negligible role. Visits to the premises, including the factory plants in some cases, meals in the canteens of some of the organizations, attention paid to the way-of-doing-things in the several companies - how visitors were announced, how meetings were scheduled and cancelled, absence or frequency and type of interruptions in the course of the interviews, degree of formality or informality in interpersonal relations - contributed to consolidate impressions or confirm information based on documentary evidence or on the interviews. The grounded theory proposed comprises three main components: the categories (the core category and the subsidiary categories), the principal relationships among them, and the contextual factors that shape the categories and relationships. From an internal perspective, these factors include corporate history and culture. From an external perspective, these contextual factors include the overall economic, social, cultural and political conditions that characerize modern India and shape, at least to a certain extent, the organizations operating in that reality. The core category identified was that of environmental scanning, to which a set of subsidiary categories was related. According to Aguilar,environmental scanning refers to the exposure to and acquisition of "information about events and relationships in a company's outside environment, the knowledge of which would assist top-management in its task of charting the company's future course of action." This

interrelated set of categories contributes to understanding how contextual factors external and internal to the organization, influence the scanning activity, and also how perceived environmental change affects strategic change. The task of explaining variance among companies resides with a few key relationships among those categories. Now let us see each environment in detail. 3.1. SOCIAL ENVIRONMENT: Indian society is multifaceted to an extent perhaps unknown in any other of the world's great civilizations. Virtually no generalization made about Indian society is valid for all of the nation's multifarious groups. Comprehending the complexities of Indian social structure has challenged scholars and other observers over many decades. The ethnic and linguistic diversity of Indian civilization is more like the diversity of an area as variable as Europe than like that of any other single nation-state. Living within the embrace of the Indian nation are vast numbers of different regional, social, and economic groups, each with different cultural practices. Particularly noteworthy are differences between social structures in the north and the south, especially in the realm of kinship systems. Throughout the country, religious differences can be significant, especially between the Hindu majority and the large Muslim minority; and other Indian groups-Buddhists, Christians, Jains, Jews, Parsis, Sikhs, and practitioners of tribal religions--all pride themselves on being unlike members of other faiths. Urban-rural differences can be immense in the Indian Society. Nearly 74 percent of India's population dwells in villages, with agriculture providing support for most of these rural residents. In villages, mud-plastered walls ornamented with traditional designs, dusty lanes, herds of grazing cattle, and the songs of birds at sunset provide typical settings for the social lives of most Indians. In India's great cities, however, millions of people live amidst cacophony--roaring vehicles, surging crowds, jammed apartment buildings, busy commercial establishments, loudspeakers blaring movie tunes-while breathing the poisons of industrial and automotive pollution. Indian caste system: Members of the highest priestly castes, the Brahmans, are generally vegetarians (although some Bengali and Maharashtrian Brahmans eat fish) and avoid eating meat, the product of violence and death. High-ranking Warrior castes (Kshatriyas), however, typically consume nonvegetarian diets, considered appropriate for their traditions of valor and physical strength. A Brahman born of proper Brahman parents retains his inherent purity if he bathes and dresses himself properly, adheres to a vegetarian diet, eats meals prepared only by persons of appropriate rank, and keeps his person away from the bodily exuviae of others (except for necessary contact with the secretions of family infants and small children). If a Brahman happens to come into bodily contact with a polluting substance, he can remove this pollution by bathing and changing his clothing. However, if he were to eat meat or commit other transgressions of the rigid dietary codes of his particular caste, he

would be considered more deeply polluted and would have to undergo various purifying rites and payment of fines imposed by his caste council in order to restore his inherent purity. In sharp contrast to the purity of a Brahman, a Sweeper born of Sweeper parents is considered to be born inherently polluted. The touch of his body is polluting to those higher on the caste hierarchy than he, and they will shrink from his touch, whether or not he has bathed recently. Sweepers are associated with the traditional occupation of cleaning human feces from latrines and sweeping public lanes of all kinds of dirt. Traditionally, Sweepers remove these polluting materials in baskets carried atop the head and dumped out in a garbage pile at the edge of the village or neighborhood. The involvement of Sweepers with such filth accords with their low-status position at the bottom of the Hindu caste hierarchy, even as their services allow high-status people, such as Brahmans, to maintain their ritual purity. Members of the Leatherworker (Chamar) caste are ascribed a very low status consonant with their association with the caste occupation of skinning dead animals and tanning the leather. Butchers (Khatiks, in Hindi), who kill and cut up the bodies of animals, also rank low on the caste hierarchy because of their association with violence and death. However, castes associated with ruling and warfare--and the killing and deaths of human beings--are typically accorded high rank on the caste hierarchy. In these instances, political power and wealth outrank association with violence as the key determinant of caste rank. Status of Women in Indian society: According to ancient Hindu scriptures no religious rite can be performed with perfection by a man without the participation of his wife. Wife's participation is essential to any religious rite. Married men along with their wives are allowed to perform sacred rites on the occasion of various important festivals. Wives are thus befittingly called 'Ardhangani' (betterhalf). They are given not only important but equal position with men. But in the later period the position of women went on deteriorating due to Muslim influence. During the Muslim period of history they were deprived of their rights of equality with men. They were compelled to keep themselves within the four walls of their houses with a long veil on their faces. This was definitely due to Islamic influence. Even today in some Islamic countries women are not allowed to go out freely. The conservative regimes of Iran and Pakistan, for example, have withdrawn the liberties given to women folk by the previous liberal governments. Even in India the Muslim women are far more backward than their Hindu, Christian and Sikh counterparts. The sight of Muslim women walking with long 'Burkas' (veils) on their person is not very rare. The women are, as a matter of fact, regarded as captive and saleable commodities in Muslim families. One man is allowed to have so many wives with the easiest provision of divorce. The

husband can divorce a wife just by saying 'I divorce you' under the provision of Muslim laws. This is what the emperors did hundred years back and the men are doing it even now in almost all Islamic countries. Even in this last phase of the twentieth century rich and prosperous men of Islamic countries keep scores of wives in their harems. It was natural outcome of the Muslim subjugation of India that woman was relegated to a plaything of man, an ornament to decorate the drawing room. Serving, knitting, painting and music were her pastimes and cooking and cleaning her business. In the wake of Raja Ram Mohan Roy's movement against women's subjugation to men and British influence on Indian culture and civilization the position of women had once again undergone a change. However, it was only under the enlightened leadership of Mahatma Gandhi that they re-asserted their equality with men. In response to the call of Gandhi they discarded their veil and came out of the four walls of their houses to fight the battle of freedom shoulder to shoulder with their brothers. The result is that the Indian Constitution today has given to women the equal status with men. There is no discrimination between men and women. All professions are open to both of them with merit as the only criterion of selection. As a result of their newly gained freedom Indian woman have distinguished themselves in various spheres of life as politicians, orators, lawyers, doctors, administrators and diplomats. They are not only entrusted with work of responsibility but also they perform their duties very honestly and sincerely. There is hardly any sphere of life in which Indian women have not taken part and shown their worth. Women exercise their right to vote, contest for Parliament and Assembly, seek appointment in public office and compete in other spheres of life with men. This shows that women in India enjoy today more liberty and equality than before. They have acquired more liberty to participate in the affairs of the country. They have been given equality with men in shaping their future and sharing responsibilities for themselves, their family and their country. It is a fact that women are intelligent, hard-working and efficient in work. They put heart and soul together in whatever they undertake. As typists and clerks they are now competing successfully with men. There are many women working in the Central Secretariat. They are striving very hard to reach highest efficiency and perfection in the administrative work. Their integrity of character is probably better than men. Generally it was found that women are less susceptible to corruption in form of bribery and favouritism. They are not only sweet tongued but also honest, efficient and punctual in their jobs as receptionists, air-hostesses and booking clerks at railway reservation counters. As a matter of fact they are gradually monopolising the jobs of receptionists and air-hostesses. Another job in which Indian women are doing so well is that of teachers. In country like India where millions are groping in the darkness of illiteracy and ignorance efficient teaching to the children is most urgently needed. By virtue of

their love and affection for the children the women have proved the best teachers in the primary and kindergarten schools. They can better understand the psychology of a child than the male teachers. Small children in the kindergarten schools get motherly affection from the lady teachers. It is probably significant that the Montessori system of education is being conducted mostly by the women in this country. Women have been serving India admirably as doctors and nurses. Lady doctors have been found to perform efficient surgery by virtue of their soft and accurate fingers. They have monopolised as nurses in the hospitals and nursing homes. Very few men have been able to compete with them in this sphere because the women have natural tendency to serve and clean. It is thus natural tendency found in women which motivated Florence Nightingale to make nursing popular among the women of the upper classes in England and in Europe. She showed the way to women kind how nobly they can serve humanity in the hours of sufferings and agonies. Women's contributions in politics and social services have also been quite significant. We cannot fail to mention the name of Indira Gandhi who shone so brilliantly and radiantly in the firmament of India's politics. She ruled this country for more than a decade and took India victorious out of Pakistan-war which resulted in the historic creation of a new country, Bangladesh. In the field of social service Indian women have also done some excellent jobs. They have not only served the cause of the suffering humanity but have also brought highest laurels for the country. The name of Mother Teressa cannot but be mentioned. She brought the Nobel Prize for India by her selfless services to the poor, destitute and suffering people of our country in particular and the needy and handicapped people of the world in general. Today, we need the services of the educated women who can tour throughout the country and help in removing human sufferings. The Government is alarmed at the rapid growth of population in the rural areas in particular. Women volunteers can more easily take up the task of canvassing the advantages of family planning among the rural womenfolk. They can, more easily than men, carry on propaganda against hazards of unhygienic conditions under which the villagers live. In urban areas they can efficiently take up the task of visiting and teaching the orphans and the helpless widows in the orphanages and the widow welfare centres. They can train them in sewing, knitting, embroidery and nursing in which women by nature excel. They can also train them in the art of music and dancing. But all this should not lead us to conclude that the women should look down upon domestic life. The main sphere of action for them who have not taken up jobs outside should be essentially a happy home which is their real kingdom and where their sweet manners and mature advices as wife, mother, sister and daughter make tremendous effects on the male members of the family. The progress of a nation depends upon the care and skill with which mothers rear up their children. The first and foremost duty of Indian women should, therefore, be

to bring forth noble generations of patriots, warriors, scholars and statesmen. Since child's education starts even in the womb and the impressions are formed in the mind of a child while in mothers arms women have to play a role of vital importance. They have to feel and realise at every step of their life that they are builders of the fate of our nation since children grow mainly in mothers arms. They should also discourage their husbands and sons from indulging in bribery and other corrupt practices. This they can do only when they learn the art of simple living by discarding their natural desires for ornaments and a living of pomp and show. In many cases families have been running in deficit due to the extravagance of the housewives in maintaining a high standard of living. The result is that the earning male members of the family are forced to fill up the gap in the budget by corrupt practices. Corruption has been so far the greatest impediment in way to India's progress. Minus corruption India would have been one of the most developed nations of the world. There is no denying the fact that women in India have made a considerable progress in the last fifty years but yet they have to struggle against many handicaps and social evils in the male dominated society. The Hindu Code Bill has given the daughter and the son equal share of the property. The Marriage Act no longer regards woman as the property of man. Marriage is now considered to be a personal affair and if a partner feels dissatisfied she or he has the right of divorce. But passing of law is one thing and its absorption in the collective thinking of society is quite a different matter. In order to prove themselves equal to the dignity and status given to them in the Indian Constitution they have to shake off the shackles of slavery and superstitions. They should help the government and the society in eradicating the evils of dowry, illiteracy and ignorance among the eves. The dowry problem has assumed a dangerous form in this country. The parents of the girls have to pay thousands and lacs to the bridegrooms and their greedy fathers and mothers. If promised articles are not given by the parents of brides, the cruel and greedy members of the bridegrooms' family take recourse to afflicting tortures on the married women. Some women are murdered in such cases. The dowry deaths are really heinous and barbarous crimes committed by the cruel and inhumane persons. The young girls should be bold enough in not marrying the boys who demand dowry through their parents. The boys should also refuse to marry if their parents demand dowry. But unfortunately the number of such bold and conscientious boys is very few. Even the doctors, engineers, teachers and the administrative officers do not hesitate in allowing themselves to be sold to the wealthy fathers of shy and timid girls. Such persons have really brought disgrace to their cadres in particular and society in general. 3.2. Cultural Environment: A society's culture includes its values, its ethics and the material objects produced by its people. It is the accumulation of shared meanings and traditions among members of a society. A culture can be described in terms of its ecology

(the way people adapt to their habitat), its social structure and its ideology (including people's moral and aesthetic principles). Culture refers to the set of values, ideas and attitudes that are accepted by a homogeneous group of people and transmitted to the next generation. Subculture refers to the norms and values of subgroups within the larger or national culture. African American, Hispanics, and Asians represent sizable subcultures. It is inappropriate to think in terms of stereotypes when marketing to these subcultures. African Americans represent the largest racial/ethnic subculture in the united states. While price-conscious, they are motivated by product quality and choice. Indian consists of people who are either Aryans and Dravidians to a large extent. Current research indicates that stereotypes are misleading. Christians are the subculture in India where as in United States, it is the culture by itself. Asians are the fastest growing subculture in the United States. The growth of this subculture is due primarily to immigration. Like Hispanics, Asians represent a diverse subculture including Chinese, Japanese, Asian-Indians, and many other nationalities. Two groups of Asians have been identified: (1) assimilated Assimilated Asians are conversant in English and exhibit buying patterns very much like "typical" American consumers. (2) Non-assimilated Non-assimilated Asians cling to their native languages and customs. Culture is part of the external influences that impact the consumer. That is, culture represents influences that are imposed on the consumer by other individuals.The definition of culture offered by Engel is "that complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man person as a member of society." From this definition, the following observations can be made: Culture, as a "complex whole," is a system of interdependent components. Knowledge and beliefs are important parts. In the U.S., we know and believe that a person who is skilled and works hard will get ahead. In other countries, it may be believed that differences in outcome result more from luck. "Chunking," the name for China in Chinese, literally means "The Middle Kingdom." The belief among ancient Chinese that they were in the center of the universe greatly influenced their thinking. Other issues are relevant. Art, for example, may be reflected in the rather arbitrary practice of wearing ties in some countries and wearing turbans in others. Morality may be exhibited in the view in the United States that one should not be naked in public. In Japan, on the other hand, groups of men and women may take steam baths together without perceived as improper. On the other extreme, women in some Arab countries are not even allowed to reveal their faces. Notice, by the way, that what at least some countries view as moral may in fact be highly immoral by the standards of another country. For example, the law that once banned interracial marriages in South Africa was named the "Immorality Act," even though in most civilized

countries this law, and any degree of explicit racial prejudice, would itself be considered highly immoral. Culture has several important characteristics: (1) Culture is comprehensive. This means that all parts must fit together in some logical fashion. For example, bowing and a strong desire to avoid the loss of face are unified in their manifestation of the importance of respect. (2) Culture is learned rather than being something we are born with. (3) Culture is manifested within boundaries of acceptable behavior. For example, in American society, one cannot show up to class naked, but wearing anything from a suit and tie to shorts and a T-shirt would usually be acceptable. Failure to behave within the prescribed norms may lead to sanctions, ranging from being hauled off by the police for indecent exposure to being laughed at by others for wearing a suit at the beach. (4) Conscious awareness of cultural standards is limited. A hardcore southindian can be easily distinguished when handling a fork and knife in eating out in north India. (5) Cultures fall somewhere on a continuum between static and dynamic depending on how quickly they accept change. For example, Indian culture has changed a great deal since the 1950s, while the culture of Saudi Arabia has changed much less. It should be noted that there is a tendency of outsiders to a culture to overstate the similarity of members of that culture to each other. In India, there is a great deal of heterogeneity within our culture; however, people often underestimate the diversity within other cultures. For example, in Latin America, there are great differences between people who live in coastal and mountainous areas; there are also great differences between social classes. Subculture refers to a culture within a culture. For example, African Americans are, as indicated in the group name, Americans; however, a special influence of the African American community is often also present. For example, although this does not apply to everyone, African Americans tend to worship in churches that have predominantly African American membership, and church is often a significant part of family life. Different perspectives on the diversity in U.S. culture exist. The "melting pot" metaphor suggests that immigrants gradually assimilate after they arrive. Therefore, in the long run, there will be few differences between ethnic groups and instead, one mainstream culture that incorporates elements from each will result. The "salad bowl" metaphor, in contrast, suggests that although ethnic groups will interact as a whole (through the whole mix of salad) and contain some elements of the whole (through the dressing), each group will maintain its own significant traits (each vegetable is different from the others). The "melting pot" view suggests that one should run

integrated promotions aimed at all groups; the "salad bowl" approach suggests that each group should be approached separately. Subculture is often categorized on the basis of demographics. Thus, for example, there is the "teenage" subculture and the "French- Indian" subculture in Pondicherry and “Portugese- Indian” subculture in Goa. While part of the overall culture, these groups often have distinguishing characteristics. An important consequence is that a person who is part of two subcultures may experience some conflict. For example, teenage native Indians experience a conflict between the mainstream teenage culture and the orthodox Indian ways. Values are often greatly associated with age groups because people within an agegroup have shared experiences. For example, it is believed that people old enough to have experienced the American Depression are more frugal because of that experience. Regional influence, both in the United States and other areas, is significant. Many food manufacturers offer different product variations for different regions. Joel Garreau, in his book The Nine Nations of North America, proposed nine distinct regional subcultures that cut across state lines. Although significant regional differences undoubtedly exist, research has failed to support Garreau’s specific characterizations. Let us look at some of the subcultures prevailing in India: The Bengali subculture Known for their contribution in the field of creative work and academic endeavours, by nature intellectual work rather than the work which will involve physical labour. All though successful in creative persuits, Bengali business men are not very common to find. Bengali houses are also proves of their artistic inclination. Extremely fond of music and books, their main festival is durga pooja. When Bengali spend a lot on new cloths, food including sweets and nonvegetarian item. The fact that the Bengali consume non-vegetarian food during the religious festival, shows the unorthodox lifestyle they follow. In most parts of India people eat vegetarian food during religious festivals. Known all over India for the variety of sweets they make, bengalies are knowns for making delicious fish dishes. Bengalies likes to spend a lot on food and prefer to consume variety of dishes. A typical Bengali menu is served in course, starting from shuckto which is like a steew of vegetable going to two or three types of fishes, ‘ Payesh’ (Kheer) and ‘Mishti doi.’(sweets curd). The Gujrati Subculture Known for their business acumen, Gujrathis are extremely traditional and have very strong fellow feeling. Gujratis at the same time are friendly towards other religional people and are extremely helpful to the people from their own caste. They are famous for being one of the richest communities in the country and at the same time maintain a Spartan lifestyle. It is not uncommon to find

rich diamond merchants travelling in the 2nd class compartment of the train or by bus. There used to be saying, “If you see a Gujarati driving a car you should know he is a karorepati.” Such simple is their life style. Gujarati businessmen have been extremely successful in the motel business and diamond business in the international market. Yet they will not forget their tradition. The author had a chance to see one famous diamond exporter in Belgium who inside his palatial house had a gujrati cook cooking “Dhollkq” and Srikhand”. The cook was flown in from Ahmedabad. The family even after 25 years in Blgium maintained all the traditions of their subculture. Ladies are also extremely traditional. The two typical features in a Gujarati household are, there will bge a well cuishioned swing in the drawing room and the kitchen is like a central palace, all the ladies will be sitting. Even if you are a guest at somebody’s place, all the ladies will jointly work. “Navaratri” and “Diwali” are their two main festivals. Navaratri is marked by community dancing called ‘garba’ while ‘diwali’ marks the onset of New Year, which is started with Laxmi Puja. Gujratis are generally vegetarian and religious minded, although cosmoplitanness is coming in especially with the new generation. The Marwari Subculture Marwari community is known all over India as the business community. Extremely traditional and religious minded, they are like Gujratis and do not display of pompous life style. Fond of sweets, Marvari women are generally non working, and Marwaris though lead a simple life style, will spend lavishly on the marriage. Hailing from Rajasthan. One will find a Marwari business man settled in eastern states of North Bengal, Assam, Orissa. Non-aggressive and soft spoken by nature, Marwaris are peaceful. The Punjabi Subculture Punjabis are distinct in terms of their lavish lifestyle, whether it is in terms of food habits, dressing, purchse of consumer durables and nondurables. Hardworking by nature, the most distinct trait of a Punjabi is his adaptability in the new environment. The author had chance to visit a Punjabi household in Delhi, the family for years of staying in Calcutta enjoyed eating fish and sweet curd, one of their daughters being married to a Keralite, the family was equally at ease with Keralite dishes like Appam and coconut chicken. Trying new things is very common with Punjabis and they like to spend a lot, with an occation or without it. Typical Punjabis food like their lifestyle is also very rich consisting of “’rajma chawal’, ‘shahi paneer’, ‘butter chicken’, ‘patiala chicken’, etc. diwali is their main festival where besides the puja of godess of wealth ‘Laxmi’, people exahange gifts. A typical Punjabi will be hardworking. Aggressive, and ambitious. Being cosmopolitan and lively are some other traits of a Punjabi. Some is true with their, music, dance or their language, it is full of life. The Oriya Subculture

Quite similar to Bengali subculture is oriya subculture. Oriya people, by nature, are extremely artistic. Oriya craftsmanship is known all over the country whether it is in fabric, philigri work, stone work. Oddissi dance is as famous as the Jagannath Temple in Konark. Extremely fond of sweets, Oriya people eat lot of ‘pan’ and ‘pakal’; during lunch hours one will find office goers standing on the road side and eating ‘pakal’. “Rath Yatra” of lord Jagannath is their main festival during which Oriyas eat vegetarian food and generally wear new cloths, take leave from the office to have a darshan of Jagannath and touch him as it is the only time common man can touch the lord. The Tamil subculture Tamilians are known both their intelligence and hard work. They shine in engineering field, scientific research and governmental jobs. Traditional by nature, a Tamilian professor will not mind going to college wearing his traditional dress of a white shirt and dhoti wrapped around. A Tamilian women will not mind going to her work place with flower in her hair; such is their attachment to their culture. A Tamil household ia an example of hygienic living. Tamil households are spic and span and decorated with traditional handicrafts, especially brassware. Although Tamil Nadu is a hot place, people are very fond of wearing rich silk sarees in deep colours, so are they fond of wearing heavy gold and diamond ornaments. Tamil Nadu is known for its Kanjivaram silk and its food whether is the ubiquitous dosa, idli or the tamrind rice, lemon rice, tomato rice. They only eat rice and not difficult to find a renowned professor who is also expert in Carnatic music or an engineer who is also a Bharatanatyam dancer. Tamilians love to hold on to their rich traditional heritage. “Pongal” is their main festival which literally means new cooked rich and held in the month of January and marks the incoming of the new crop. 3.3. Economic Environment: Business fortunes and strategies are influenced by the economic characteristics and economic policy dimensions. The economic environment includes the structure and nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets, global economic linkages, economic policies etc. A widely used classification of economies is on the basis of per capital income,ie.,the average annual income per person. Accordingly, countries are broadly classified as low income, high income economies and the middle income economies. Low income economies are those economies with very low per capital income. All economies with per capita $755 or less in2000 are regarded as low income economies. There are 63 low income economies in 2000. High income economies are countries with very rich income per capital. Those with a per capital GNP of$ 9266 or above in2000 fall in the category of high in come economies.

There are mainly two categories of high income economies, namely, industrial economies and oil exporters. Middle income economies fall in between the low income and high income economies. The middle income economies are subdivided in to lower middle income and upper middle income economies. In 2000, there are 92 middle income economies (54 lower middle incomes and 38 upper middle incomes. The low income economies are sometimes referred to as third world (the high income and middle income economies representing the first and second worlds.).Low income is just an indication of deprivation people in developing countries. Low income prevents access to basic necessities, not only better and modern amenities. The term recession is depression in an economy which leads to stagnation and poor incomes. Within the category of low income economies, for example, sometimes a special category name least developed economies is identified. Most of the least developed economies suffer from one or more of the following constraints: a very low GNP per capita, land locked remote insularity, desertification and exposure to natural disasters. According to the Human Development Report there are more than 40 least developed countries in 1999.There are on the other hand developing economies such as the Asian countries. They are sometimes referred to as newly industrialising economies. Now Peoples Republic of China is regarded as a newly industrializing economy. The most comprehensive indicator of the level of economic activity of an economy is its aggregate output, i.e., the total annual output of finished goods and services, known as gross national product (GNP), which is defined as the total market value of all final goods and services produced in an economy during a given time period (usually a year). GNP is a monetary measure of total output. It excludes transfer payments (like buying and selling of bonds and securities, gifts taxes, or welfare payments) and secondhand sale of goods, as these are a part of current production. In order to avoid double-counting. GNP excludes the production contribution of housewives, the efforts of self-help in a productive process by members of households, or improvement in product quality not reflected in price changes. Similarly, social cost of environmental pollution is not deducted from total output. Yet, GNP is till the best measure of nation’s total output. There are three ways to look at the level of economic activity. viz., the output, income and expenditure. Depending upon the way we look at them, we call them gross national product (GNP), gross national income (GNI) and gross national expenditure (GNE), where. • • GNP – Sum of the market value of all final goods and service3s in an economy during a given time period; GNI – Sum of the money incomes derived from activities involving current production in an economy during a given time period; and

GNE – Sum of all that is spent of currently produced goods and services by all types of buyers in an economy during a given period.

Thus, national income can be measured by either of the three ways : (i) (ii) (iii) as an aggregate of goods and services produced during a year; as an aggregate cost of factor services in the economy during a year; or as an aggregate of expenditure on consumption, saving and investment during a year.

The national income data can also be quite helpful for business. In order to undertake long-term investments and to formulate business policies it is quite essential for a dynamic management to do a thorough analysis of changes occurring in the national income. Since national income reveals, on the one hand, the structure of the economy and, on the other, the possible directions of change in the future economic policy of the government, national income data in the hands of an expert managerial economist can prove a life-line for business. It is quite vital for a firm aspiring to capture or retain leadership in business, as it is perhaps one of the most essential ingredients for any business forecasting exercise. The national income data can also be successfully used for determining the product diversification programme and undertaking technological innovations. National income statistics is, thus, a wealth of information, but its usefulness depends on keenness to observe and probe as well as patience to analyse. BUSINESS CYCLES: The effect of upswings and downswings in economic activity is felt quite intensely because of the ever increasing business activity and the strong interrelations between different sectors of an economy and between various economies. The ill effects of the wide swings in business activity were almost ravaging during the Great Depression of 1930s. it was also noticed that after depression there was no ‘natural recovery’ of the economic activity. Artificial measures to be adopted for this purpose needed a scientific understanding of the swings in the activity. Business cycle or trade cycle refers to the fluctuations in economic activity occurring regularly in the capitalist societies. In a business cycle there are wave-like fluctuations in four inter-linked economic variables: aggregate employment, income, output and price level. When the values of these economic variables over time are plotted on a graph, we get a wave-like figure, which is given the name of a ‘cycle’. According to Keynes, “A trade cycle is composed of periods of good trade characterized by rising prices and low unemployment percentages. Alternating with periods of bad trade characterized by falling prices and high unemployment percentages”. Mitchell gives even a more explicit idea of what a business cycle is when he says, “Business cycles are a type of fluctuations found in the aggregate economic activity of nations that

organize their work mainly in business enterprises. A cycle consists of expansions, and revivals which merge into the expansion phase of the next cycle: this sequence of change is recurrent but not periodic…” in short one can observe that: (1) Business cycles are the wave-like fluctuations in economic activity as reflected in the basic economic variables like employment, income, output and price level. (2) These fluctuations are cyclical in nature. One must distinguish between secular trend, random fluctuations, seasonal changes and cyclical fluctuations. The secular trend represents long run changes in business activity which occur slowly and are spread over a number of years. Such long-run changes are the results of factors like improvement in production techniques, change in population, etc, which occur suddenly and are unpredictable. Effect of these events on the economy is limited to the period of occurrence of the event, as there is no regularity in their occurrence. Thus, neither the secular trend nor the random variations in economic activity can form the part of business cycle. The seasonal changes, which are short-run oscillations with regularity, can be confused with the cyclical fluctuations. But the basic difference between the two is that seasonal variations repeat themselves each year (e.g., demand for heavy woolen clothes, light woolen clothes and cotton clothes, and so on, depending on the season each year), while the cyclical fluctuations have a longer life span. The seasonal fluctuations, therefore, have easier predictability and adjustability in business than the cyclical fluctuations. (3) The sequence of changes in business cycle (i.e., recovery, prosperity, depression and recession) recurs frequently and in a fairly similar pattern. (4) The rhythm or the periodicity between the cycles need not be similar. (5) Business cycles are a type of fluctuations found in the aggregate economic activity and not in any single firm or industry. In fact, it connotes the cyclical changes in overall economic environment affecting all the business entities. Business cycles, the periodic booms and slumps in economic activities, are generally compared to ‘ebb and flow’. The ups and downs in the economy are reflected by the fluctuation in aggregate economic magnitudes, including production, investment, prices, wages, bank credits, etc. The upward and downward movement in these magnitudes show different phases of business cycles. Basically, there are only two phases in cycle, viz., prosperity and depression. However, considering the intermediate stages between prosperity and depression, the various phases of trade cycle may be enumerated as follows: 1. Expansion of economic activities, 2. Peak of boom or prosperity, 3. Recession, the downtrend,

4. Trough, the bottom of depression, and 5. Recovery and expansion. In a stagnated economy, depression begins when growth rate turns negative i.e. total output, employment, prices, bank advances, etc., decline during the subsequent periods. The span of depression spreads over a period during which growth rate stays below the secular growth rate or below the zero growth rate in a stagnated economy. Trough is the phase during which the down-trend in the economy slows down and eventually stops, and the economic activities once again register an upward movement with a lapse of time. Though is the period of most sever strain on the economy. When the economy registers a continuous and rapid upward trend in output, employment, etc., it enters the phase of recovery though the growth rate may still remain below the steady growth rate. And when the growth rate crosses the line of steady growth rate, the economy once again enters the phase of expansion and prosperity,. If economic fluctuations are not controlled by the government, business cycles continues to recur. Recovery This is the phase of revival of demand for goods and services. The economic activity as a whole increases slowly, although the general prices start rising. The upward movement of business activity is slow, production picks up, construction activity is revived and there is a gradual rise in employment. This is a period when the industrialists and the businessmen repay the loans taken by them from the banks earlier and the frozen stocks held by the banks are released. Stocks of goods remain below the normal with the shopkeepers. Once the recovery starts, it results in a snowballing process for investment. The result is that demand orders pour in and the producers get stimulus and encouragement to produce more. The sellers stop their conservative period in general favoring expansion in business activity. The capital equipment is replaced. Banks are liberal in the matter of advances. The prices recover and tend to reach the normal. The speed, with which the expansion of business activity takes place in response to a given initial increase in investment, would depend upon the multiplier effect. Prosperity During this phase there is a rapid cumulative movement of prices, employment, income and production. The prices and general business activity is above the normal. Total output starts growing at a rapid pace due to higher investment and employment. Prices of finished products rise faster than the increase in wagerate, raw material prices and interest rate. Consequently, producers stand to gain. Prices of all the commodities do not rise to the same extent. The sequence of general price rise generally begins with increase in security prices, which then passes on to raw material prices, wholesale prices, wages of unskilled labour, retail prices and finally the interest rates.

Recession : When the business cycle takes a downward turn from the state of prosperity, the state of recession is said to have set in. during the phase of prosperity, production increases with every increase in commodity prices. As more and more of unemployed labour, capital and raw material are employed, interest rate, wages and other costs rise with increasing rapidity. Simultaneously, the banks suddenly discover that they have expanded their deposits a little too far. The ratio of cash reserves to total deposits falls. The banks become reluctant to advance loans in the interest of their safety and statutory requirements. In order to meet their obligations, the sellers would, therefore, have to unload their stocks in the market. Due to unloading of stocks by many firms, the prices start declining. Profit margins decline further because costs start overtaking prices. Business psychology becomes depressed and the boom bursts. There is a struggle for solvency among the businessmen. Some firms close down while others reduce production, leading to reduction in investment, employment, income and demand. This process is cumulative. This phase of business cycle is characterized by fall in prices, commercial panic, restriction and calling back loans by banks, a sharp increase in interest rate and fall in investment. Soon the production falls, unemployment increases and inventory stocks get accumulated. There is a collapse of confidence. If not controlled in the beginning by timely monetary and fiscal measurers by government which can sustain investment at a high level, recession may give way to even a more grave situation, called depression . Depression: If unchecked, depression is a natural consequence of the recessionary crisis. Gradually, the process of falling prices, demand and employment gather momentum. Decrease in price follows the same sequence as does the price increase in case of the state of boom. In this phase, general demand for goods and services falls faster than the production of goods, though this is more in case of capital goods than consumer goods. Producers find selling prices falling faster than their costs. Producers suffer losses because by the time the goods are ready for sale the prices are found to have fallen further, with the result that producers are not able to recover their full cost. Businessmen get panicky, and start releasing their stocks, which hastens the decline in prices. The phenomenon of over-production appears and workers in large numbers are thrown out of work. There are accumulated reserves with banks. Demand for credit is at its lowest, resulting in idle funds with the banks. In general, the bottom of depression is reached when liquidation of accumulated stocks is completed. Depression is, thus, characterized by low prices, idle funds with banks, mass unemployment and slack trade. Levels of the economy:

Two types of policies are pursued by State to combat the inflationary and deflationary tendencies in the economy. These are called stabilization policies, which mainly include : (i) Monetary policy and (ii) Fiscal policy. 1. Monetary policy. It refers to the credit control measures adopted by the central bank of an economy (in India, the Reserve Bank of India). These are of two kinds : Quantitative or selective controls. Quantitative or general controls include bank rate variations, open market operations and varying reserve ratios. They aim at regulating the overall level of credit in the economy through the commercial banks. Bank rate is the minimum lending rate at which the central bank discounts bills and securities held by commercial banks borrow less from the Central bank. On the other hand, commercial banks raise their lending rate. This reduces the money supply in the economy. Reduction in money supply reduces demand for goods and services in the economy, resulting in the check on price rise. Open market operations refer to the sale and purchase of securities by the central bank. When the central bank aims to control inflation it sells securities in the open market, thereby reducing reserves of commercial banks. When the central bank aims to control inflation it sells securities in the open market, thereby reducing reserves of commercial banks. This reduces credit in the market. The reduction in money supply helps in checking price rise. Changes in reserve ratio can help combat inflation. The portion of deposits which a commercial bank has statutorily to keep with the central bank as deposit is called the reserve funds. In order to reduce credit by the commercial banks, many a time the central bank increases the percentage of such deposits. Increase in reserve ratio reduces the bank advances, thereby reducing demand for goods and services, and checks price rise. Selective credit controls are used to encourage or discourage specific types of credit for particular purposes. In order to check the speculative activity in the economy, the central bank changes the margin requirements to be charged by the commercial banks on those activities. In recessionary conditions, the State should use monetary policies in the opposite direction to control recessionary forces. The central bank should lower the bank rate, thus, making borrowing by commercial banks cheaper. Commercial banks in turn would lower their lending rate, resulting in greater demand for credit. This would encourage investment, output, employment, income and demand. Consequently, prices would start rising. Similarly, while operating in the open market, the central bank should buy securities, thereby raising money supply in the economy, whose impact would also be an increase in investment, output, employment, income and prices. The central bank can also use the instrument of reserve ratio to combat encourage greater lending, thus reviving economic activity. Lastly, when recession is in some specific sectors of economy the central bank can use some selective credit control measures, particularly lowering margin requirements, which would help in encouraging greater business activity.

2. Fiscal policy. Fiscal policy refers to the deliberate changing of taxes and government spending for the purpose of keeping the actual GNP close to the potential full employment GNP. If the potential GNP is exceeded it causes inflation, while if the actual GNP falls short of the potential it causes recessionary conditions. When inflation is due to excess purchasing power in relation to the amount of goods and services available in the economy, the basic remedy for controlling inflationary conditions is to drain away excess purchasing power. In such a case, fiscal policy should aim at taking rupees out of the income-expenditure stream. As a result of this policy the aggregate demand will reduce, leading to control of price rise. There are two approaches for accomplishing this : (1) To restrain or reduce government spending and create a surplus budget (where tax revenue exceeds government expenditure). The cutback on government expenditures would reduce aggregate demand originating in the public sector; and its spillover effect I rest of the economy would also dampen aggregate demand. (2) To increase taxes on business and consumers without increasing government expenditure. Obviously, its impact would also be to create surplus budget and dampen the aggregate demand. Depending on which of the approaches are used, there will be differential impact on public and private sectors. However, both these approaches can also be used simultaneously. To combat recessionary conditions, just the opposite kind of fiscal policy measures need to be adopted. The government should aim to generate fiscal deficit by either increasing government expenditure (keeping tax revenues constant) or decreasing taxes (keeping government expenditure constant) or both. We know that in recession the economy suffers from unemployment as well as low level of output and aggregate demand. To give boost to aggregate demand, there is a need to pump purchasing power in the economy. By increasing aggregate demand, the unused capacity and unemployed labour can be employed. Again, the impact of the increase in government expenditure will be felt through resurgence of demand in the public sector and that of the cutback on taxes through the private sector. Indicators of Economic Development: Inflation: Inflation has attracted sufficient attention of economists and policy makers. India is pursuing a policy of planned economic development. One of the prime considerations in the strategy of growth has been to ensure that growth takes place in an environment of price stability, which was considered crucial for both-steady growth and even distribution of the gains of growth. Any increase in prices was likely to affect investment planning and income distribution in the economy. Hence, efforts to contain and or avoid the same were an integral part of the planning process. The transmission of inflation-ary impulses in the economy is affected by various factors e.g. the differences in sectoral relations in

the economy, nature of markets, both of products and services, the extent of linkages between these markets, the pattern of income and asset distribution, levels of concentration of corporate and trade-union's power and the effectiveness of the intermediation of financial institutions, rate of growth in nominal wages and labour productivity, structure of capital formation and, finally, the rate of development, etc. Inflation is defined as the persistent rise in the general price level. The question arises as to what should constitute the appropriate measure to reflect the general price level. In order to analyse the general price level, percentage annual changes in (i) Wholesale Price Index (WPI), (ii) Gross Domestic Product (GDP) at market prices, deflator, (iii) GDP (at factor cost) deflator and (iv) cost of living index (CLI) for industrial workers are usually considered. Because of wide coverage, the GDP deflator (both at market prices and factor cost) should be considered as the most appropriate index of inflation because the deflator covers commodities as well as services, whereas the other two indices reflect movement only in commodity prices with different 'Baskets'. Inflation rate has dropped from being among 10% during 1991 to 5.91% during 2004. Emergence of Consuming class: The Indian middle class has been an enigma to most marketers who have tried to assess its buying patterns. Although this market has not proved to be the made-to-order goldmine that the global players originally viewed it as, it is fast shedding the conservative tag. Increased disposable income levels, as well as the shaking out of the taboo associated with consumer loans has resulted in middle class families paying more and opting for CTVs. As the number of channels increases, so does the strife amongst family members on which programme to watch. TV manufacturers can convince them to go in for a second TV set. Two colour TVs may seem too much of a luxury to bank balanceconscious middle-class families, but a new B&W TV may do just fine. This could be another market for the B&W makers to address. B&W manufacturers should look at increasing production and cost efficiencies to sustain in the market. A very low-priced B&W TV is sure to find a substantial market among the poorer classes. With increased impetus on cost cutting, faster rotating models and a little help from the Government on the duties front, the B&W industry can protect itself from blackening out. The governements reform policies have already started to pay off. $1.6 billion in U.S investment projects has been approved since the introduction of economic reform – twice the amount of investment in India during the preceding 40 years. This beginning of liberalization although so very recent, has already meant an impetus and growth in the rise of the standard of living among the middle class. By the year 2000, India is projected to have a population of one billion, and while India’s per capita income average income is quite low ($330USD), India has a growing middle class. An estimate 200 million Indians have an annual incomes comparable to those in the United States and Canada. Globally except for China nowhere will the new middle-class be larger than in India. Amounting to hundreds of million of people, this new middle-class (with a major political base and buying ability) while modern in many respect, being entrepreneurial and professional, will also have the traditional caution of

their past generation towards the 21st century. The growth in the earning ability and thus a rise in the standard of living amongst middle-class will also mean an end to the "Brain Drain" phenomena happening in most developing countries. Brain Drain being a phenomena when some of the best students and technicians in a developing country after being subsidized in their education by their own government migrate to a developed country, to seek a better standard of living. A quick survey amongst numerous American Engineering and Technical Universities would probably illustrate this "Brain Drain" both amongst faculties as well as students. With the birth of the new middle-class, their buying power and their technical saviness and an almost virtual end to the "Brain Drain" phenomena, the third world will be the place for the growth of new technology. Bleeding technologies once mainly a factor of the developed world, will be happening in this so called once called third world, as the third world will be where consumerism will abound. In this newfound consumer land will be the rise of telecommunication. Since 1990s, India's $1.1 billion computer equipment market has been growing at the rate of 31 percent annually more than any other information technology sector. India already is the world’s leading exporter in software. There will also be a major trend (already existing) in the rise of programming farms, where Indian programmers would write the backend and the front end developed elsewhere. This philosophy of outsourcing work would not only exist in programming but amongst numerous technical and scientific endeavors. The scale of economic expansion in India (as well as in China) cannot be underestimated. By the year 2025 India could be in the top five, with an economy as large, or almost as large, as that of Japan and Germany. Moreover it is estimated that across the third world two to three billion will emerge from poverty to enjoy middle-class affluence in coming years. As we stand today at the threshold of a new century, we stand at the beginning of a new industrial revolution. An industrial revolution that will take place in the third world countries with the help of developed countries by way of monetary investment, transfer of technology, implementation of management and marketing strategies. As the dynamics of global economics continue to change, so will major companies that will be at its core be an agent of that change or be its very victim. Those that see and seize the opportunities will win; those that fail to recognize the intensity of global competition will lose. Foreign Direct Investment: Foreign direct investment is a key ingredient in economic growth. It can impact the host economy through a variety of channels: by adding to investable resources and capital formation; by transferring technology, skills, innovative capacity, and organizational and managerial practices between countries; and by accessing international marketing networks. FDI contributes to a significant share of the domestic investment, employment generation, exports etc. FDI inflow into India touched $4.26 billion in 2003 as compared to $3.44 billion in 2002. With a 24% increase in FDI inflow, India has become one of the top 10 FDI destinations among the developing countries while it is fourth among the Asian economies. FDI inflow into the country would further increase with the recovery

of the global economy. Foreign Direct Investment (FDI) is permited as under the following forms of investments. 1. Through financial collaborations. 2. Through joint ventures and technical collaborations. 3. Through capital markets via Euro issues. 4. Through private placements or preferential allotments. 5. Through GDRs( Global Depository Receipt) is treated as Foreign Direct Investment (EURO issues). FDI is not permitted in the following industrial sectors: 1. Arms and ammunition. 2. Atomic Energy. 3. Railway Transport. 4. Coal and lignite. 5. Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc. 3.4. Politico-legal environment: India suffered political instability for a few years due to the failure of any party to win an absolute majority in Parliament. However, political stability has returned since the previous general elections in 1999. However, political instability did not change India's economic course though it delayed certain decisions relating to the economy. The political divide in India is not one of policy, but essentially of personalities. Economic liberalisation (which is what foreign investors are interested in) has been accepted as a necessity by all parties including the Communist Party of India (Marxist). Thus, political instability in India, in practical terms, posed no risk to foreign direct investors because no policy framed by a past government has been reversed by any successive government so far. You can find a comparison in Italy which has had some 45 governments in 50 years, yet overall economic policy remains unchanged. Even if political instability is to return in the future, chances of a reversal in economic policy are next to nil. As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for Kashmir in the north and parts of the north-east, terrorist activity is either non-existent or too weak to be of any significance. It would take an extreme stretching of the imagination to visualise a Bangladesh-type state-disrupting revolution in India or a Kuwait-type annexation of India by a foreign power. Hence, political risk in India is practically nonexistent.. A country's economic policy environment must be conducive for firms to achieve efficiencies that will enable them to be globally competitive. It is also widely accepted that taxation policy can have strong incentive effects on corporate decisions. CII interacts closely with different levels of government to put forward industry's viewpoint. CII's large membership enables us to be the

most impartial and representative industry body, with a high level of credibility with the government and key regulatory bodies. In order to achieve our objective of influencing government policy, we undertake extensive research, interact with key government officials and disseminate information through publications, seminars and events. With a large network of offices across the country, we are able to track policy issues in detail at the regional level. CII also interacts closely with the Members of Parliament - the policy makers - across political parties to raise awareness about the need for reforms, the need for change to keep up with in an extremely competitive global economy. This has helped to keep up the flow of economic legislation passing through Parliament. Among the critical contingencies faced by every business firm is the need to manage its social and political environment. Both the social and the economic performance of the firm can be affected in significant ways by managerial strategies and tactics; firms and their managers can be active players in efforts to improve their social and economic bottom lines. Thus, this course will examine the public affairs environment of the firm and the methods used by managers to navigate within it. The corporate social performance of a firm and its economic results are characteristically intertwined: Both in the short and the long run, failures to attend to social performance issues can produce less than optimal economic results. Sometimes these issues present themselves in crises that demand swift, effective managerial intervention. These very practical concerns accompany the manager's role as a moral citizen who must successfully manage a complex set of ethical issues. The private corporation is only one of the means by which economic activity and social endeavor in general may be organized. Private managers are likely to have significant interaction with their public counterparts, not only in the context of public regulation, as in the United States, but also in the contexts of a variety of public enterprises. Such enterprises are far more common in the global economy than in our domestic one. We shall therefore examine the characteristic behaviors of public and of private enterprises. The corporation is a relatively recent invention. Ever since it evolved in the last century, it has made active use of the benefits that only government can provide. Far from being seen purely as a history of conflict, the tradition of business-government relations should be understood more often as a history of mutual benefit. An important focus in this course will be on the management of the business-government interface. We shall look at the functioning of legislatures and the decision making processes of regulatory agencies from the perspective of participation by business. Participants in public policymaking typically include a constellation of actors, including legislative committees, regulatory agencies and other government bodies, public and private interest groups, courts, and so on. We shall examine the processes by which influence is exerted in this system, including a look at the behaviors and strategies/tactics of interest groups and the means by which firms make strategic use of the opportunities presented to them in this system.

Government in this country is often characterized by rigid hierarchies, red-tapism, complicated procedures, sluggish decision-making and lack of accountability. Little wonder then, interaction with Government usually turns out to be cumbersome, perplexing and pathetically slow. Public access to Government services is usually clumsy and complicated. In a paper-based system, locating a correspondence or file in a Government department can be a truly frustrating experience. The problem gets further compounded in case of multiplicity of agencies. The advent of Information Technology (IT) as a tool leveraging the delivery of services is universally acknowledged now. In today's world, egovernance has actually given an opportunity of a paradigm shift in the process of delivery of government services to the public. Sweeping transformations have taken place in IT with the convergence of computing and communication technologies. The advent of the Internet has thrown open numerous possibilities. Groupware technology can also offer dramatic improvements in the intra-government synchronization, optimisation of government resources, and decision support systems to boost the efficiency and efficacy of the public policy. The major contributions of groupware in improving organisational performance include on-line collaborative work, electronic community development, knowledge management and workflow applications. In such a scenario, information will be more directly accessible to decision-makers and flow smoothly across departments through a common database and compatible systems inter-linked under a secure high-speed networked environment. In addition to a tangible improvement in the functioning of the administration, the government-public interface shall undergo a radical change for the better. The near absence of IT in a large number of government departments today offers both a massive challenge and an outstanding opportunity to use state-ofthe-art technologies to shape the country's future. Developments around the globe are taking place at a breathtaking pace, and unless we urgently take steps to plan for this new world of technology in this millennium, the government itself may shortly face the peril of becoming lesser relevant. Wrapped in a mystic enigma, government processes at present give enormous discretion and power to the administration, with ample scope of its misuse. In such a scenario, a properly conceived, developed and deployed model of e-governance will provide a rare opportunity to the government to reinvent itself and evolve on an on-going basis. It will redefine the public-government relationship and the businessgovernment interface. By enabling improved connectivity and communication between all stakeholders, e-governance truly has the potential to propel the country on the path of overall advancement. Such a thriving model of egovernance shall also reinforce India's emergent status of a global IT superpower.

With the rapid pace of change in the IT industry, there has been a shift in focus from the traditional inputs of a production process to the processes involved in the creation, storage, dissemination and use of information. An IT-driven system of s-Governance works better, costs less, and is capable of servicing citizens' needs as never before. Analogous to e-commerce, which allows businesses to transact with each other more efficiently (B2B) and brings customers closer to businesses (B2C), s-Governance aims to make the interaction between government and citizens (G2C), government and business enterprises (G2B), and inter-agency relationships (G2G) more friendly, convenient, transparent and inexpensive. The resulting benefits are a higher revenue growth and reduced costs. With the advent of the Internet, the 'citizen as a shareholder' can now provide several inputs to the government's policy-making process, while the 'citizen as a customer' can demand better services from his government. Governments across the globe are trying to make this a reality through implementation of information technology initiatives. However, undertaking such initiatives without focusing on long-term goals will result in 'islands of excellence' and render a myopic vision of e-governance. Public policy and its implications: Developing an appropriate public policy towards the industrial sector has been an important task for Indian policy makers for a long time. When India moved away from an inward looking industrialisation strategy to a more ‘open’ economy in 1991, industrial firms needed to restructure themselves to retain competitiveness. Much of these restructuring is needed to correct the inefficiencies created by operating in a protected market. The Automobile sector has been a major candidate in the industrialisation process since the beginning of planned development. Automobile industry in India has been subjected to substantial policy changes over the last two decades. The policy changes were in two doses and took the form of partial de regulations introduced in 1985 and liberalisation measures launched since 1991. The pre 1985 regime could be described as an era of strict controls and regulations. The initial changes, introduced in 1985, eased the licensing requirements, broad-based the classification of vehicles for issue of licenses, allowed selective expansion of capacity and partially relaxed controls with regard to foreign collaborations, imports of capital goods, raw materials and spares. Though these measures represented a "domestic liberalisation", the policy environment continued being geared towards imposing trade and investment regulations, constraining the growth of big business houses and regulating exchange rates. It was only after 1991 that notable broadbased changes in policy that had far reaching implications actually came into being. These changes dispensed with the bulk of controls and regulations and for the first time since independence assigned a central role to market forces. To list some of these changes more explicitly - approval for foreign investment up to 51% equity holdings came to be given automatically, most of the industries that comprise the manufacturing sector were removed from the licensing network, the monopolies [MRTP] act was amended - allowing big business houses to expand at will, domestic currency was made convertible in the trade account, the exchange rate was allowed to be influenced by the market and quantitative controls on imports of capital goods and components were

removed. In addition to these measures aimed specifically at the industrial sector, the Government of India also adopted certain structural adjustment and macro stabilisation policy measures during the post 1991 period. A growing body of literature has examined the impact of liberalisation in industrial and trade policies on manufacturing sector performance in different countries. While most of the studies focused on making inter country comparisons, a few studies analyse the impact of trade liberalisation on manufacturing productivity .It focuses on variables such as concentration, ownership, size distribution, spatial distribution and total factor productivity growth, and their results suggest that liberalisation does not have a major impact on the industrial structure under examination explores changes in some key corporate strategies in response to economic reforms introduced in India since 1991 and points out significant changes with respect to mergers and acquisition activities of multinationals, foreign technology purchase, R & D and manufacturing capabilities. Most of the earlier studies that attempted to analyse the differential behaviour of firms in terms of conduct and performance variables have brought out the differences between multinationals and local enterprises. Automobile firms in India over the period 1987-88 to 1989-90, found that even within the multinationals, Japanese affiliates differ from those of Western Countries. For India to become a major player in world trade, an all encompassing, and comprehensive view needs to be taken for the overall development of the country’s foreign trade. While increase in exports is of vital importance, we have also to facilitate those imports which are required to stimulate our economy. Coherence and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. It was felt that the Exim Policy with its limited focus may not be able to meet our objectives. Thus, while incorporating the existing practice of enunciating an annual Exim Policy, it is necessary to go much beyond and take an integrated approach to the developmental requirements of India’s foreign trade. This is the context of the new Foreign Trade Policy. Trade is not an end in itself, but a means to economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity. The Foreign Trade Policy is rooted in this belief and built around two major objectives. These are: To double our percentage share of global merchandise trade within the next five years; and To act as an effective instrument of economic growth by giving a thrust to employment generation The two-fold objective of the Policy is proposed to be achieved by adopting, among others, the following strategies: Unshackling of controls and creating an atmosphere of trust and transparency to unleash the innate entrepreneurship of businessmen, industrialists and traders. Simplifying procedures and bringing down transaction costs. Neutralizing incidence of all levies and duties on inputs used in export products, based on the fundamental principle that duties and levies should not be exported.

Facilitating development of India as a global hub for manufacturing, trading and services. Identifying and nurturing special focus areas which would generate additional employment opportunities, particularly in semi-urban and rural areas, and developing a series of ‘Initiatives’ for each of these. Facilitating technological and infrastructural up gradation of all the sectors of the Indian economy, especially through import of capital goods and equipment, thereby increasing value addition and productivity, while attaining internationally accepted standards of quality. Avoiding inverted duty structures and ensuring that domestic sectors are not disadvantaged in the Free Trade Agreements/Regional Trade Agreements/Preferential Trade Agreements that enter into in order to enhance exports. Upgrading infrastructural network, both physical and virtual, related to the entire Foreign Trade chain, to international standards. Revitalising the Board of Trade by redefining its role, giving it due recognition and inducting experts on Trade Policy. Activating Embassies as key players in export strategy and linking Commercial Wings abroad through an electronic platform for real time trade intelligence and enquiry dissemination. There is an inherent contradiction in the Attitude and policy of the Government as regards the private sector. The Government has continuously emphasised the important role assigned to the private sector in the mixed economy of India and the steps it had taken to encourage the private sector. At the same lime, the Government had taken various measures, both direct and indirect, which do not help the private sector to develop freely and rapidly but which actually restrict and hamper its growth. We may highlight here some of the problems of the private sector. Procedural delays. In all developing countries --India is no exception-there are too many regulations imposed by the Government on the private sector and too many procedural delays. It is estimated on an average, it takes 7 years "from the conceptual stage to the production stage for any significant investment to take place in India." Decisions which used to be taken at one time at a low level of government bureaucracy are concentrated in the hands of the top bureaucracy, or with the ministers and in some cases even with the cabinet. There is no delegation of decision-making and in fact, even the smallest decisions are taken at the top level, resulting in avoidable delay, cost escalation, and higher burden on the consumers. Unrealistic controls. The Government is influenced by contradictory motives, as for instance, the protection of the consumers (price controls) and the prevention of concentration of wealth and income (capacity restraint). The price controls imposed by the government on many of the goods do not give proper incentive for additional production. Actually, the Government should encourage competition among the rival firms and increased production would automatically bring down the prices. On the other hand, price controls under conditions of shortage tend to perpetuate shortage, rise of

black markets and possible shifting of investment from controlled items to the production of non-controlled items. In this Connection, the system of dual pricing has been found to be much better than unrealistic price controls. At one time, licensing of capacity was meant to bring about organised growth and prevent monopolistic tendencies, hi practice, however, it has emerged as something unique in the whole world. While attempt is made to increase capacity to create more employment and produce more, India is the only country in the world which penalizes increase in production. Capacity restraint is indeed anti-investor and anti-consumer. Since 1980, and more recently after the resumption of power by Mr. Rajiv Gandhi there has been a welcome trend of regularising excess capacity in scheduled industries, removal of restrictions on creation of new capacities, abolition of unnecessary controls and liberalization of controls wherever they cannot be abolished. Reservation for the small sector. The Government has generally worked on the assumption that small industries are in conflict with large ones which always stifle the growth of the small and cottage sector. Accordingly, the Government has attempted to help the small sector in many ways. One method is to provide excise exemption or impose, a lower rate of excise duties for goods produced in the small sector. Another method is to reserve certain products in the small sector and prevent the large sector from producing such goods. As a result of such measures, the complementarity of the two sectors in the process of growth has been lost. While it may not be desirable to continue reservations or differential excise duties for all Government. Unfortunately, considerable controversy has been created in the definition of the joint sector and the industries that should be brought under this sector. Part of this blame goes to the Dutt Committee Report which used the term "joint sector" for the first time and gave not one but three concepts of joint sector : (a) Existing private enterprises belonging to the large industrial houses should be brought under the joint sector by public financial institutions converting their loans into equity. "In that case we would like to emphasise that they should be clearly treated as belonging to the joint sector and not to the private sector." (b) The joint sector would include those industrial units in which both public and private investment had already taken place and where the State has already been taking an active part in direction and control. (c) A large sized industrial unit in Schedule B and C categories, necessitated on account of technical and economic advantages of large scale, should necessarily be in the joint sector to prevent concentration of economic power. In this case, the joint sector should be treated as belonging to the public sector, for a large portion of the cost would be provided by the Government and public financial institutions though, of course, private parties too would be permitted to have equity participation. 3.5. Lessons for marketers: The most striking feature of contemporary India is the rise of a confident new middle class. It is full of energy and drive and it is making things to happen. In terms of political power, it is erstwhile middle class that has climbed to the top in the social

hierarchy of modern societies. It has transformed itself into the ruling class by acquiring control over the levels of state power. Property no more rules, even indirectly, these days. Nor does labour in the ”peasant and workers” states. It is the “knowledge” group comprising not only politicians and bureaucrats but also business executives, company directors, factory mangers, scientists engineers, technocrats, bankers, journalists, intellectuals lawyers, doctors, teachers and many other belonging to liberal profession and “services” sector, that does so. That group or class constitutes the political class and a section of it the ruling elite. The two key attributes distinguishing the class from other social classes are its possession of education or knowledge in the broad sense of the term and leadership qualities that help to put the class at the top in all walks of social life. The social climb that this class has experience has gone coincided with metamorphical change that the society in Western countries has undergone in socioeconomic political and ideological fields. The concept of democracy secularism, human rights, social security, social justice and welfare state all parts of middle class philosophy and ideology. Since the thought and ideology of the middle class has come to acquire universal appeal, this has help to put the class in commanding position vis-à-vis the rest of society. It has cast that class in the leadership role and vested it with decision making regulation coordination and controlling power in terms various types of social activity and relations. This class has come to constitute the elite in the modern societies. A part of it forms the governing elite, the rest becoming non-governing elite. The governing elite by virtue of its control over the livers of power in the state machinery an exercise of all political powers on behalf of the state is bale to influence production and distribution of income and wealth class relation, social change, and the political and economic development of the society it governs. This makes it and instrument of history, an arbiter of destiny of nation. They are historical forces which are set into motion by the action of the elite itself, there are others that are autonomous in character which the elite it self as to content with. The elite itself, of course, does not have absolute freedom of action. It exercise of power is moderated by the consideration of its continuing to be in possession of power against the challenge that the non governing elite poses to it in the matter. The struggle for power between the governing and non-governing elites is a constant feature of the modern state and the society. The struggle is intra-class and not inter class. The masses do not compete for power with the elite. It is the difference sections of the elite who do so among themselves. The battles are fought and struggles waged in the name of ideology, national interest and welfare of the masses. Professions about promoting these interest no all masks worn by the elites contenting for political power; a degree of genuineness is always there. That degree differs from one society to another depending upon the level of consciousness reached among the masses. The mote developed that consciousness is and more enlighten the masses are the more difficult it would be for the elite to mislead them by catch phrases, empty slogan and ideological swearing. In advanced society the class as well as self-interest of the elite will coalesce with those of the society as a whole. The elite circulation will still be there and may even be more pronounced than in a comparatively less developed society but it will waste on the account that the governing elite gives of it self when in power that on the relative manipulative abilities of the contenting elites. The competition for power among the elite will thus become a of social instrument had material advancement. That gives the

democratic system of the government an edge over dictatorship and absolute monarchy in which cases power is monopolised by a single individual assisted by his coterie or collectively by a cohesive oligarchy. This will augur well for the marketers in the Indian context. Modern technology has made the job of the marketer easier. Here a few tools that are in use today for improving marketing processes,and building brand value: SMS One can locate the nearest pizza outlet or log on to a Web site to check out the specifications of the new car you plan to buy. i-Seminars Seminars on the internet instead of physical seminars is better for the customerno travel time and expense. E-marketing No snail mailing,only e-mails;interactive Web information (no printing of brouchers)and Web banners. e-Surveys Online market surveys of customers help in deciding product strategies,which result in a greater possibility of acceptance of the final product or service,adding to the the brand value of the organization. Online billboards Online billboards made of super-large plasma displays allow for time-sharing and instant message revision. Superior design tools Better tools like Photoshop and illustrator allow a designer to do things that would have required very expensive design workstations a decade or two ago. Touch-screen kiosks Touch sreen kiosks used to market and showcase brands at shopping mails have changed the way a consumer can feel and experience a product on the shop floor. Analysis tools Better data mining technologies coupled with cheaper storage has accelerated the pace of research,so that one can narrow down on one’s target and focus better.At every point of influence, not just marketingawareness,acquisition,education,conversion,sale,service,support-role of technology has changed our processes and efficiencies. The Indian electronics and hardware industry has been lagging behind the impressive performance of the software sector. Most of the hardware requirements of the burgeoning software and telecom sectors are met by imports. The Indian government has recognised the need to increase domestic output and formulated the Electronic Hardware Technology Park (EHTP) scheme that offers various concessions for companies that manufacture either electronic goods or components. 4. Have you understood type questions:

1. The marketing environment is BEST described as being: A. Composed of controllable variables. B. Composed of variables independent of one another. C. An Indirect influence on marketing activity. D. Dynamic and Changing 2. If the Kellogg Company decides to build a new cereal plant because it anticipates the next five years will bring low unemployment and increases in buying power, it is forecasting a period of: A. Depression B. Prosperity C. Recovery D. Austerity E. Recession 3. Coca Cola markets its soft drink to members of Generation Y who love extreme sports and are risk-takers. If Coca cola Dew began lobbying politicians and engaging in advocacy advertising to support continued use of high fructose corn syrup and caffeine in products targeted toward young people, the company would be engaging in: A. Mass Marketing B. Environmental Management C. Target Marketing D. Market Segmentation. 4. Ramji Systems have developed Movie Mask, a system that acts as a video censor by interfering with the playback process so that supposedly offensive material never appears on the television screen. For movie production companies, the Movie Mask is a(n) ________ factor in their external environment. A. B. C. D. Technical Economic Social Political

5. Summary: There is a perceptible change in the mind set of the consuming class in India as is evident from the social, cultural, political, technological and economic environments as discussed in this unit. However, one change which is fast sweeping the country is the advent of Internet. The medium of the Internet and the development of ecommerce are progressing extremely fast on a global. However, while the Internet acts as a faster and less costly platform for consumers and businesses it has inadvertently increased the importance of customer satisfaction. By making transactions faster and easier it had enabled the customer to switch just as quickly between e-businesses, causing the element of competition to take on a

new diversion. It is very important to achieve customer satisfaction to get good financial performance in services in the physical world, and the same can be said of e-commerce where a customer can be lost if unable to access a Website or if the experience proves unsatisfactory. 6. Exercises 1. A marketing manager for a small computer manufacturer is analysing the potential effects of political, legal, social, and economic forces on the firm's operations. Develop an environmental analysis for him. 2. To effectively monitor changes in the marketing environment, marketers must engage in what activities? 3. Conduct an evaluation of the consumption pattern of the Indian middle class. 4. Do you think all these MNC’s rushing to India is based on the growing economic clout of India? Justify your answer. 7. References 1. A.E.A., Readings in Business Cycle Theories, American Economic Association. CLARK,J.J.AND CHEN, M.(EDS.), Business Fluctuations, Growth and Economic Stabilization, Random House, N.Y.,1963. 2. Dauten, C.A., Business Cycles and Forecasting, South-Western Publishing Co. Cinciantti, 1961,2nd Edn., Cchs.3-7. 3. Gordon, R.A., Business Fluctuations, Harper and Brothers Publishers, NewYork,1952,Chs.8-12. 4. Haberler,G., Prosperity and Depression, United Nations, New York, 1952, 3rd Edn., Parts I and II. 5. Hamber,G., Business Cycles, The Macmillan Company, New York,1951, Chs.3-8. 6. Hansen.., Business Cycle and National Income. W.W. Norton and Company Inc.,, New York,1951. 7. Hicks,Jr.,A Contribution to the Theory of the Trade Cycle, Oxford University Press, London, 1950. 8. Lee,W., Economic Fluctuatio ns, Richard D.Irwin, Inc., Illionis, 1955. 9. Rameshan, P., “Corporate Performance During1990s”, Productivity, JanMar.2001, pp631-641. 10. Kumar, Krishna; “Meeting the Challenges of a Borderless Economy: Needed a Paradigm Shift?”: Working Paper No. 2001/4, Indian Institute of Management, Lucknow (India), presented in Opening Seminar on WTO & Allied Issues held at Indian Institute of Management, Lucknow , February 24-25, 2001. 11. Kumar, Krishna & Srivastava Ritu, “A Study of Indian Business Ventures Abroad”;Working Paper No. 2001/21, Indian Institute of Management, Lucknow (India), presented in the 4th Conference of Strategic Management Forum, Indian Institute of Management, Ahmedabad (India), May 26-28, 2001.

12. Murthy, M.R., and Ranganathan, K.V.K., "Foreign Private Capital: Penetration Through Collaborations", Young Indian, Vol. 8, No. 10, October 11, 1997, pp. 3-9. 13. “India’s Foreign Exchange Reserves and Vulnerable Liabilities”, Centre for MonitoringIndian Economy, (Mumbai), Monthly Review of Indian Economy”, July 2001, p.128. 14. Aswathappa, K. (Dr.),”Essentials of Business Environment”, (6th edn.), Himalaya, 1997, pp. 34-41. 15. Cherunilam Francis (Dr.), “Business Environment Text & Cases”, (14th edn.), Himalaya, 2003, pp.623-624. 16. Goyal, S.K., et. al., "Economic Policies and Indian Development: A Discussion Paper", Institute for Studies in Industrial Development, April 1997.

Marketing with other functional areas of management Unit structure:
1. Introduction 2. Learning Objectives 3. Marketing Management 3.1 Nature of marketing 3.2 Scope and functions of marketing. 3.3 Significance of marketing. 3.4 Objectives of marketing. 3.5 Coordination between marketing and other functions. 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction: As you aware, marketing is a dynamic discipline. The nature of marketing is such various departments and cannot function in that it will have to liaison with isolation. The significance of marketing department has changed in India since the liberalisation wave was unleashed. Marketing has certain objectives and that will deliver the best possible results for the organization. Hence it is important that there exists an excellent coordination between marketing and other functions. 2. Learning Objectives: When you finish this unit, you should be able to: • Understand the scope and functions of marketing. • Understand the importance of marketing.

• •

Understand the nature and objectives of Marketing Management. Understand the coordination between Marketing and other departments.

3. MARKETING MANAGEMENT Marketing management is an important to operative function (as distinct from managerial function) of management. It performs all managerial functions in the field of marketing. It is responsible for planning, organizing, directing and controlling the marketing activities. It is required to build up appropriate marketing-mix to achieve the objectives of the business. According to E.W. Cundiff and R.R still, “Marketing management is concerned with the direction of purposeful activities towards the attainment of marketing goals.” The basic goals of marketing are satisfaction of needs of customers and generation of revenue for the business. Most of the big business enterprises organize the marketing activities separately under the charge of a marketing manager. The marketing manager looks after various aspects of marketing to achieve the objectives of marketing, viz; creation of customers and satisfaction of their wants and earning of profits. Marketing management attempts to contribute to the organizational objectives. It deals with planning, organizing, directing and controlling the activities related to the marketing of goods, ideas and services to satisfy the customer’s needs and contribute to organizational objectives. The nature of marketing management is illustrated in the following points. (i) Marketing management is a functional area of management. As a managerial function, it includes analysis, planning, implementation and control of activities concerned with development and distribution of products for satisfying the needs of the customers. Marketing management is goal directed. It attempt to satisfy the needs of customers by offering them want satisfying products and generate revenue for the business. Marketing management determines the appropriate marketing mix of the firm. Product design, its promotion, its pricing and its distribution are properly harmonized so that goods are accepted by the customers. Marketing management is a specialized job. Efficient handling of marketing activities require specialized knowledge of markets, products, consumer’s tastes and behaviour, government policies, and business environment. Marketing management is the marketing concept in action. It includes all activities which are necessary to know the needs of customers and supplies goods and services to satisfy the needs of the customers. The marketing concept is based on the philosophy





that all activities of the business enterprises should be oriented towards the satisfaction of requirements or needs of the customers 3.1.NATURE OF MARKETING 1. Marketing is Customer-focused. Marketing intends to satisfy and delight the customer. The activities of marketing must be directed and focused at the customer. Marketers can remain in customer mind if they are provided value for what they spend. Customer focus can optimize costs for the customer while allowing the organization to focus on its core competencies. Today’s customer makes constant trade-offs between quality, price, and benefits. Thus, marketers must allow customers to dictate product specifications and quality standards. Marketing efforts must be directed at meeting customer needs, not market shares. For this, marketers must track customer needs on a continuous basis. 2. Marketing must Deliver Value. Marketer have to track customer needs and deliver the product as per their requirements. This is not an end in itself. The company must satisfy the following equation with resultant value above 1 as seen in fig.1:

CustomerValue =

Benefits Cost

The corporate strategy must be aimed at delivering greater customer value than competitors. The corporate planning, processes, and people must be reconfigured around the customer. 3. Marketing is Business. When customer is the focus of all activities marketer has not to search customers to seek response to his products. Customer group is decided for whom the product is prepared and presented. 4. Marketing is surrounded by Customer Needs. Marketing starts with the identification of customer needs and requirements. These are turned into probable features that might satisfy the basic needs. The portable form of product is made out and presented before the customer for approval. The customer suggests changes or improvements in the portable product and the final product is brought before the customer. Fig .1.illustrates the point.

Identification of Customer Needs (by Marketing D tt )

Probable Features of Product (Suggested by M k ti D tt )

Portable Product (Assisted by Marketing

Final Product (Presented Marketing Deptt.)

Customer Suggests Changes/Modifications

Fig.2 Marketing and Customer Needs. 5. Marketing is a part of Total Environment. Total environment may be defined as the combination of all resources and institutions which are directly related to the production and distribution of goods, services, ideas, places and persons for the satisfaction of human needs. However, it is better to look at remote and immediate environment of any marketing organization as shown below in Fig.3 Technological Remote External Environment Immediate External Suppliers International
Financial t

Technical System Financial Institutions Customers Marketing Organisation Personnel System Competitors

R & D System

Economic Educational

Govt. Agencies



Socio-cultural Fig.3. Remote and Immediate Marketing Environment


6. Marketing Systems Affect Company Strategy. Marketing has its own sub-systems which interact with each other to form complete marketing system that is responsive to company marketing strategy. Through the sub-systems (marketing Information system, Marketing Planning system, Marketing Organisation and Implementation System and Marketing Control System) shown in Fig.4, the company monitors and adapts to the total marketing environment.

The interaction between marketing sub-systems and environment has been discussed in detail in chapter 3. 7. Marketing as a Discipline. The subject of marketing has emerged out of the business which has derived its existence from economics. After emerging from business, marketing has got its strength from related areas-law, psychology, anthropology, sociology, statistics, mathematics because the related problems impinge heavily on consumer behaviour, legal aspects of marketing, research on consumer needs, advertising media, pricing, promotion methods, etc. thus, marketing as a disciplines stands tested as an art and a science. Fig. 4 illustrate the point. Strategies/Tactics for Product, Art Pricing, Promotion, Distribution, Law Competitors, External Environment Psychology Marketing Anthropology as a Sociology Research on Consumer, Statistics price, Media, Channels, Mathematics Scienc product, Market, Business

Fig.5 Marketing as Science and Art 8. Marketing Creates Mutually-beneficial Relationships. The customer is the focus of all marketing activities. But, during the last decade, the focus has shifted to the way of doing business, i.e., the strategic aspects of marketing. Here the means of marketers are their knowledge and experience, and the end result is in the form of mutual beneficial relationship. Thus, marketing is everything that results in the mutually beneficial relationships with the customer. For example, if social contribution can help enhance company image, help to aged, children and disabled would definitely attract the consumer confidence in the organization because of its assumption of social responsibility. Thus, customer might differentiate between Coke and Pepsi, Whirlpool and Godrej refrigerators, etc. 3.2.SCOPE AND FUNCTIONS OF MARKETING The scope of marketing can be understood in terms of functions that a marketing manager/director/department performs. In most of the business enterprises, marketing department is set up under supervision of the Marketing Manager. The major purpose of this department is to generate revenue for the business by selling want satisfying goods and services to the customers. In order to achieve this purpose, the Marketing Manager performs the following functions:

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii)

Marketing research Product planning and development Buying and assembling Selling Standardisation, grading and branding Packaging Storage Transportation Salesmanship Advertising Pricing Financing Insurance

Functions of Marketing
(A) Functions of Research Facilitating (B) Functions of Exchange (C) Functions of Physical Treatment (D) Functions


1. Marketing Salesmanship Research 2. Product

1. Buying and Assembling 2. Selling

1. Standardisation 1. 2. Advertising 3. Pricing

Grading and Branding 2. Packaging

The functions of marketing may be classified into four categories as shown in the above Fig.6 A. FUNCTIONS OF RESEACH A1. Marketing Research It means the intelligence service of the organization. Marketing research helps in analyzing the buyer’s habits, relative popularity of a product, effectiveness of advertisement media, etc. its major task is to provide the marketing manager with timely and accurate information so that better decisions can be made. The scope of marketing research is very wide. It may cover all the areas of business which have bearing on the marketing function. In the words of W.J.Stanton, “Marketing research is the systematic search for and analysis of facts related to a marketing problem. Its emphasis is shifting from fact finding, information gathering activity to a problem solving and action recommending function”.

A2. Product Planning and Development A product is something which is offered by a business firm to customers to satisfy their needs. It has great importance in all other areas of marketing management. For instance, marketing research is mainly directed towards knowing the needs of the customers and increasing the sale of the product; and storage and transportation activities depend upon the nature of the product. Therefore, it is necessary to plan and develop products which meet the specifications of then customers. Products are the foundation of any marketing programme. The success of marketing department depends upon the nature of the product offered to the customers. The product must be so designed and developed that it meets the requirements of the customers. Product planning and development involves a number of decisions, namely, what to manufacture or buy? How to have its packaging? How to fix its price and how to sell it? The design, quality, colours, size and other features of the product can be determined by conducting marketing research. The product department will be guided by the requirement of the users. B. FUNCTIONS OF EXCHANGE B1. Buying and Assembling Procurement of raw materials, semi-finished or finished products has gained great importance for the modern industrial and commercial enterprises. Raw materials are purchased for production by the industrial enterprises and finished goods are purchased for resale by the commercial enterprises. Whatever may be the case, the marketing department plays an important role. It is the marketing department which will supply the information regarding the needs and tastes of the customers. Coordination between purchasing officials and the marketing officials will help in purchasing right types of materials or goods at right time and in right quantities. Purchasing is different from assembling. Purchasing involves determination of requirements, finding the sources of supply, placing the order and receiving the goods. But assembling means collection of goods already purchased from different sources at a common point. It is also used in another sense. Raw materials are purchased and assembled in order to produce goods and services. B2. Selling This is an important aspect of marketing under which ownership of goods is transferred from the seller to the buyer. Sale may take the form of : (i) a negotiated sale, and (ii) an auction sale. In case of negotiated sale, the terms and conditions between the buyer and the seller are arrived at by bargaining or haggling. But in case of an auction sale, there is no scope for negotiation between the seller and the buyer. The buyers assemble at the place of

auction and bid against one another for the goods on sale. The goods are sold to the highest bidder. Negotiated sale may take the following forms, namely, (a) sale by inspection ,(b) sale by sample, (c) sale by description, (d) sale by grade, and (e) sale by brand. C. FUNCTIONS OF PHYSICAL TREATMENT C1. Standardisation, Grading and Branding. Standardisation means setting up of specifications of a product. Grades of agricultural products are based on these specifications and standards. Industrial goods are given brand names by their manufactures to convey to the customers that their goods conform to certain well-defined standards. These activities promote the sale of products. C2. Packaging Packaging is traditionally done to protect the goods from damage in transit and to facilitate easy transfer of goods to customers. But now it is also used by the manufacturer to establish his branded products as distinct from those of his rivals. Author activity connected with packaging is labeling. Labeling means putting identification marks on the package. The label is an important feature of a product. It is that part of a product which contains information about the producer and the product. A label may be a part of a package or may be a tag attached directly to the product. The label is sued to communicate brand, grade and other information about the product. Packaging has become one of the essential services f modern marketing. It acts as a multi-purpose arrangement. It gives protection to goods on its route from manufacturer to consumer. It even protects the goods during its life with the user. Packaged goods are generally more convenient to handle. Packaging also gives individuality to a product. It makes easier for the consumer to identify a product by looking at its package. Packaging facilitates the sale of a product. It acts as a silent salesman of the manufacturer, particularly at a place where there is widespread use of self-services, automatic vending and other self-selection methods of retail selling. Sometimes, packages are duly sealed to ensure products of right quality to the consumers. In the absence of sealing, duplicate products may be distributed to the consumers by unscrupulous dealers. C3. Storage Goods are generally produced in anticipation of the demand. They have to be stored properly in warehouses to protect them from any damage which may be caused by ants, rats, moisture, sun, theft, etc.

Storage of goods in warehouses has become an indispensable service these days. Producers, manufacturers, traders, mercantile agents, importers and exporters engaged in business have to store their goods in warehouses. Goods are produced or procured well in advance of the demand. They are stored in warehouses till they are actually sold in the market. Thus, warehousing creates time utility. In addition, modern warehouses perform certain marketing services also such as grading, packaging, labeling, etc. C4. Transportation Modern organizations produce on a large scale to cater to the requirements of customers scattered throughout the country. This calls for transportation of goods from the place of production to the place of consumption. Transportation provides the physical means which facilitate the movement of persons, goods and services from one place to another. Transport plays a significant part in the economic, social and political development of a country. Rapid industrialization and exchange of goods and services cannot take place unless sufficient facilities for transportation are available. It is with the help of various means of transport that raw materials are transported from the place of their production to the industrial centres where they are converted into finished products. It is again transportation that facilitates the movement of goods from the producers to the users. By doing so, transportation removes the distance problem and creates place utility. Transportation creates time utility in goods and services because speedy transport minimizes the time of their transit. Transport leads to regional specialization. A region may specialize in the production of those goods and services for which it is most suited. This leads to production of goods and services in different regions at the lowest possible cost. Transportation also plays a crucial role in the price mechanism. It tends to equalize and stabilize the prices of various commodities by moving them from the areas where they are surplus to those areas where they are in short supply. D.FUNCTIONS FACILITING EXCHANGE D1. Salesmanship Personal selling in an important method of selling goods. It is widely used in retail marketing. Salesmanship or personal selling involves direct and personal contact of the seller or his representative with the purchaser. It is the oldest known form of selling and is the most important and recognized method of selling. The art of salesmanship has undergone a big change. The attitude of salesman towards the customers and vice versa has also changed. This change has gone hand in hand with the changing concept of ethical standard in business. Earlier, caveat emptor (let the buyer beware) ruled a sales

transaction, but now the satisfaction of customer is more important. A salesman finds our what his customer needs and does his best to meet it from the merchandise at his disposal. Selling has become a science of human relations and an art of getting along with people so effectively that sales resistance may be reduced to the minimum. D2. Advertising Advertising has become an important function of marketing in the competitive world. It helps to spread the message about the product and thus promote its sale. It facilitates creation of a non-personal link between the advertiser and the receivers of the message. The importance of advertising has increased in the modern era of large scale production and tough Business firms use several media of competition in the market. advertisement to sell their products. These include newspapers, magazines, radio, television, cinema halls, hoardings, window displays, etc. D3. Pricing Determination of price of a product in an important function of a marketing manager. Price of product is influenced by the cost of product and services offered, profit margin desired, prices fixed by the rival firms and Government policy. A sound pricing policy is an important factor for selling the products to the customers. The price policy of a firm should be such that it attracts all types of customers different means. A good price policy helps in determining the varieties of a product to be made or procured so as to satisfy the demands of various kinds of customers. D4. Financing Financing and marketing functions of a business are inter-linked with each other. The marketing department has an important say on policies of the finance department in regard to cash and credit sales. Financing of customer-purchasing has become an integral part of modern marketing. The provision of goods to the customers on credit basis is an important device to increase th volume of sales. A manufacturer has also provide credit facilities to wholesalers and retailers. As a matter of fact, credit is the lubricant that facilitates the operation of the marketing machine. D5. Insurance A large number of risks are involved in exchange of goods and services. Insurance helps to cover these risks. It facilitates the smooth exchange of goods by covering risks in storage and transportation. Loss or damage to goods or property may arise due to fire, theft, natural calamities like flood or earthquake and so on. People employed in business firms are also liable to the risks of injury or loss of life due to accidents in the

work-place. Business firms are able to provide for protection against these risks by insurance companies. Thus can cover the risks on payment of a nominal premium and recover the loss, if any, arising our of the risk. 3.3 SIGNIFICANCE OF MARKETING Marketing Affects Our Lives Customer is the revolving force of marketing. Customer decides what products suit their needs. The choice of one product over another sets the pace of marketing action. Thus, because of changed social perception about the role of women, higher percentage of women tend to move out of their homes. This changed role of women has resulted into need for crèches, household domestic help, expanded need for communication facilities because of separation of mother and child, more security inside house where child is mostly alone, home entertainment equipments like TVs, VCRs, Video games, Personal Computers, etc., so that the child does not move out of home and also the parents could entertain themselves when they are back from work. As a result of women venturing out of home, there is expanded need for Day Care Centres, Maids/Robots, Telephone, Steel Grills, Alarm System, Personal Security Device, TV, VCR Video games, Personal Computers, etc., Table 3 helps to gauge as to how marketing affects our lives. Table 2. Effect of Marketing on Our Lives. Reasons Need Promoting Need Separation 1. Division of Nuclear Joint Family Family set-up Product/Servce Required Lawler, Documentation, Officers to Administer separation, TV, Radio, conveyance, Coolers, Gas stove, Gas cylinder refill, Chair, Table, Bed, Almirah etc. (Separate-sized product for each) Special Institutions to provide maintenance for Air conditioners, cars, scooters, computers, etc.

2. Greater Specialists Complexity of Products offered

Marketing Satisfies our Needs. Once it is ascertained that marketing affects our lives in many ways, the immediate question arises: How it satisfies our needs? Here the product is main propeller of the marketing activities. However, not only that the product should satisfy customer needs and wants, it should also remove

hindrances between the marketers and customers by creating utilities for them by adding value to the product. By removing these hindrances, marketing ensures free and smooth exchange of goods and services from marketers to customers. 1. Form Utility. Customer expects that their needs should be fulfilled with appropriate goods or services with particular features/attributes/style/shape/size etc. Form utility supplies them all by converting the raw form of products into meaningful final products. Thus, customers force marketers to direct production department in terms of specific customer needs satisfaction. For example, Whirlpool advertises its refrigerators by showing a man asking different customers to, explain their requirements. The final product comes up as per the customer’s requirements. 2. Person Utility. The marketers and ultimate customers are not always situated at the same place, so that the customers could buy the products and services for their consumption or usage. At times, there is a big gap between the producers and the ultimate customer, marketing helps to remove the hindrance of person by means of trade. Trade, as a part of marketing, plays a major role in establishing contact between producers as providers of goods and services and customers as users or consumers of those goods and services to satisfy their needs. Various traders, namely, wholesalers, retailer and mercantile agents operate to provide person utility. 3. Exchange Utility. In case of goods and services, the person utility clears the way for their proper exchange. Marketing helps to bring together the producers of goods ready to ell their goods for money and the consumers of those goods ready to part with their money (purchasing power), thus removing the hindrance of exchange. Moreover, with money as the medium of exchange, payment for goods and services is made through banks. In this way, procure goods ion credit. Further, banks often finance trade in ways more than one. Thus exchange utility is provided by money, banking, and finance. 4. Place Utility. Goods may be produced at a place where advantages of location other than the market may be available whereas the buyers of such goods may be situated at a far off place. The barrier of distance between the place of production and the market where these products can be sold is removed by different means of transport. Besides transporting goods from the place of production to that of consumption, the services of insurance to cover the risk of loss during transit and storage and packaging to protect goods against damage and pilferage are also aimed at removing hindrance of place. Thus, place utility brings the producer of goods and services closer to the customer. 5. Time Utility. Goods, in modern times, are produced in anticipation of demand and as such they are to be stored as long as the demand for the same comes up. Such stored goods are to be released as and when

demand materializes. This function of storage and preservation is performed by warehouses which remove the hindrance of time by balancing the time lag between production and consumption, thus creating time utility. During this process of storage, insurance plays its role by removing the risk of loss or damage through theft or fire. 6. Knowledge Utility. A producer may find it difficult to sell his products unless and until he brings it to the knowledge of the prospective consumers the utility and the distinctive features of his products. Advertising and salesmanship help to remove the hindrance or lack of knowledge on the part of the prospective buyers by bringing to the notice of the customer the utility of buying the goods and services offered . Marketing Generates Revenue for the Business Firm. Marketing is a basic function of all business firms. According to peter Drucker, “It is in marketing that we satisfy individual and social values and needs, be it through producing goods, supplying services, fostering innovation for creating satisfaction.” Marketing is an important activity these days, particularly in the competitive economies. Marketing generates revenue for the business enterprises. No firm can survive in the long-run unless it is able to market its products. In fact, marketing has become the nerve-centre of all human activities. Efficient marketing management is a pre-requisite for the successful operation of any business enterprise. A business organization is differentiated from all other human organizations by the fact that it makes and sells products or service. Marketing is the beating heart of the business organsiation. The chief executive of a business organisation cannot plan, the production manager cannot produce, the purchase officer cannot purchase, and the financial controller cannot budget until the basic marketing decisions have been taken. Many departments in a business enterprise are essential for its growth, but marketing is still the sole revenue producing activity. Marketing function is rightly considered to be the most important operative function of management. Role of marketing in Economic Development Marketing is the kingpin that sets the rate of progress of the economy. The marketing organization, if more scientifically organized, makes the economy strong and stable. The lesser the stress on the marketing function, the weaker will the economy be. Underdeveloped marketing is a sign of under-developed economy. An under-developed economy is characterized by many shortages and is a seller’s market. Selling effort is not needed much. As a result, business firms do not feel the need for changing their marketing methods and practices. The other reasons for the unsystematic marketing in an under-developed economy are heavy dependence upon

agriculture, old methods of production, over-population, lower income and lower standard of living. Since marketing is consumer oriented, it can bring about many positive changes in the underdeveloped economies. Marketing enables a nation to improve the standard of goods and services and consequently business values. Consumer gets the top-most priority. Quality of goods, store display, advertisement, packaging, etc. are all directed towards the satisfaction oft eh consumer. Marketing helps in improving the standard of living. Marketing provides better standard of living by offering a wide variety of goods and services with freedom of choice, and by providing the customer a higher standard of living, because it meets the consumer’s physical as well as emotional needs. Marketing generates employment both in production and in distribution area. A large number of people are employed by modern business houses to carry out the functions of marketing. Marketing also gives an impetus to further employment facilities. In order to ensure the finished product reach the customer, it passes through wholesalers and retailers and in order to man these numerous establishments, many people get employed. In the absence of marketing, the level of employment should have not increased. Marketing helps in developing economic resources. Since a business firm generates revenue and earns profits by carrying out marketing functions, it will engage in exploiting more and more economic resources of the country to earn more profits. Therefore, marketing should be given the greatest importance if the national resources are to be exploited fully. Marketing determines the needs of the customers and sets out the pattern of production of goods and services necessary to satisfy the needs of the customers. Marketing also helps the traders to explore the export market. 3.4. OBJECTIVES OF MARKETING Marketing management is concerned with those activities which are necessary to determine and satisfy the needs of customers so as to achieve the objectives of business. Thus, the basic goal of marketing management is to achieve the objectives of the business. A business aims at earning reasonable long-term profits by satisfying the needs of customers. In the light of this statement, we may state the objectives of marketing management as follows: 1. To create customers for the business. The marketing manager must attract customers to buy the firm’s products and services. This will facilitate increased sales. New customers may be attracted through advertisement and sales promotion activities such as distribution of samples, display of goods, etc. 2. To satisfy the needs of the customers. The marketing manager must study the demands of customers before offering them any goods or services. Selling the goods or services is not that important, as the





satisfaction of the customer’s needs. Modern marketing begins and ends with the needs of customers. To determine marketing-mix that will satisfy the needs of the customers. Product, pricing, promotion and physical distribution should be so planned as to meet the requirements of different kinds of customers. To generate adequate profits for the business. The marketing department is the only department which generates revenue for the business. Sufficient profits must be earned as a result of sale of want-satisfying products. If the firm is not earning profit, it will not be able to survive in the market. Moreover, profits are also needed for the growth and diversification of the firm. to earn goodwill for the business. To build up the public image of firm over a period is another objective of marketing. The marketing department provides quality products to customers at reasonable process and thus creates its impact on the customers. The marketing manager attempts to raise the goodwill of the business by initiating image building activities such as sales promotion, publicity and advertisement, high quality, reasonable price, convenient distribution outlets, etc. If a firm enjoys goodwill in the market, it will increase the morale of its sales-force. They will show greater loyalty and will develop a sense of service to the customers. This will further enhance the reputation of the business. To raise standard of living of the people. Marketing management attempts to raise the standard of living of the people by providing them better products at reasonable prices. It facilitates production and distribution of a wide variety of goods and services for use by the customer.

3.5 Coordination Between Marketing And Other Functions: The persons interacting with the customer are commonly known as Sales Managers, Advertising managers, Sales promotion Managers, marketing Researchers, product Managers, Brand Managers, Customer-Service managers, etc. The person producing the product is known as Production Manager. The person recruiting people into the organsiation is known as Personnel Manager. The person dealing with financial aspects is known as Finance Manager. The task of the marketing management is to coordinate with other departments and expect reciprocal coordination from other departments. Thus, if sales people feel that the product is not up to the mark, the marketing management should order a probe by the marketing research department which invariably should include representation from production department. Otherwise, it would mean that sales persons were unable to sell the product and therefore put blame on the defects in the product. In essence, there should be proper coordination between the marketing and other departments. Achieving Coordination

Marketing concept forces business firms to use an integrated approach in their operations. Each firm should coordinate the activities of purchase, production, finance, personnel and marketing departments to satisfy the needs and expectations of customers. Thus, marketing should not be considered merely as a fragmented assortment of marketing functions. Each and every department bas to contribute for the satisfaction of customers and this needs proper coordination between the functioning of all departments. Coordination with Purchase and Production Departments Marketing department is responsible for sales forecasts which are communicated to all the departments of the firm. It has to prepare the time schedules for the production and the purchase departments to inform them the dates by which goods are to be manufactured and made ready for delivery. It informs the purchase and production departments of the introduction of new substitutes and any change in the prices of competitive goods. It also communicates about the quality of goods committed by it to the customers. Information is also to be given in case of urgent orders so that the purchase department is able to proceed immediately for the purchase of materials required to execute the urgent orders. Since marketing department is in touch with the present and prospective customers, it should gather information about the change in taste or needs of the people and pass it on to the purchase and production departments. This will enable the purchase department to purchase right types of materials. The purchase department should inform the marketing department about the changes in the cost of raw materials to facilitate the latter in fixing competitive prices. There should always be harmonious relations between the purchasing and marketing departments. The marketing department must take assistance from the purchase department in calculation of pricing of job contracts and in submitting bids or quotations so that adequate profit margin is assured of such proposals. Coordination with Finance Department Every enterprise maintains a separate department known as Finance Department which is responsible for managing the funds of the enterprise. There should be harmony of relationship between the marketing and finance departments because marketing department can’t extend unlimited credit to the customers and credit collections are to be made by the finance department. The finance department should help the marketing department to determine pricing, cash discount and credit policies under different conditions. So far as revenues are concerned, finance is dependent on the marketing policies and revenues are concerned, finance is dependent on the marketing policies and programmes, and their administration. Total sales revenues as well as their timing significantly affect the cash flow of the business. Product pricing, customer credit policies, terms and conditions of

sales including trade, cash and quantity discount, all have a vital bearing on the finances of the company. On the other hand, availability of funds plays a crucial role in the planning and operation of marketing programmes. All promotional activities including advertising, sales promotion, etc., are dependent on the size of the budget. Customer credit and sales administration policies are also closely related to the firm’s financial policies. Coordination with Human Resource/Personnel Department Coordination between marketing and human resource departments is important for matching the total organization effort with market opportunity. The effectiveness of marketing, as of any other function, depends on the quality of its personnel.. Marketing needs sincere, aggressive and innovative kinds of people. Its personnel should also be adept in interpersonal and communication skills. The personnel specialist can be of great assistance to the marketing manger in the recruitment, selection, training, development and maintenance of a high quality of sales force and other marketing personal. A suitable incentive scheme is also important to motivate the sales-force. The personnel manager can provide expert advice to the marketing manager in designing an effective incentive scheme. 4. Have you understood type questions: 1. All of the following are marketing management tasks EXCEPT: A. marketing planning. B. organising marketing activities. C. co-ordinating marketing activities. D. project development and analysis 2. Which one of the following is an example of a customer in an organisational market? A. a homemaker who buys detergent B. a consumer who hires a solicitor C. a shop owner who buys pencils for use in his shop D. a plant manager who buys petrol for her personal car 3. An aggregate of people who, as individuals, have needs for products in a product class and have the ability, willingness and authority to purchase such products is called a: A. B. C. D. market segment target market customer group market

5. Summary

To sum up, an attempt should be made to develop integrated marketing in the firm to serve the customers better. The marketing department can’t achieve the marketing goals independently; it has to seek the cooperation of all other departments, namely, purchase, production, finance, legal, personnel, etc. All these departments must focus on the customer to achieve integrated marketing. 6. Exercises

1. What according to you is the problem area between marketing and finance department? Comment. 2. Explain the relevance of marketing concept to a monopoly organization? Comment. 3. Discuss the provisions in the organizations’ policy which could prove to be a benefit for an organization. 4. A company which is foraying into the states of Orissa, Bihar and Jharkhand for marketing its toothpaste, what support the entire organization should give? Explain.
7. References 1. Cundiff , E.W.Etol , Fundamentals of modern marketing, Prentice Hall of India Pvt. Ltd. New Delhi. 2. De Bruicker , Stewart F., and Summe, Gregory., make sure your customers keep coming back , Harward Business review, 1985. 3. Neelamegham, S., Marketing management and the Indian Economic, Vikas Publishing (P) Ltd., New Delhi – 1987. 4. Neelamegham, S., Marketing in India, cases and Reading , Vikas (P) Pvt. Ltd. New Delhi 1992.

Market segmentation
Unit structure: 1. Introduction 2. Learning Objectives 3. Market segmentation 3.1. Micromarketing 3.2. Steps involved in segmentation process 3.3. Bases for market segmentation 3.4. Bases for segmenting business markets 3.5. Benefits of segmentation 3.6. Market segmentation in various industries 3.7. How to implement market segmentation 4. Have you understood type questions

5. Summary 6. Exercises 7. References 1.Introduction:

Market segmentation is based on the generally true concept that the market for a product is not homogenous as to its needs and wants. The opposite of market segmentation is market aggregation, which is looking into one mass market. CocaCola practiced mass marketing when it sold only one kind of coke in a 6.5 ounce bottle. The arguments for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. Long run production runs are more economical than short runs. However, many critics point to the increasing splintering of the market, which makes mass marketing more difficult. The more that market may be aggregated, the lower the cost per thousand in buying advertising to reach that mass market, at least within the range of certain promotional budgets. However in order to attract more local and specialised markets, it becomes necessary that the companies need to segment the market. Thus segmentation involves substantial use of advertising and promotion. This is to inform market segments of the availability of goods or services produced for or presented as meeting their needs with precision. Market segmentation is the process of disaggregating the total market for a given product into a number of sub-markets. The heterogeneous market is broken up in the process into a number of relatively homogenous units. The process is based on the recognition that (a) any given market or consumer group is made up of a number of subgroups distinguished by varying needs and buying behaviour; and (b) it is feasible to disaggregate the consumers into suitable segments in such a manner that the characteristics of the segmented groups would vary significantly AMONG segment but would almost be identical WITHIN segments.
Segmentation may also be practised through specialisation in sales force in one market or the greater diversification of distribution channels. Segmentation is based upon developments on the demand side of the market and represents a rational and more precise adjustment of product and marketing effort to consumer or user requirements. According to Wendell Smith, market segmentation consists of heterogeneous market (one characterised by divergent demand) as a number of smaller homogenous markets in response to differing product preferences among important market segments. 2. Learning Objectives: When you finish this unit, you should be able to: • Understand the need for segmenting the markets.

• • • •

Understand the importance of micro marketing. Understand the steps and process of market segmentation. Understand the market segmentation in different industries and Learn the difference between consumer and industrial segmentation.

3. Market Segmentation:

A company can segment its market in many different ways. And the bases for segmentation vary from one product to another. However, the first step is to divide a potential market into two broad categories; ultimate consumers and business users. The sole criterion for this first cut at segmenting a market is the customer’s reason for buying. Ultimate consumer buy goods or services for their own personal or household use and are satisfying strictly non-business wants. Business users are business, industrial, or institutional organizations that buy goods or services to use in their own organizations, to resell, or to make other products.
3.1 Micromarketing:

The focus of mass marketing is on mainstream brands. Typically these appeal to a broad cross section of demographic groups. They are promoted using mass distribution media using simple, undifferentiated messages. Promotional effort is shared evenly across the country and little effort is made to customise the product to reflect the particular needs of individual consumers or the localities in which they live. The focus of micromarketing is quite different. Less interested in market share than in customer lifetime value, the micromarketer uses profiling tools to build a careful picture of the target audience for the product. The micromarketer is keen to recognise the different motivations that lead different demographic segments to buy each variant of the brand and through different channels. Reliance is on media, which can be highly targetted - direct mail, telephony, the Internet, door-to-door distribution - many of which can be customised on a one-to-one basis. Micromarketers are completely aware of differences in local culture and seek to customise their proposition, incentives and distribution mix by location. Quantitative techniques such as profiling, mapping, scoring and clustering are used to define and reach target audiences efficiently. The major objectives of micro marketing are: Understand the characteristics of their customers Identify the value and profitability of different customer segments Identify the size and characteristics of the market in which they operate. Some of the possible micro segments, which are attractive for marketers, include:

a. Segment Marketing

A market segment consists of a large identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits. For example, an auto company may identify four broad segment; car buyers who are primarily seeking basic transportation, or high performance, or luxury, or safety. Segment marketing offers several benefits over mass marketing. The company can create a more fine-tuned product or service offering and price it appropriately for target audience. The choice of distribution channels and communication channels becomes easier. The company also may face fewer competitors in the particular segment.
B. Niche Marketing

A niche is a more narrowly defined group, typically a small market whose needs are not well served. Marketers usually identify niches by dividing a segment into sub segments or by defining a group seeking a distinctive mix of benefits. For example, the segment of heavy smokers includes those who are trying to stop smoking and those who don’t care. An attractive niche is characterized as follows: the customers in the niche have a distinct set of needs: they will pay premium to the firm that best satisfies their needs; the niche is not likely to attract other companies (competitors); the niche gains certain economics through specialization; and the niche has size, profit and growth potential. Both small and large companies can practice niche marketing.
C. Local Marketing

Target marketing is leading to marketing programmes being tailored to the needs and wants of local customers groups (trading areas, neighbourhoods, even individual stores). Citibank provides different mixes of banking service in its branches depending on neighbourhood demographics. Those favouring localizing a company’s marketing see national advertising as wasteful because it fails to address local needs.
D. Individual Marketing

The ultimate level of segmentation leads to “segments of one”, “customized marketing”, or “one-to-one marketing”. For centuries, consumers were served as individuals. The tailor made the suit and the cobbler designed shoes for the individual. Much business-to-business marketing today is customized, in that a manufacturer will customize the offer, logistics, communication, and financial terms for each major account.
3.2.Steps involved in segmentation process:

According to Philip Kotler, the main steps involved in the segmentation process are as follows. 1. Asses the differences between one customer group and the other in terms of their needs and their likely responses to the product and other marketing inputs of the firm.

2. Find out by what descriptive characteristics can consumers of a particular disposition be tagged on to a specified segment. 3. Based on the above, disaggregate the consumers into suitable segments. 4. Analyse and establish whether it is desirable and possible to formulate separate marketing programs and marketing mixes for the different segments. 5. Find out which segments would be happy with the offerings of the firm and could therefore be considered as the natural targets of the firm. 6. Select those segment which offer high potential and which would be amenable to the offerings of the firm. Three stages are there for identifying market segments a. Survey b. Analysis c. Profiling a. Survey stage: The researcher conducts exploratory interviews and focus groups to gain insight into consumer motivations, attitudes, and behaviour. Then the researcher prepares a questionnaire and collects data on attributes and their importance ratings; brand awareness and brand ratings; product usage patterns; attitudes towards the products category; and demographics, geo graphics, psychographics and media graphics of the respondents. b. Analysis stage: The researcher applies factor analysis to the data to remove highly correlated variables then applies cluster analysis to create a specified number of maximally different segments. c. Profiling stage: Each cluster is profiled in terms of its distinguishing attitudes, behaviour, demographics, psychographics, and media patterns. Each segment is given a name based on its dominant characteristics. One way to discover new segments is to investigate the hierarchy of attributes that consumers examine in choosing a brand. 1) Brand-dominant hierarchy, 2) Nation-dominant hierarchy, 3) Price dominant, and 4) Type dominant.
3.3. Bases for segmenting consumer markets:

Two broad groups of variables are used to segment consumer markets. Some researchers try to form segments by working at “consumer characteristics”: geographic, demographic and psycho graphic. Then they examine whether these customer segments exhibit different needs or product responses. Other researchers try to form segments by looking at consumer responses to benefits sought, use occasions, or brands. Once the segments are formed, the researcher sees whether different characteristics are associated with each consumer- response segment.
3.3.1.Geographic Segmentation:

Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities or neighbourhoods. The company can operate in one or few geographic areas or operate in all but pay attention to local variations. For example, Godrej – Sara Lee identified two different geographical segments, the south India and the other regions for its mosquito repellant products. For South India, the brand “Jet” was popular and throughout India the “Good Knight” brand was the popular brand. So ‘Good Knight’ was made the national brand while ‘Jet’ was made a regional brand.
3.3.2.Demographic Segmentation:

Segmentation based on age of the customer group, sex, family size, race, religion, community, language, occupation, educational level, social level, family life cycle, nationality and income level comes under demographic segmentation. To consider an example, the market for consumer goods in India has been segmented by marketers broadly into three segments; the high-income group, the middle class and the lower income group.
3.3.3.Psychographic Segmentation:

In psychographics segmentation, buyers are divided into different groups on the basis of life style or personality and values. People within the same demographic group can exhibit very different psychographic profiles.
3.3.4.Behavioural Segmentation:

In behavioural segmentation, buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Many marketers believe that behavioural variables-occasions, benefits, user status, usage rate, loyalty status, buyer-readiness stage, and attitude-are the best starting points for consulting market segments.
3.3.5.Multi-Attribute Segmentation (Geo-clustering):

Several variables are combined to identify smaller, better-defined target groups. Thus a bank may not only identify a group of wealthy retired adults, but also within that group distinguish several segments depending on current income, assets, savings, and risk preferences. One of the most promising developments in multi attribute segmentation is called geoclustering. Geo clustering yields richer descriptions of consumers and neighbourhoods than traditional demographics. The groupings take into consideration 39 factors in 5 broad categories. (1) Education and affluence, (2) family life cycle, (3) urbanization, (4) race and ethnicity and (5) mobility.

3.4. Bases for segmenting buisiness markets:

Some of the bases for segmenting the consumer markets are also useful bases for segmenting business markets. For example, business markets can be segmented on the geographic basis. Some industries are geographically concentrated. For example, firms that process natural resources locate close to the source to minimize shipping costs. Also, businesses can be segmented on the basis of demographics. For example, the size of the firm, the firm’s type of business, firm’s method of buying, etc. Sellers also can segment on the benefits desired by the buyer and on product usage rates. To get a feel for business market segmentation, let’s look at segmenting by 1. Type of customer 2. Size of customer 3. Type of buying situation For segmentation to be useful, the segments must be Relevant, Accessible, Sizeable, Measurable, and Profitable.
3.5. Benefits of market segmentation:

1. One customer group can be distinguished from another with in a given market and enables to decide which segment of the market should form as target market. 2. Facilitates in-depth study of the characteristics of the buyers. 3. Help marketing man to develop marketing programme on a predictable and reliable base. 4. More suitable ‘marketing offers’ for a particular segment can be easily developed. 5. Suitable marketing mix can be achieved. 6. Due to concentrated efforts most productive and profitable segments of markets can be achieved. 7. It helps to assess competitors’ stand in the market. 8. Customers and companies can choose each other for mutual benefit and satisfaction.
3.6.Market segmentation in various industries: 3.6.1.Soap industry: Laundry soap: very expensive detergents to wash things. General application, broad distribution, low cost and medium advertising. Examples: Nirma. OK, Rin Special laundry soap: To wash fancy things with stress cleaning effect, and ‘will do not harm the expensive garments’ as selling points. Distribution only to high-income customers and retailers. High priced much advertising. Examples: Surf Excel, Tide

Low-grade toilet soap: For washing the body. Broad application, low price, low quality, medium advertising and wide distribution. Examples: Nima, Lifebuoy Premium toilet soap: For the luxury customer group, particularly women and high bracket income-groups. Stress ‘beauty’ as a selling point. Distribution only to highincome customers and retailers. High price, high quality and heavy advertising. Examples: Dove, Aramusk, Lux international Toilet soap for stores, offices and restaurants: For customers and employees to wash their hands. Sell direct to the businesses. Packaged in large numbers per box, no individual wrapping, no advertising and low priced. Industrial soap: For washing hands after very dirty work. Higher cleansing power than ‘commercial’ soap. Sold directly to industry. Packaged in large numbers per 3.6.2.Watch industry:

The Titan Company segments its market on the basis of 1. Geographic location of customers. Quite common is the rural and urban divide in the consumer market. Sonata range is segmented for smaller towns and rural areas where the company is looking at brand switches. 2. Life style pattern: Digital ‘fastrack’ is designed especially for the trendy and sporty. So far digital watches have always had a stereotyped image either around specification of sports. With 22 variants in four series, Titan’s new collection aim’s to provide a wide choice for the fashion conscious 15-24 age group. 3. Based on age: Titan produces watches for children in the brand ‘ Dash” and youth.

4. Based on sex: Company produces variety of products aiming and beefing its presence in the women market titan has launched variety of products like sonata, regalia, for, men and has new range of fast track watches for woman aged 18-30 a fashion branch to match the aspirations of woman. 5. Based on income: Titan launches variety of products based on the purchasing power of people the titan sold it products for the range from 450/- on wards to 30,000.
3.6.3. Indian car industry: Indian car industry can be classified based on the price of the car, into the small car or the economy segment, mid-sized segment, luxury car segment and super luxury car segment. The various models in the segments of the car market can be classified as:

Economy segment : Maruti Omni, Maruti 800, Maruti Alto, Chevy Spark Mid-sized segment : Ambassador Nova, Fiat Palio, Maruti Zen Estilo, Hyundai Santro, Tata Indica, Maruti Swift, Maruti Wagon R, Chevy Aveo UVA, Hyundai Getz Luxury segment : Maruti SX4, Tata Estate, Tata Sierra, Chevy Aveo Honda City, Mitsubishi Lancer, Ford Fiesta, Huyndai Accent, Hyundai Verna Super Luxury segments: Grand Vitara, Mercedes Benz and other imported cars

3.7. How to implement market segmentation

Market segmentation is simply the process by which we subdivide a large potential market into smaller groups that have different buying criteria and needs, thereby enabling marketing strategies which appeal to the needs of particular segments.
Identify your market: What are the overall boundaries of the market that you 1. intend to segment? In many traditional marketing operations this is done at the product development stage, in newer business (e.g. the software market) this is often not done at all with many software products developed on a hunch or as a result of the drive of one leading personality. However, get as much information about your intended target as possible.

2. Establish a Segmentation Matrix: Establish key market segmentation drivers for a product, this could be based on age, spending power, usage of other products, demographics, geographic, preferred payment method, the list is endless. Use those, which you consider to be most important to define a few 'master' segments.
Prioritize: prioritize in line with the resources that you are able to devote to your 3. marketing effort and the likely impact of addressing each segment on any support/spare parts services. 4. Have you understood type questions: 1. Maruti knows that some people want vans, estate cars, or economy cars. In this case Maruti has found its markets to be: a. heterogeneous b. undifferentiated c. focused d. homogeneous 2. The process of dividing a total market into market groups so that persons within each group have relatively similar product needs is called:

a. segmenting b. differentiating c. target marketing d. concentrating 3. If Audi cars focused all of its marketing efforts on professionals with over Rs.2 lakh a month gross earnings, it would be using a ______ targeting strategy. a. homogeneous b. undifferentiated c. multisegment d. concentration 4. Gillette was the first marketer of disposable razors to offer a product specifically designed for women. This is an example of segmentation using _______ variables: a. Demographic b. Psychographic c. Geographic d. Family life cycle 5. By offering Colgate for Kids (attractive taste for children), Regular Colgate, Colgate Total and Colgate Herbal toothpastes, it is segmenting the market based on: a. benefits b. psychographics c. lifestyle d. demographics 5.Summary Segmentation emphasizes the importance of knowing and targeting current customers. Most companies do not have a proper balance of targeting current customers for retention and prospective customers for acquisition. Because of the traditional emphasis on transactions rather than relationships and acquiring new customers rather than retaining and growing current ones, many marketing programs have not been as cost-efficient as they could be. 6. Exercises

1. Develop a market segmentation for the following: a. Dish washers b. Microwave ovens c. Laptop computers

2. What are the factors that influence the development of a market segment? Explain. 3. Develop a strategy for segmenting industrial markets. Cite examples. 4. Classify the lifestyles in India and break down the same for the benefit of manufacturers of consumer durables.

7. References

1. Frank.E.Ronald, Massy.F.William, Yoram Wind, “Market Segmentation”, Prentice Hall of India, 1972, pp.113-114. 2. Davar.S.Rustom, “Modern Marketing Management”, Universal Bookstall, 7th edition, pp.147-149. 3. Stanton.J.William, Etzel.J.Michael, Walker.J.Brue, “Fundamentals of Marketing”, Mc GrawHill Inc., 10th edition pp. 123-126. 4. Alan.A.Roberts, “Applying the strategy of market segmentation”, Business Horizons, fall 1961, Chicago. 5. Wendell R.Smith, “Product differentiation and market segmentation as alternative marketing strategies”, Journal of Marketing, National Quarterly, July 1956. 6. Bucklin RE, Sunil Gupta etal. “ A brand’s eye view of segmentation in consumer brand choice behaviour”, Journal of Marketing Research, Vol.32, February 1995, pp. 66-69. 7. Wyner GA., “Segmentation analysis, Then and Now”, Journal of Marketing Research, Vol.7, winter 1995, pp.40-41. 8. Roy. “Growth in financial services”, Business Today, February 7-21, 1998. 9. Mishra RN. “Role of service sector in our economy”, Indian Management, Vol.39, No.7, July 2000, pp.54-55. 10. Narayan Krishnamurthy, “This line is always busy”, Advertising and Marketing, 15 March 2000, pp.91-92. 11. Chandrasekar K.S, “Strategic management in the Indian pharmaceutical industry: Focus on marketing strategies”, Alagappa University (unpublished thesis), 2001.

Positioning and Differentiation
Unit structure: 1. Introduction 2. Learning Objectives 3. Positioning and Differentiation 3.1 Principles of positioning 3.2 Errors in positioning 3.3 Strategies for positioning 3.4 How to position a brand 3.5 Positioning strategies in consumer durables 3.6 Positioning paradigms 3.7 Advantages of positioning

3.8 Disadvantages of positioning 3.9 Examples of positioning 3.10Product differentiation variables 3.11Product differentiation strategies 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction:

Al Ries and Jack Trout, proponents of the concept, defined positioning as “Positioning starts with a product. A piece of merchandise, a service, a company, an institution or even a person----. But positioning is not what you do to your product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect”. Positioning is the art of designing the company’s offering and image to occupy a distinctive place in the target markets’ mind. The end result of positioning is the successful creation of a market- a focused value proposition, cogent reasons why the target market should buy the product. The significance of product positioning can be understood from David Ogilvy’s words: “The results of your campaign depend less on how we write your advertising than on how your product is positioned. Often factors like luxury, economy, quality and fashion form planks for positioning. While positioning a brand the leaders position has to be reckoned. Product differentiation in a way is the prelude to product positioning. They are interrelated strategies and are employed in close alignment with each other.
2. Learning Objectives: When you finish this unit, you should be able to: • Understand the principles and some errors in positioning . • Understand the positioning advantages and disadvantages. • Understand the examples of positioning in the Indian context • Understand the product differentiation variables and • Learn the effective strategies to be applied with respect to differentiation . 3. Product positioning and Differentiation:

The product can be positioned for an exclusive well to do segment of the market, it can be positioned for men, for children, for fun loving youth, for health conscious market, it can be a claim on luxury, a claim on distinctiveness, a claim of convenience, economy, novelty, usage. The marketer cannot invent a positioning theme when he is ready to enter the market with his product. He should have already decided what his ‘cash on’ point should be where he should introduce his product for whom and on what distinctive claim he should go around and promote his product.
Thus as a comprehensive definition positioning can be viewed as

♦ The position of a brand is the perception it brings about in the mind of the target customer. ♦ This perception reflects the essence of the brand in terms of functional and non-functional benefits in the judgement of that consumer. All products can be differentiated to some extent. But not all brand differences worthwhile or meaningful. A difference is worth establishing to the extent that it satisfies any of the following criteria.
Important- the difference delivers a highly valued benefit to a sufficient number of buyers. Distinctive- the difference is delivered in a distinctive way. Superior – the difference is superior to other ways of obtaining the benefit. Preemptive- the difference cannot be easily copied by competitors. Affordable- the buyer can afford to pay for the difference. Profitable – the company will find it profitable to introduce he difference. 3.1.Some of the principles of positioning are:

1. It is better to be the first than to be late. The selectivity of the mind is such that the pioneer will always have a presence in the mind-set of the consumers. Hence companies like Thums up, Amul, Xerox etc., are still in the minds of the consumers. 2. In case not the first, then the company should be able to create a new category by making even a small change in the marketing mix elements. AIWA and AKAI created a pricing strategy through replacement market and got into the minds of the consumers. Maruti created a small car market through product innovation. 3. It is important to understand the position and strategies of the competitors. It is clear that the competitors’ strengths and weaknesses should be known to the company. Britannia did the repositioning exercise to overcome the competition and similarly Tata Indica gave a scare to Maruti when they introduced their small car in the market. Certain strategies usually adopted by competitors for positioning Strengthen its own current position in the customer’s mind. The famous advertising line from Avis acknowledged its position in the car rental business and claimed “ We are number two. We try harder.” Grab an unoccupied position. Complan is advertised as the “complete food for the growing children”. Deposition or reposition the competition Exclusive club strategy which is the Three Big idea and implies that those in the club are the best.

4. Positioning using an easy name is very important in this context. Names like LG is easy to pronounce as compared to the earlier name, “Goldstar”. Similarly, Bata is found to be recalled better than LeeCooper.
3.2. Positioning errors:

As companies increase, the number of claims for their brand, they risk disbelief and a loss of clear positioning. In general, a company must avoid four major positioning errors. 1. Under positioning: Some companies discover that buyers have only a vague idea of the brand. The brand is seen as just another entry in crowed market place. 2. Over positioning: Buyers may have too narrow an image of the brand. Thus a consumer might think that diamond rings at Tiffany start at $5000 when in fact Tiffany now offers affordable diamond rings starting at $1000. 3. Confused positioning: Buyers might have a confused image of the brand resulting from the company’s making too many claims or changing the brand’s positioning too frequently. 4. Doubtful positioning: Buyers may find it hard to believe the brand claims in view of the product’s features, price, or manufacturer.

3.3. Different types of positioning strategies: 1. Attribute positioning: A company position itself on an attribute, such as size or number of years in existence. Raymond’s and other companies, with long period of service, appealing to the customer that they had been serving the customer for quite a long time. Philips launched tube lights stating that it will consume only less electricity. Some having an attractive attribute, such as “environmentally friendly,” e.g., Hero Honda launched its two wheeler vehicle stating that it is environment friendly. This strategy is widely used now for food products. For example Sunflower and Saffola introduced oil with one common denominator – they contain no cholesterol 2. Benefit positioning: The product is positioned as the leader in a certain benefit. Various automobile products like Hero Honda position themselves as better in mileage. Hero Honda’s advertisement “Fill it, Shut it and forget it” is evidence to the benefit offered to the customers. 3. Use or application Positioning: Positioning the product as best for some use or application. The Suzuki Samurai “no problem bike” is a classic example in this category. D‘Cold was positioned as a vapourub for adults. 4. User positioning: Focussing the product as best for some user group. Business today position itself as a business magazine used by the top managers. 5. Competitor based positioning: The product claims to be better in some way than a named competitor. For example, Pepsodent position itself as being able to reduce the number of germs in the teeth of the users when compared to the other brands of toothpaste. Pepsi used “nothing official about it” to counter the official drink status of Coca-Cola during the Cricket World Cup in 1996.

6. Product category positioning: The product is positioned, as the leader in a certain product category. Aquafresh position its dental paste not as toothpaste but rather a mouth paste. 7. Quality or Price positioning: The product is positioned as offering the best value. Bajaj scooters position itself as a product that offers value to the customers’ money. In the automotive field, positioning by price and quality is common. In recent years, “luxury” cars that accentuate quality and carry comparatively high prices have proliferated; Infiniti and Lexus are the latest noteworthy entries. However, the makers of luxury cars are having trouble differentiating themselves from each other with respect to important attributes such as performance, comfort, and safety. As a result, consumers are confused. 8. Positioning in relation to a target market: Regardless of which positioning strategy is used, the needs of the target market always must be considered. This positioning strategy doesn’t suggest that the other ones ignore target markets. Rather, with this strategy, the target market – rather than another factor such as competition – is the focal point in positioning product. Nestle offers different products using this strategy those address different consumers’ desires regarding taste, calories and price.

3.4.How to position the brand:

To position the brand a technique called perceptual mapping is commonly used. This technique involves studying the consumers' perception of the product and competitors brands and based on it identifying vacant slots. Specifically this involves the following: (1) Studying the ideal product perception – this involves studying both tangible and intangible attributes that a customer looks for while buying a product. Among the tangibles are product features, performance levels, style and aesthetics of the product packaging, product components and even price and distribution. The intangibles will include the services that a customer looks for, like after sales service, training on how to use the product, financing assistance etc. (2) Get the customers to rank these attributes in the order of importance to them. (3) Customer’s knowledge of the competitors brands. (4) How do the competitors brand favour in the ideal product map. Here the customers are asked to assess competitor brands and specify how close or far they are on each attribute to the ideal product. (5) Based on the assessment of competitor brands on the ideal product map, product managers identify vacant slots and then build the positioning strategy by filling these up. It is important to note here that if an attribute sought by a customer is not high on his/her priority and the firm feels it has the strength in it and should be considered by the customers, the firm can adopt a strategy to help change this perception. But the customer perceptions should be continued for, changing customer perceptions in a long drawn out strategy involving substantial resources.

After this perceptual mapping is done, the marketer uses statistical techniques to arrive at a position.
3.5.Most common positioning strategies in the consumer durable sector: 1. Benefit/use positioning: The positioning strategies adopted by consumer durable depend a lot on ‘usage’, ‘economy’ and ‘corporate identity’ of which a well established brand surely projects the identity of the product in terms of ‘ which corporate house the product is from’. Benefit or usage is the next positioning strategy used. For e.g.: - BPL Converti projects out the multi usage of the product. This strategy is based on identifying the possible uses to which the firm’s brand can be put to. In a way it may appear same as use situations but differs from it because this talks on all the possible uses of a product or brand. For e.g.: - since video cassette recorders (VCRs) could be used in playing, recording and regulating the pace at which the different scenes can be watched (like pause, forward etc) most customers saw it as a distinct development over the video cassette player and the demand for VCR boomed. 2. Competitor related positioning: This is the strategy of placing a firm’s brand next to the leader in the market and trying to uproot it on a specific tangible variable. . To fend off rival makers of microprocessors, Intel corp. launched a campaign to convince buyers that its product is superior to competitors. The company even paid computer makers to include the slogan, “Intel inside”, in their ads. Coca-Cola and Pepsi-Cola compete directly with each other in virtually every element of the marketing mix (even celebrity endorsers).

For e.g.: - Onida was positioned against the giants in television industry through this strategy. For Onida colour TV was launched on the message that all others were clones and only Onida was the leader and the message said “ the boss wasn’t late; it was others who arrived in a hurry” and later followed it with the envy concept. Today Onida has been able to uproot all the yesteryears leaders in the TV market.
3. Lifestyle positioning: A firm may even position the brand as a lifestyle contemporary or futuristic. Many of today’s new kitchen appliances like microwave ovens are positioned accordingly. 4. Positioning by corporate identity: This type of positioning is seen very much with consumer durables when a tried and trusted corporate identity or source which has become a household name for products like Philips for radios and lamps is used to imply the competitive superiority of newer products bearing that name: Philips mixies, Philips electric irons, Philips refrigerator. Godrej Company also often uses this strategy in positioning their product. By stressing on the “Godrej product”. BPL too uses this corporate identity. It says “From BPL”. 5. Positioning by versatility of usage:

Many consumer durables are positioned on the basis of the versatility of usage. For e.g.: - the Prestige pressure pan is positioned in such a way that the product is designed specifically to give the benefit of versatile usage to the consumer. 6. Surrogate positioning: In this kind of positioning the product can’t be positioned differently on the basis of attributes but differentiated by positioning them on the surrogates for the attributes. The claim would be that our product is better than or different from others. For e.g.: the Futura pressure cooker is advertised based on these surrogate ideas. It uses two kinds of surrogate ideas – ‘predecessor’ – the popular and trusted Hawkins association and ‘Endorsement’ because Indians admire Western designs and are impressed by the western names.
3.6.Positioning paradigms:

Monopolistic competition is prevailing in the contemporary markets. Product differentiation and price differentiation are the main features of the monopolistic competition. The marketer must reinterpret the product differentiation as a meaningful consumer benefit. Suppose a company has identified four alternative positioning platforms technology, cost quality and service as shown in following table5.1. It has one major competitor. Both companies stand at 8 as technology (1=low score, 10=high score), which means they both have good technology. The competitor has a better standing on cost (8 instead of 6). The company offers higher quality than its competitor (8 compared to 6). Finally, both companies provide below average service. It would seem that the company should go after cost or same to improve its market appeal. However, other considerations arise. The first is how target consumers feel about improvements in each of these attributes. Column 4 indicates that improvements in cost and service would be of high performance to customers. But can the company afford to make the improvements in cost and service, and how fast can it provide them? Column 5 shows that improving service would have high affordability and speed. But would the competitor be able to match the improved service? Column 6 shows that the competitor’s ability to improve service is low. Based on this information, column 7 shows that the appropriate actions to take with respect to each attribute. The one that makes the most sense is for the company to improve its service and promote this improvement.

(1) Competitive advantage

(2) Company standing

(3) Competitor standing

(4) Importance of improving standing H-M-L

(5) Affordability and speed H-M-L

(6) Competitor’s ability to improve standing H-M-L

(7) Recomme nded action

Technology Cost Quality Service

8 6 8 4

8 8 6 3




Hold Monitor Monitor Invest

Positioning through differentiation *H-high M-medium L-low
3.7.Advantages of positioning:

It helps to focus the product on a specific target customer. It offers the product a new appeal in the market. a distinctive place can be occupied in the target markets’ mind. Successful creation of the market.
3.8.Disadvantages of positioning:

It is not possible to offer a product wholly for a specific type of customers. The wrong positioning has affected a number of products.
3.9.Examples of positioning in the Indian context:

The Positioning of Great shake -Health drink, -Against milk -Soya milk was positioned against a universal product; milk, appealing to a health conscious market. However unpalatability to Indian tastes made the product a failure. The Positioning of Complan: Against milk and as a health builder , Superior over milk The Positioning of Amul Milk powder: -Against milk, -Convenient and ready substitute to milk and not as one superior to milk

The Positioning of Maruti Udyog: - As a vehicle that displays the customers personality - A car which is Young and Energetic - A vehicle which had comfort and reliability and a Low cost of Operation 3.10.Perceptual mapping: Perception is the meaning added by an individual to the information that has been obtained from the environment. This forces a consumer to create his own ideas or say, perception about a brand/product. If consumer feels that branded footwear are costly, he/she will always try to buy from unorganised market. Similarly, a customer might feel that Raymond’s products are of high quality without even having an experience of the product. When a brand creates a proposition, it chooses a position, which will enable it to differentiate itself from other brands. As consumers get used to this position, a close association develops between the brand and the proposition. Subsequently, this association defines what the brand stands for and it is important for a brand to continue and nurture that proposition or develop on it. This can be done through mapping the perceptual thinking of the prospective customers. This method is known as perceptual mapping. In order to construct a perceptual map for say readymade garments; it is necessary first to identify the features that are more widely expected by the customer. Based on the market research and from the inputs of the experts/executives, following ten dominant features have been identified: Wrinkle free Fashion Perfect fit Quality fabric Good looks Attractiveness Color options Popularity Stitching and Economical With the above features, the perceptual map can be constructed by taking the two outstanding features in the two axes as in the following figure. Those features can be Quality and Price.

From the perceptual map, it is clear that the brands bearing foreign impressions are falling in the first quadrant where the features like Wrinkle free, fashion, quality fabric

etc., are found. Color plus, Provouge brands are lying in the second quadrant which denotes the features like perfect fit, colour options, popularity etc. This quadrant gives less consideration to quality. The features like economical is taken in fourth quadrant where the brands like Excalibur and Parx are plotted. This plotting of the perceptual map gives a direction for any new entrant in the readymade garments about the consumer psyche. Features must essentially translate into benefits in the consumer’s mind, and be offered at a price where the price-value equation meets, is the lesson for the new entrant in this sector.
H ig h P ric e
P e rfec t fit C o lo u r o p tio n s p o p u la rity S titch in g o w q u a lity . C a m b rid g e . P a rx .E x c alib u r . K u m ar L o w p ric e C o lo u r p lu s . P ro v o u g e . W rin k le fre e F a sh io n Q u a lity fab ric . A rro w . L o u is P h illip e . u ese n . V a n HZ o d iac A ttrac tiv e n ess . P e te r E n g la n d G o o d lo o k s H ig h Q u ality

E co n o m ic a l

Perceptual map for readymade garments

3.11. Product differentiation Variables: Product differentiation has many differentiation variables, they are • Form • Features • Performance • Conformance • Durability • Reliability • Repairability • Style • Design Form: Many products can be differentiated in form, the size, shape or physical structure of a product. Consider the many possible forms taken by products such as

aspirin. Although aspirin is essentially a commodity, it can be differntiated by dosage size, shape, coating, action time and so on. The UPS as is being used in Personal Computers and other electronic devices have undergone such changes in size that from a vary bulky equipment, one cannot even see an UPS now. To that extent miniaturisation has taken place in this sector. Features: Most product can be offered with varying features, characteristics that supplement the products basic function. Being the first to introduce valued new features is one of the mose effective ways to compete. Companies must also think in terms of feature bundles or packages. During 1992-93, when Kinetic Honda conducted market research, it showed that most of the existing twowheelers were not user friendly. Starting was the problem to the user. Kinetic Honda brought in a scooter which had an electronic ignition dispensed away with the boring kick-start routine as a stand-by. In addition the new model contained a whole new range oof features including automatic gear shifting, choke, built-in indicators and a stream lined aerodynamic design. The major differentiation through features as evident from Colour Television industry are: Screens are modified into super flat ones from the ususal tinted screens. Interactive picture set modes Bass, treble, 3D Surround effects, Dolby noise reduction, pitch adjustments Number of channels nearing 210 in AIWA and 200 in Konka. High Definition Televisions, Plasma televisions Performance Quality: Performance quality refers to the level at which the products’ primary characteristics operate. This is to be focussed only when the company is certain that offering higher product performance produce higher profitability. Quality link to profitability does not mean that the firm should design the highest performance level possible. There are diminishing returns to ever-increasing performance. The manufacturer must design a performance level appropriate to the target market and competitors performance levels. Conformance Quality: Conformance quality is the degree to which all the produced units are identical and meet the promised specifications. The problem with low conformance quality is that the product will disappoint some buyers. Maruti for instance offers specific technological product differentiations based on the model bought by the customers. Multi point fuel injections, All Aluminium Combustion Engine are only available with specific models. IFB washing machines are still famous mainly

because of the fact that their front loading machines have been performing without any defects. Durability: It is the measure of the products’s expected operating life under natural or streeful conditions, is a valued attribute for certain products. Buyers will generally pay more for vehicles and kitchen appliances that have a long-lasting reputation. Tinting machines are being introduced by Asian Paints to differentiate their shades since actual handling is not possible to show the durability of the paints. This has also helped solve the logistics problem as the dealers can now stock only the base material and thus save almost 20-25% in the working capital cycle. Reliability: Reliability is a measure of the probability that a product will not malfunction or fail, within a specified time period. Buyers normally will pay a premium for more reliable products. Dunlop car tyres showed their reliability by advertising the special kind of tyres for each brand. For a Maruti, a tyre was specially desinged for its front wheel drive. An extra wide tyre was desinged for Premier Padmini because it goes through a lot of wear and tear on city roads and for the Ambassador, the tyre walls with extra rubbe to take the extra weight. Repairability: Repairability is a measure of the ease of fixing a product when it malfunctions or fails. Buyers prefer products that are easy to repair. An automobile made with standard parts that are easily replaced has high repairability. Channel differentiation in terms of number of Maruti service centres made Maruti a successful one. Style:

Style describes the product’s look and feel to the buyer. Buyers are normally willing to pay a premium for products that are attractively styled. Car buyers pay a premium for Weekender models because of their extraordinary look. We must include packaging as a styling weapon, especially in food products, cosmetics, toiletries, and small consumer appliances. The package is the buyers first encounter with the product and is capable of turning the buyer on or off.

As competition intensifies, design offers a potent way to differentiate and position a company’s products and services. Design is the factor that will often give a company its competitive edge. Design is the totality of features that affect how a product looks and

functions in terms of customer requirements. Design is particularly important in making and marketing durable equipment, apparel, retail services, and packaged goods. Some companies confuse design with styling and think that design is a matter of enclosing an average product in a stylish casting. Or they think that reliability is something to catch during inspections rather than designing it into the manufacturing process.

For example, for many people, brushing is a ritual to which they pay relatively little attention. As a consequence, many brushes are used well past the point when their bristles are worn and are no longer effective. Toothbrush maker Oral – B discovered a way to capitalize on this widespread habit. The company, by introducing a patented blue dye in the center bristles of its toothbrushes found a way to have the brush itself communicate to the customer. As the brush is used, the dye gradually fades. When the dye is gone, the brush is no longer effective and should be replaced Similarly, John Scully marketing team at Pepsi – cola used packaging as a way to differentiate Pepsi from Coke. They created a distinct, if temporary advantage for Pepsi by designing plastic bottles that where lighter and thus easier for customers to carry, than the heavy glass bottles of the time. They called it the beauty on the move and that it not only made carrying soda easier, but it also reduced the advantage of Coke’s well known contoured bottle. At the time ,it was difficult to produce plastic bottles in that shape. 3.12.Characteristics of differentiation strategies

There are a variety of ways to differentiate. Whatever the route, the successful differentiation strategy should have three characteristics.
Generate customer value Provide perceived value Be difficult to copy Differentiation strategy needs to add value for the customer. A distinction is needed between apparent value and actual value. Too often a point of difference with apparent value is not valued by the customer. The one stop financial service vision was not valued by customers they wanted excellence and competence from investment managers, and aspirin products had much less value in the market than was hoped. The value of the Bayer name did not transfer to new product classes. One key to a successful differentiation strategy is to develop the point of differentiation from the customer’s perspective rather than from the perspective of the business operation. How does the point of differentiation affect the customer’s experience of buying and using the product? Does it serve to reduce cost, add performance, or increase satisfaction?

Another method for differentiating a product is to employ market research to systematically understand the customer and to test ideas and assumptions. One role of market research is to insure that the value added will justify the price premium involved. A differentiation strategy is often associated with higher price, because it usually makes price less critical to the customer and because differentiation usually costs something. The question is whether that price premium works in the marketplace.

The perceived value problem is particularly acute when the customer is not capable of evaluating the added value. Consider the airline safety or the skill of a dentist. The customer is unable to evaluate them without investing a significant time and effort. Rather than expand such effect, the customer will look for the signals such as the appearance of the aircraft or the professionalism of the dentist’s front office. The task is then to manage the signals or the cues of value added. User association and endorsements can help. Oral B is the toothbrush recommended by the dentists and Air jordan is endorsed by Michel jordan. The point of differentiation needs to be sustainable. A value added such as 24hour support is relatively easy to copy if it proves successful. The challenge is to create differentiation strategies that are difficult to copy. One reason to identify two strategic thrusts – synergy from the previous chapter and first mover advantage in the next – is that when they are combined with a differentiation thrust, sustainability is more likely. When the point of differentiation involves a total organisational effort with a complex set of assets and skills, it will be difficult and costly to copy, especially if there is a dynamic constantly evolving quality to it. A creative organisation with heavy R&D investment, such as that of Microsoft, will inhibit duplication. The quality option and building strong brands can also require a total organisational effort.

4. Have you understood type questions: 1. An attribute of a product that is desired by customers in a target market and which competing products cannot match is termed ____________ a. a strength b. a differential advantage c. a selling point d. a benefit 2. Soft Shave is a shaving cream aimed particularly at women. The activities and decisions involved an developing and maintaining the product concept in buyers minds is called: a. b. c. d. the promotion mix the product mix product positioning product promotion

3. A product's _________ is the place it occupies in the minds of consumers relative to competing brands: a. b. c. d. 5. Summary segment position attribute image

Many kinds of efforts that were given to produce differentiation in the product being offered have failed. For example Westin Stamford hotel in Singapore advertises that it is the world’s tallest hotel. But the tourists were least bothered about the height of the hotel. Hence each firm needs to develop a distinctive positioning for its market offering which is very much relevant in the benefit being provided by the product. Take the case of an excellent positioning strategy being used by Volvo (station wagon). They are aiming at the safety conscious upscale families and the positioning strategy is very much related with the benefits being offered which are durability and safety. They position the product as the “safest, most durable wagon in which your family can ride.” Differentiation is the act of designing a set of meaningful difference to distinguish the company’s offering from competitor’s offerings. Most profitable strategies are built on differentiation; offering customers something they value that competitors don’t have. But most companies in seeking to differentiate them, focus their energy only on their products or services. In fact, a company has the opportunity to differentiate itself at every point where it comes in contact with its customers – from the moment customers realize that they need a product or service to the time when they no longer want it and decide to dispose of it. It is believed that if companies open up their creative thinking to their customers entire experience with a product or service – what the company call consumption chain – they can uncover opportunities to position their offerings in ways that they, and their competitors, would never have thought possible. Physical products vary in their potential for differentiation. Product differentiation has a close linkage with product positioning. It is in a way a prelude to product positioning. At one extreme we find products that allow little variation: salt, steel, paracetamol. Yet even here, some differentiation is possible. HLL makes several brands of laundry detergent, each with a separate brand identity. At the other extreme are products capable of high differentiation, such as automobiles, commercial buildings, and furniture. Duplication by competitors requires not only ability but will. Increasing the investment or risk involved will discourage competitors. If, for example, multiple points of differentiation are involved, duplication will be more expensive. Duplicating only one aspect of this differentiation strategy would be inadequate. Over investment in a value added activity may pay off in the long run by discouraging competitors from duplicating a strategy. For example , the development of a superior service back up system might discourage competitors. The same logic can apply to a broad product line. Some elements of that line might be unprofitable, but if they plug holes that competitors could use to provide value, then the analysis looks different.

6. Exercises

1. Develop a perceptual map for automobiles (cars) in the Indian context. 2. What is positioning errors? Can you identify during the last one year in selected industries. 3. What is the role of advertising agency in making positioning statements? Identify the same from two agencies (national) of your choice. 4. Explain the positioning of Surf Excel and Tide and justify your answer. 5. What is the difference between product positioning and brand positioning? Explain with examples.
7. References 1. Adrian Slywotzky and Benson Shapiro, “ Leveraing to beat the odds: The new marketing mindset”, Harvard Business Review, September- October 1993, pp.100107. 2. Claudio Romano, “Identifying factors which influence product innovation: a case study approach”, Journal of Management Studies, January 1990, pp.78-92. 3. Devine Hugh and John Morton, “ How does the market really see your product?”, Business Marketing, July 1984, pp.70-77. 4. Ian C. MacMillan and Rita Gunther McGrath, “Discovering New Points of Differentiation”, Harward Business Review, July-August 1997, pp133-145. 5. J.Karel, “Brand strategy positions products worldwide”, Journal of Business Strategy, May-June 1991, pp.16-19. 6. John Rockwell and Marc Particelli, “ New product strategy: How does the pros do it?”, Industrial marketing, May 1982, pp.49-60.

Product management
Unit structure: 1. Introduction 2. Learning Objectives 3. Marketing mix element- Product 3.1 Product strategies 3.2 Rationale for product mix 3.3 Components of product plan 3.4 Product life cycle 3.5 Product portfolio Analysis 3.6 New product management 3.7 New Product Development 4. Have you understood type questions 5. Summary 6. Exercises 7. References

1. Introduction: Dominiquez conceives product management as a hexagon and found to have the following as the important aspects: Product Forecasting Planning Market Profit and Coordination

According to Philip Kotler, there are five levels of a product. Marketing managers need to think their way around five different levels of product when working through the essentials of the offer which is going to be made to the customers. They are:
The core benefit: The basic benefit which is what the customer really wants when deciding on a particular product. For example, a toothpaste which is able to clean the teeth. The generic product: This is the basic version of the actual physical product, for example, an electric cooker. The expected product: A set of attributes and conditions that buyers normally agree to when they purchase a product. For example, a soap is expected to last long and at the same time does not wear away due to water. The augmented product: The product includes additional services and benefits which help to distinguish it from competitive offerings, for example, a manufacturer of television might extend the normal warranty period from one year to say three years. In fact, SHARP television offered seven years warranty. The potential product: At the final level stands the product of the future, namely all the transformations and augmentations that a particular product might undergo in the future. This is where the companies search for new ways to satisfy their customers and differentiate their products. The emergence of Hyper markets is one example. It is hence imperative that you are given a indepth information on what is product, why product management is important to organizations, the ways of new product development and its entry into the market etc. Let us learn them in detail. 2. Learning Objectives: When you finish this unit, you should be able to: • Understand the various product levels and their importance . • Understand the different aspects of product life cycle • Understand the product management issues and problems . • Understand the ways of new product management and their steps .

3. Product management:

Product is any thing that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas. A product mix (also called product assortment) is the set of all products and items that a particular seller offers for sale. For example, Kodak’s product mix consists of two strong product lines: information products and image products. A company’s product mix has a certain width, length, depth, and consistency. These concepts are illustrated below.
Width: The width of the product mix refers to how many different product lines the company carries. Hindustan Unilever Limited (HUL) has different product lines. It offers different products for the consumers. The product lines offered by HUL are Home and Personal care, Food and Beverages and Industrial, Agricultural and others. Length: The length of a product mix refers to the total number of items in the mix. This is obtained by dividing the total length by the number lines. Procter and Gamble offers different product line width. It offers different brands under detergents like Tide, Ariel. Depth: The depth of a product mix refers to how many variants are offered of each product in the line. Hindustan Unilever Limited offers tooth paste named Close Up at different sizes like 20 grams, 50 grams, 150 grams etc. In this case HTL had a product depth of three. Consistency: The consistency of the product mix refers to how closely related the various product lines are in terms of the end use, production requirements, distribution channels, or some other way. P&G’s product lines are consistent insofar as they are consumer goods that go through the same distribution channels. The lines are less consistent insofar as they perform different functions for the buyers. These four product mix dimensions permit the company to expand its business in four ways. It can add new product lines, thus widening its product mix. It can lengthen each product line. It can add more product variants to each product and deepen its product mix. Finally, a company can pursue more product-line consistency.


Software, Hardware, Soaps, Baby Care, Cooking media, lighting and Medical equipments Power projects, Telecom, Satellite and Internet Services, Infrastructure (Roads, Oil lines, Ports, Landscape business), Petrochemicals, Textiles, Fibres, Plastics, Refining and Marketing Spirits, Media, Healthcare, Agro-chemicals, Engineering and Media software Cements, Alkalies, Tyres, Cigarettes, Telecom equipments, Cellular service, Paper products, Hardware and Office Automation equipments Cookery products, Undergarments, Pharmaceuticals, Cleaning agents and Personal care products Product mix of select companies





3.1.Product strategies: Godrej offers different brands of refrigerators, soaps and other things to its consumers. Did this diverse assortment of products developed by accident? No -- it reflects a planned strategy by the company. To be successful in marketing, producers and middlemen need carefully planned strategies for managing their product mixes.

Product-mix expansion Product-mix expansion is accomplished by increasing the depth within a particular line and/or the number of lines a firm offers to consumers. Let’s look at these options. When a company adds a similar item to an existing product line with the same brand name, this termed a line extension. For illustrations, pull the coupons insert out of your Sunday newspaper. For example Pepsi-cola company introduced many new flavors for its drink like Diet Pepsi, Lehar Team etc. Like wise Coca-Cola Company introduced news flavors like sprite, diet coke etc. The line extension strategy is also used by organizations in service fields. For example, universities now offer programs to appeal to prospective older students, and the Roman Catholic Church broadened its line of religious services by adding Saturday and Sunday evening masses. There are many reasons for line extensions. The main one is that the firm wants to appeal to more market segments by offering a wider range of choices for a particular product. Line extensions

might be the most pronounced trend in marketing during the early 1990s. As discussed in the nearby box, line extensions have become so common as to raise questions about their effectiveness. Another way to expand the product mix, referred to as mix extension, is to add a new product line to the company’s present assortment. To illustrate, when Johnson & Johnson introduced a line of Acuvue disposable contact lenses, that was mix extension because it added another product to the company’s product mix. In contrast, line extension adds more items within the same product line. When J&J adds new version of baby soaps, that’s line extension. Under a mix-extension strategy, the new line may be related or unrelated to current products. Furthermore, it may carry one of the company’s existing brand names or may be given an entirely new name. Here are examples of these four alternatives. Most often, the new line is related to the existing product mix because the company wants to capitalize in its expertise and experience.
Related product, same brand: ♦ Pepsi cola’s Pepsi, Miranda, Lehar 7UP, Diet Pepsi, etc. ♦ SmithKline Beecham’s Horlicks, Boost etc. Unrelated product, same brand: ♦ Godrej produces many unrelated products like refrigerators, soaps

Related product, different brand: ♦ Procter & Gamble introduces Luvs as a companion to its disposable diapers. Unrelated product, different brand: ♦ Veegaland, an amusement park at Kochi from the well known voltage stabiliser maker V-Guard. ♦ McDonald’s testing leaps and bounds, an indoor playground for children and their parents.

Trading up and trading down: The product strategies of trading up and trading down involve a change in product positioning and an expansion of the product line. Trading up means adding a higher price product to a line to attract a broader market. Also, the seller intends that the new product’s prestige will help the sale of its existing lower-price products. By adding Adreno and Energy as new bikes to the saddle of LML scooters, the company has traded up. Trading down means adding a lower-price product to a company’s product line. The firm expects that people who cannot afford the original higher-price product or who see it as too expensive will buy the new lower-price product. The reason: the lower-price product carries some of the status and some of the other more substantive benefits (such as performance) of the higher-price item. Nirma introduced Nima soap in the northern market at Rs.5 when other low end soaps are sold at the lowest price of Rs.6.

Some times the effect of trading down can be achieved through advertising, without introducing new, lower-priced products. A manufacturer of fine or chinaware might accomplish this by advertising some of the lower-price in its existing product lines.Trading up and trading down are perilous strategies because the new products may confuse buyers, resulting in negligible net gain. It is equally undesirable if sales of the new item or line are generated at the expense if the established products. When trading down, the new offering may permanently hurt the firm’s reputation and that of its established high-quality product. To reduce this possibility, new lower-price products may be given brand names unlike the established brands. In trading up, on the other hand, the problem depends on whether the new product or line carries the established brand or is given a new name. If the same brand name is used, the firm must change its image enough so that new customer will accept the higher-price product. At the same time, the seller does not want to lose its present customers. The new offering may present a cloudy image, not attracting new customers but driving away existing customers. If a different brand name is used, the company must create awareness for it and then stimulate consumers to buy the new product. Alteration of existing products: As an alternative to developing a completely new product, management should take a fresh look at the organizations existing products. Often, improving an established product – product alteration can be more profitable and less risky than developing a completely a new one. However product alteration is not with out risks. When Coca-Cola co. modified the formula for its leading product and changed its name to new coke, sales suffered so much that the old formula was brought back 3 months later under the Coca-Cola classic name. Product mix contraction: Another product strategy, product mix contraction, is carried out either by eliminating an entire line or by simplifying the assortment with in a line. Thinner and/or shorter product lines or mixes can weed out low-profit and unprofitable products. The intended result of product-mix contraction is higher profits from fewer products. Hindustan Lever has announced that it would prune its brand portfolio during the year 2001-2002. During the early 1990’s most companies expanded – rather than contracted – their product mixes. Numerous line extensions document this trend. As firms find that they have an unmanageable number of products or that various items or lines are unprofitable, or both, product-mix pruning is likely. The result in many organizations will be fewer product lines, with the remaining lines thinner and shorter.
3.2.Rationale for product mix:

Internationally, brand rationalization has been on companies’ agendas for some time. In September 1999, Unilever announced that it would prune its brand portfolio by 75% from 1600 to 400. The basket of 400 includes brands like Dove, Lux, and the Calvin Klein range of fragrances. Extensions are a company’s way of responding to consumer’s

desires, which are often gauged through research. Still, many consumers cannot differentiate across the numerous alternatives – and get frustrated or angry in the process. The large number of new offerings also poses problems for many retailers. Under these circumstances, it is important for a Product manager to look at the optimum mix of products in the company’s portfolio. It is hence necessary that the Product Manager gives due consideration to the financial aspects related to the products and concentrates on the following: 1. Cumulative annual sales revenue 2. Cumulative support costs 3. Cumulative asset use including that of buildings, machinery, inventories and receivables 4. Cumulative profit contribution and finally 5. Cumulative return on assets contribution by the product By calculating the above, the Product Manager can look at the following as alternatives: 1. Concentrating on the true profitability of each product irrespective of the years of reckoning 2. Pricing has to be reworked based on the total costs 3. Possible outsourcing products to augment the product mix Product line extensions: A product line if it is too short, then the Product manager can increase profits by adding items in the similar line under the same brand name, usually with new features. This is termed as product line extension. The line extension may be innovative, ‘me-too’,or filling in using another package size like that of Bisleri (from one litre bottle, offered two litre bottle). The vast majority of new product introductions consists of line extensions. Bacardi white rum which entered India, soon realising the need for black rum, added the brand into their line. In a study undertaken by Holak and Bhatt revealed the following about line extensions: Line extension of strong brands are more successful than weak brands Line extension of symbolic brands enjoy greater market success than those of less symbolic brands Line extensions that receive strong advertising and promotional support are more successful than those that receive less promotional support Firm size and marketing competence plays a part in an extension success Earlier line extensions have helped in the market expansion of the parentbrand Incremental sales generated by line extension may more than compensate for the loss in sales due to cannibalisation.

Some of the examples of product line extensions are: 1. TVS Victor scooter from motorcycle manufacturer TVS-Suzuki

2. Kinley club soda from Coca-Cola 3. Elf Equitaine has launched Elf Super Sporti S 15W40 through Elf Lubricants 4. Reebok has widened their DMX range with the launch of DMX 6 series 5. Reckitt and Coleman launched their line extension – Harpic Plus Bleach 6. Parker pens introduced a line extension – Parker Zodiac pens 7. Pepsi came out with their Mirinda Lime drink as the Mirinda extension 8. Johnson and Johnson introduced New Stayfree Secure sanitary napkins 9. HLL launched the new variant of Surf – Surf with excel power 10. P&G intorduced Pantene Pro-V anti-dandruff and Head & Shoulders Menthol shampoo 11. Dabur extended Vatika to Vatika Henna Cream conditioning shampoo 12. Marico introduced Parachute Lite, Parachute Nutrisheen grooming cream, Parachute Nutrisheen After wash liquid for woman 13. Brittania introduced dairy products like Brittania Butter and Brittania Cheese Spread 14. Mercedes Benz introduced Mercedes E 230 and M 250-D 15. Iodex came out with Iodex power cream for the lower waist area problems 16. Iodex Sport was launched for people with a sporty attitude 17. Bajaj scooters introduced Bajaj Pulsar DTSi Product mix width expansion: 1. Dettol: Dettol started off in the 1930’s with Dettol mouthwash, antiseptic cream, obstetrics cream and liquid antiseptic. Over the years, the portfolio has expanded to soaps, liquid soap and shaving cream, Dettol plaster and several other products are still to use the brand equity of Dettol. This has been done mainly due to the threat of Savlon. All these products will be positioned along Dettol’s core values – trust and protection. 2.Godrej: Apart from their growing portfolio of soap brands, Godrej bought Key, Ezee and Trilo from Cussons International. IT has since added many brands in the soap category including Godrej Fairglow, Godrej Sandal, Fairever vanishing cream etc. Godrej also added ‘Cooklite’, edible oil and later on added a small variant –Chota Cooklite. In the FMCG sector, Godrej is trying to augment their portfolio with new brands from competitors. 3.DS Groups: During 1999, DS group conducted a study through McKinsey and decided to increase their product mix by adding food and beverages, Salt and spices branded –Catch, Tea and edible oils in the same brand name and also mothfreshners. This is done apart from their major brands – Baba Zarda and Rajniganda paan masalas.

3.3.Components of Product plan: Each product level within a business unit must develop a marketing plan for achieving its goals. The marketing plan is one of the most important outputs of the marketing process, and it should contain the following elements. 1) Executive summary and table of contents. The marketing plan should open with a brief summary of the plan’s main goals and recommendations. The executive summary permits senior management to grasp the plan’s major thrust. A table of contents should follow the executive summary. 2) Current marketing situation: This section presents relevant background data on sales, costs, profits, the market, competitors, distribution and the macro environment. The data are drawn from a product fact book maintained by the product manager. 3) Opportunity and issue analysis: After summarizing the current marketing situation the product manager proceeds to identify the major opportunities/ threats strengths/ weakness and issues facing the product line. 4) Objectives: Once the product manager has summarized the issues, he or she must decide on the plan’s financial and marketing objectives. 5) Marketing Strategy: The product manager is responsible for the broad marketing strategy or “game plan” to accomplish the plan’s objectives. In developing the strategy, the coordination of product manager, production manager and buyers are needed. The product manager also needs to talk to the sales manager to obtain sufficient sales force support and to the financial officer to obtain sufficient funds for advertising and promotion. 6) Action Programs: The marketing plans should specify the broad marketing programs for achieving the business objectives. Each marketing strategy should be focussed in such a way that the action to be done, when and how it is to be done should be planned.

7) Projected Profit and Loss statement: Action plans allow the product manager to build a supporting budget. On the revenue side, this budget shows the forecasted sales volumes in units and the average price. On the expense side, it shows the cost of production, physical distribution, and marketing, broken into finer categories. The difference between revenue and sales is projected profit. Once approved, the budget is the basis for developing plans and schedules for material procurement, production schedule, employee recruitment, and marketing operations. (viii) Control: The last section of the market plan outlines the controls for monitoring the plan. Typically the goals and budget are spelled out for each month or quarter. Senior management can review the results each period. Some control sections include Contingency plans. A Contingency plan outlines the steps management would take in response to specific adverse developments, such as price war or strikes. 3.4.Product Life Cycle

Product life cycle as a concept has been an indicator by which companies decide the fate of the products and the brands they posses or introduce as new products. It is only a toll which can be used for taking marketing decisions based on the position of the brand/product in the life cycle. Some of the important aspects of the life cycle strategies are mentioned below:


Main strategy Aim to get the innovators try the product Aim at the weaker market Fight off the increasing competition and support loyal customers 1.Revamp

Price Try to have a higher price to cover the launch costs Keep price up to take advantage of market growth Avoid price wars

Advertising and sales promotions Generate awareness; Samples, test drives etc. Reinforce success; Reduced sales promotions Stress the differential advantages; use sales promotions to attract users to the brand Stress and inform change Spend more, special offers Do nothing




Change price levels Reduce price Price down to clear stocks


2.Promotion 3.Substitution

Product life cycle strategies Arguments against PLC:

According to PLC, sales following a product’s launch are initially slow but then increase as awareness grows. Maturity is reached when the rate of sales growth levels off and repeat purchasers account for the majority of sales. Ultimately, sales begin to decline as new products and new technologies enter the market. Leading eventually to the product being withdrawn. The literature available in this area have thrown contradicting arguments. One school of thought is clear that PLC is a foundation for an effective product management system, while Dhalla and Yuseph argued that the PLC is conceptually and operationally flawed. The bases on which the arguments are presented include:
The biological metaphors used to suggest that products are living entities is misleading Attempts to match empirical sales data to life-cycle curves have proved difficult and the results are largely meaningless The life cycle of a product and hence the shape of the curve is determined by how the product is managed over time. It is not an independent variable as is suggested by traditional PLC theory The PLC is not equally valid for product class, product form and for brands as often argued The stages of the life cycles are difficult to define Identifying where on the life cycle a product is at any particular time is difficult to determine The scope for using the concept as a planning tool is limited and Evidence suggests that where companies have tried to use the PLC as a planning tool, opportunities have been missed and costly mistakes made. The product life cycle of Maruti:

The passenger cars in the low end models are passing through a maturity stage. The profits associated with a car follow the ‘S’ curve of its life cycle , and decline as the product nears the end of the maturity phase. Maruti Udyog’s decision to drop prices during December 1998 of all versions of the Maruti 800 came at this stage. The respite that the price-cut is expected to provide is aimed at extending the maturity phase of Maruti as seen from the following figure:

Every product comes to the market has to pass through a series of stages (i.e.) which is studied under the head product life cycle. It may be a shorter (or) longer life cycle depending upon the performance of the product. To say that a product has a life cycle is to assert four things : Products have a limited life. Product sales pass through distinct stages, each posing different challenges, and problems to the seller. Profits rise and fall at different stages of the product life cycle. Products require different marketing, financial, manufacturing, purchasing, and human resource strategic in each stage of their life cycle. Stages In Product Life Cycle : The shape of the product life cycle curve are portrayed as bell-shaped. This curve is typically divided into 4 stages: Introduction Growth Majority Decline







Introduction : During the market introductory stage, there may not be ready market for the product. Sales are low; the product undergoes teething troubles, profits seem a remote possibility ; demand has to be created and developed ; and the customers have to be prompted to try out the product. this stage posses several problems for the marketer. This stage poses several problems for the marketer. The complexity of the problems and the duration of the stage depend upon the nature of the product, its price, its technological newness and the consumer’s view of the product. One of the crucial decision to be taken in this stage is the pricing decision so, the management can pursue one of the four strategies. I. Rapid skimming : Launching the new product at a high price and a high promotion level. It will take advantage of early entry and the realitive novelty of the product in the market introduction stage. Those who became aware of the product are eager to have it and can pay the asking price and the firm faces potential competition and wants to build brand preferences. 2. Slow skimming : Launching the new product at a high and low promotion. This strategy make sense when the market is limited sense, when the market is limited in size ; most of the market is aware of the product, buyers are willing to pay a high price, and potential competition is not imminent. 3.Rapid Penetration : Launching the product at a low price and spending heavily on promotion. This strategy make sense when the market is large, the market is unaware of the product, most buyers are price sensitive, there is strong potential competition, and the unit manufacturing costs fall with the company’s scale of production and accumulated manufacturing experience. 4. Slow penetration : Launching the product at a low price and low level of promotion. This strategy make sense when the market is large, is highly aware of the product, is price sensitive, and there is some potential competition. Another crucial area demanding attention at this stage is market development and promotion. In this

stage, demand has to be created and developed. The firm has to invest heavily in promotion and visit for the reward. Several examples of this introductory phase illustrates the different core strategies available. Consumer electronics and industrial product companies almost always pursue a skimming strategy. When Washing machines, Refrigerators, Camcorders, digital tape players were first introduced, they were priced heavily intitally and then fell in price over time. At the same time, penetration pricing is done usually in the Fast Moving Consumer Goods (FMCG) because market share is very important for retaining the Space Keeping Units in the retail outlets. II. Growth Stage : During this stage, the demand for the product increases and the size of the market grows. There is a rapid increase in sales. Early adopters like the product, and additional consumers start buying it. Now competitors enter, attacked by the opportunities. They introduce new product features and expand distribution. Prices remain where they are or fall slightly, depending on how fast demand increases. Sales rise much faster than promotional expenditures, causing a welcome decline in sales promotion ratio. Profits increase during this stage as promotion costs are spread over a large volume and unit manufacturing costs fall faster than price declines owing to the producer learning effect. During this stage, the firm uses several strategies to sustain rapid market growth as long as possible. It improves product quality and adds new features and improved styling. It adds new models and flanker products (i.e. products of different sizes, flavours, etc.) It enters new market segments. It increases its distribution coverage and enters new distribution channels. It shifts from product awareness advertising to product preference advertising. It lowers price to attract the next layer of price sensitive buyers. Marketing and distribution efficiency becomes the decisive factor at this stage. The pioneer sales and profits keep increasing at this stage. III Maturity Stage : In the maturity stage, the demand for the product reach a saturation point. Price competition become intense and the pioneer tries to distinguish his brand

by subtle product differentiation and exploits the brand loyalty built by the company. Maturity divides into 3 phases : i) Growth phase : This is the first phase where the sales growth rate starts to decline. ii) Stable phase : In the second phase, sales flatten on a per capita basis because of market saturation. Most potential consumers have tried the product, and the future sales ar governed by population growth and replacement demand. iii) Decaying maturity : In the third phase, the absolute level of sales starts to decline, and customers begin switching to other products and substitutes. Market Modification : The company might try to expand the market for its mature brand by working with the two factors that makeup sales volume. Volume = number of brand users x usage rate per user. The company can try to expand the number of brand users in three ways. Convert non-users. Enter new market segments. Win competitor’s customers. Volume can be used adopting the following three strategies. The company can try to get customers to use the product more frequently. The company can try to interest users in using more of the product on each occasion. The company can try to discover new product uses and convince people to use the product in more varied ways. Product modification: Managers also try to stimulate sales by modifying the product’s characteristics through quality improvement, feature improvement, or style improvement. This strategy has several advantages. New features build the company’s image as innovator and win the loyalty of market segments that value these features. They provide a opportunity for free publicity and they generate sales and distributor enthusiasm. The chief disadvantage is that feature improvements are early imitated ; unless there is a permanent gain from being first, the feature improvement might not pay off in the long run.

Marketing – Mix Modification : Product managers might also try to stimulate sales by modifying other marketing mix elements. i) Price : Regarding the price, the decisions should be made in a way to attract buyers or the price should be lowered (or) sometimes it is highered to signal higher quality. ii) Distribution : In the distribution element, the outlets where the products to be displayed increased or not ; about the introduction of new distribution channels, the number of outlets are to be decided. iii) Advertising : The factors to be considered in advertising is, the expenditures made, the message of the present advertisement to be modified, and about the frequency, size of advertisements. iv) Sales Promotion : Should the company set up sales promotion – trade deals, cents – off coupons, rebates, warranties, gifts and contests are to be decided. v) Personal selling: In this, the number of quality of sales people to be increased, basis for sales force specialisation, sale territories revision, sales force incentives, sales – call planning are to be properly planned. vi) Services : The technical assistance given by the company to the customers, credit facilities, their delivery node are to be enhanced. So, the marketing mix modifications should be done efficiently. The major problem is especially price reductions and additional services is that they are early imitated.

IV Decline Stage : In this stage, sales begin to fall. The demand for the product shrinks probably due to new and functionally advanced products becoming available in the market / market being more saturated to the product. In any case, prices and margins get depressed ; total sales and profits diminish. Firms do perceive the impounding total decline and prepare for the gradual phasing out of the product. Successful firms quite often keep new products ready in the queue to fill the vacum created by the decline of existing products.

Some firms will use several strategies to over come this decline stage like that is to link up the sale of these products with some other premium products they have developed and thus try to sketch the life of declining product. In a study of company strategies in declining induction, five decline strategies available to the firm : Increasing the firm’s investment (to dominate the market / strengthen its competitive position). Maintaining the firm’s investment level until the uncertainties about the industries are resolved. Decreasing the firm’s investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative riches. Harvesting (“milking”) the firm’s investment to recover cash quickly. Divesting the business quickly by disposing its assets as advantageously as possible. Managing the product mix throughout the product life cycle Effects and Responses Competition Stages of the Product life cycle Introductio Growth Maturity n None of Some Many rivals importance emulators competing for a small piece of pie Increasing Profits are Profits reach peak levels as competition negligible cuts into profit because of a result of margins and high prices high ultimately into production and growing total profits demand and marketing costs Intensive; use Intensive; Selective, heavy trade employ small as allowances to distribution trade retain shelf discounts is slowly space since dealers built up are eager to store Use Aim at the Make the advertising as mass market needs of a vehicle for aware of early brand benefits differentiation adopters among

Decline Few in number with a rapid shakeout of weak members Declining volumes pushes costs up to levels that eliminate profits entirely



Selective; slowly phase out unprofitable outlets

Advertising strategy

Emphasise low price to reduce stock

Overall Strategy

Market establishm ent; persuade early adopters to try the product

Market penetration; persuade mass market to prefer the brand

otherwise similar brands Defence of brand position; check the inroads of competition

Preparations for removal; milk the brand dry of all possible benefits

Advantages of Product Life Cycle: 1) Facilitates preplanning the product launch:

In launching of a new product, many companies fail because of not knowing how to handle the problems at various stages in PLC. With the help of PLC concept, it is possible to foresee and predict the profile of the proposed product’s life, the events that are likely to take place in the market, and the issues on pricing, channel and promotion that are likely to come up. The elaborate Exercise at preplanning and the lead time available for keeping strategic options ready in anticipation of certain events in the market, make the marketing man better equipped to charter the course of a product.
2) Facilitates prolonging of profitable phase : Some products get into trouble in their maturity stage, the PLC concept can be of help to the marketing man. Strategies are formulated at this stage to prolong profitable phase to overcome the threat from competitors normally, the following strategies are followed. Finding out new users of the product. Finding out new uses of the product. Popularising more frequent use of product. Making the product more distinctive to the consumers. By adding real / psychological value to the product. 3) Facilitates investment decision on products : Product portfolio planning is becoming a crucial subject, and the PLC as a tool can help in long term planning. This inturn facilitates investment decisions on products ; investment can be given to the right products and committing heavy resources on wrong products can be avoided. In short, practicing the PLC concept means that one is substituting stop-gap arrangements in product management with a structured long term product monitoring plan. 4) Linkage between the PLC concept and the entry strategy :

As a new product travels through its life, different firms join the market. With their respective versions of the product, at different stages. The specific stage in the PLC of the product at which a given firm enter with its brand, will influence the entry strategy of the firm. Basically, four distinct entry postures are possible for a firm seeking entry into the market. Entry as innovators Entry as early followers Entry as segmenters Entry as Me-too’s 5) Effective tool in managing customers : Customers experience with the company changes as the product passes through the PLC stages. As the experience level of customer changes, the benefits they seek from the company also keep changing. The seller of the product has to understand when and how a transition is taking place in the experience level of the customer, as his product moves along its life cycle. The changing expectations and demands of the customers can be handles through different strategy routes – strengthening the company – customer relationship, augmenting the product, improving service support or modifying the pricing approaches. 6) As a control tool : PLC concept also helps the company as a control tool by measuring the performance of the products of their company to the competitor’s product launched in the past. A detailed comparison can be made at each stages of PLC and an effective strategy can be implemented.

Levels of Product Life Cycle:: Product life cycle operates a three levels. Product level Product sub-category level. Brand level. It can be explained with the help of an example : “Computers”

1. Product category :
It involves all configuration of computers – super computers, mainframes, micro/mini and personal computers.

2) Product sub – category :

The sub-category is personal computers within computers. Within the sub category of PC, it involves brands like HCL, Wipro and Siva.

3. Brand level : At the brand level ; HCL, Wipro and Siva brands are having their own paths. So, when a company wants to project its life cycle (i.e.) Wipro wants to project the life cycle of its PC, it cannot make a realistic analysis unless it studies the life cycle of a product sub-category personal computers as a whole. Wipro’s life cycle at the brand level cannot evolve totally independent of other PC’s in the market. So, when the life cycle of brand is assessed, it is essential to study the life cycle of the product category and the product sub category as well. However, an idea of the likely life cycle of the main product category of computers is helpful in understanding the course of the sub category personal computers. In concluding that, a meaningful picture of the path the brand is taking, it has to be studied in the context of the life cycle of the product sub category and product category.
PLC strategies of Nylon: Nylon was a product that was primarily used for the military purposes to make parachutes, threads, and ropes. Then it was extended to circular knit market that is women’s hosiery. At that stage, the necessity for the growth of nylon was found. Then there are steps taken to vitalise nylon. Steps Taken To Vitalise Nylon: Frequent usage: Then steps were taken to vitalise nylon. The usage of nylon was increased and the convenience that nylon had created a market for itself. Frequent usage of nylon was promoted the bare laggardness of the users were used. The stockings were promoted using that. Varied usage: Nylon was promoted as a fashion product. This product is perceived as a hosiery functional product. The clothing function of it was to promote as a large extent. There the varied usage of the nylon was stressed to the users and was promoted in the market. New users:

The users of the nylon products were first the military, the it was targeted at hosiery function and fashion users, and younger teenagers and substitutes were using those products. New uses: New uses were created for the nylon, it was stretched and socks, rugs, tires and bearings there uses of the nylon which was created to promote it warp knits were invented in 1945 and nylon tire cord was invented in 1948. Nylon textured yarns were invented in 1955 and carpet yarns were invented in 1958. As a result of this in 1962 the sales went up of to 500 million pounds which was previously 50 million pounds. PLC strategies by Vaccum Tube Industry And Semiconductor Industry: In early 1930’s, vaccum tubes got into the usage in electronics industry, the home entertainment industry. Till 1940, the product was in the introduction stage in the time of World War II the product’s usage became high at the period of 1945 to 1950. the product sales grown from 90 to 280 after the period of the 1950 the use of TV and phonographic computers made its sales to 300 units due to military usage the number rose to a height of 400 units. At the early 1960’s, the semiconductors were invented and the vaccum tubes were out of the market. After the innovation of semiconductors, the growth in the electronic industry was triggered after 1954. In early 1950’s, the portable radios made the industry to grow, then Germanium devices and Silicon devices had a separate PLC then the other trigger like space, IC’s also triggered the growth of the industry. The computers and the IC’s were acting as the catalyst for the growth of the semiconductor industry. The industry growth can be explained using the diagram as explained below.

3.5. Product portfolio Analysis

Portfolio planning is best advised for diversified companies than a more product coherent ones. Portfolio planning hence recognises that diversified companies are a collection of businesses, each of which makes a distinct contribution to the overall corporate performance and which should be managed accordingly. Such companies are expected to redefine businesses for strategic business units (SBU), which may or may not differ from operating units. They then classify these SBUs on a portfolio grid according to the competitive position and attractiveness of a particular product market. Based on these, they use this framework to assign each a ‘strategic mission’ with respect to its growth and financial objectives and allocate resources accordingly. Companies can thus theoretically assess the strategic position of each of their enterprises and compare these positions using cash flow as the common variable. The four components of strategy can be seen as influences on the firm's effectiveness and efficiency. The firm's effectiveness is determined by the combined influence of scope, distinctive competence and competitive advantages.
Objective of Resource Development:

Implementing Corporate Level Strategy Resource development is very helpful implement corporate level strategy. Corporate level strategy is to determine what business to go into and relative allocation of resource and management of synergies among them.

Direct Interaction with Scope and Resources Deployment They should there fore be considered at the corporate level and should not be treated as functional area policy decisions to be decided at lower levels. Business level strategy focuses on how to compete in a particular product / market segment or industry. Competitive advent ages and distinctive competencies thus become dominant strategic concerns at this level. At functional level, the primary focus of strategy is efficiency.
Types of portfolio planning:

Following are the possibilities of various types of portfolio planning undertaken by companies:
Types Analytic planning Explanations Portfolio planning is only in the stage of planning tool and traditional administrative tools are used Portfolio planning as a central part of the ongoing management process and strategic mission is explicit in activities

Process planning

Types of portfolio planning

Benefits of portfolio planning: Since the road to portfolio planning is a long one, companies often get stuck trying to implement it and cannot realise the full potential of the approach. In implementing portfolio planning, companies often write in biases that block its usefulness, including the tendency to focus on capital investment rather than resource allocation. In spite of such limitations, portfolio planning is offering the following benefits to companies if implemented properly: 1. It promotes substantial improvement in the quality of strategies developed at both the business and the corporate level. 2. It provides a guideline for adopting their overall management process to the needs of each business. 3. It provides selective resource allocation to the various SBUs. 4. It furnishes companies with a greatly improved capacity for strategic control when portfolio planning is applied intelligently and with attention to its limitations and problems.

Peter Drucker on portfolio planning:

Peter Drucker suggests a mechanism of portfolio analysis of products within the company. He suggests that all products can be classified into five groups as follows:
Tomorrow’s breadwinners: These are either modifications or improved versions of what one company has got as their major products or new products. Today’s breadwinners: These may exist today but they really are the innovations of yesterday. Yesterday’s breadwinners: These are old hat but eat up all that they earn. “Problem children”: Difficult to live with perhaps but better parental control should make the difference between a healthy child and a potential deviant child. “Also-rans”: These are otherwise known as ‘me-too’ products in the market whose existence itself is a question mark. Boston Consulting Group Matrix: The business policy portfolio models are most popular useful to understand the firms strategic concerns and choices. They defined the firm's scope or domain by highlighting the inter - relatedness of diverse factors such as 1. Market growth 2. Market share 3. Cash and Cash flow patterns 4. Capital intensity 5. Product maturity etc.

Relative market share

High Star Market growth High Cash cow Low

Low Question mark


BCG Growth/Share Matrix

Star are high growth - High market share business which may or may not be self sufficient in term of cash flow. This cell corresponds closely to the growth phase or product life cycle Cash cows As the term indicates, cash cows are business which generate large amounts of cash but their rate of growth is slow In terms of PLC, these are generally mature business which are reaping the benefits of experience curve. The cash generation exceeds the reinvestment that could profitably be made into 'cash cows'. Question Marks Business with high industry growth but low market share for companies are question marks or problem children. They required large amount of cash to maintain or gain market share. Question mark is usually new products or services, which have a good commercial potential Dogs Those businesses, which are related to slow growth industries and where a company has a low relative market share, are termed as 'dogs'. They neither generate nor require large amounts of cash. In terms of PLC, the 'dogs' are usually products in the late maturity or declining stage.

The firm should hold its dominant market position by reducing prices and thus keeping away the high cost competitors. Cash flows are likely to be negative during the growth phase in a dominant market since the firm will have to keep in investing to maintain its competitive edge. Dominant position generates positive cash flows, during the mentioned stage of life cycle. The BCG matrix makes it very clear that a firm for its ultimate success needs a balanced portfolio of products or businesses. The individual businesses are analyzed to form a corporate portfolio, which should act as a guide to commit the firm’s resource. Portfolio should be balanced in terms of profit, cash flows, and overall corporate risk.
GE Nine Cell Matrix: Another corporate portfolio analysis technique is based on the pioneering effort of general electric (GE) company of the united state supported by the consulting firm of Mckinsey & Company. The vertical axis represents industry attractiveness, which is a weighted composite rating based on eight different factors. These factors are: 1. Market size and growth rate 2. Industry profit margins 3. Competitive intensity 4. Seasonably

5. 6. 7. 8.

Cyclically Economics of Scale Technology and Social, environmental, legal and human impacts.

The horizontal axis represents business strength competitive position, which is again; a weighted composite rating based on seven factors. These factors are 1. Relative market share 2. Profit margins 3. Ability to compete on price and quality 4. Knowledge of customer & market 5. Competitive strength and weakness 6. Technological capability and 7. Caliber of management

Industry attractiveness High High Investment Growth Business Strengths Medium Selective growth Selectivity Selectivity Harvest Medium Selective growth Low Selectivity




GE Nine Cell Matrix The two composite values for industry attractiveness and business strength/competitive position are plotted for each business in a company's portfolio. The PIE charts (Circles) denote the proportional size of the industry and the dark segments represent the company's market share. The nine cells of the GE matrix are grouped on the basis of low to high industry attractiveness and were to thrown business strength three zones of three calls each are made denoting different conditions represented by green yellow and red colours for this reason, the matrix is also known as the stoplight strategy matrix. Based on the three zone, the signal is go ahead to grow and build indicating expansion strategies business in the green zone attract major

investment for the yellow zone, the signal 'Wait and See' indicate hold and maintain type of strategies aimed at stability and consolidation for the red zone the signal is top indicate achievement strategies of divestment and liquidation or rebuilding approach for adopting turnover strategies. Advantages It is compared to the BCG matrix it offers intermediate classification of medium and average rating. It incorporates a large variety of strategic variables like market there & Industry size. Draw back It only provides broad strategic prescriptions rather than the specific or business strategy. Directional policy matrix (DPM): The DPM is a method of business portfolio analysis formulated by Shell International Chemical Company. It has nine cells in which businesses are located depending upon their scores on each of the two axes: Expected market profitability and competitive positions. The horizontal axis, labeled "business sector prospects" or "prospects for market sector profitability," is a measure similar to industry attractiveness used in the GE planning grid. A firm is rated on a scale from "unattractive," through "average," to "attractive" depending upon an evaluation of its industry's market growth, market quality, and environmental aspects. Similarly, its location on a scale that runs from a "weak," through "average," to "strong" competitive position is determined by answering questions about its market share position, production capabilities, and R&D strengths. The cell labels represent possible strategic choices or types of resource deployments most appropriate for the firm, given its score on each of the two axes. More specifically these cell labels have the following implications: Disinvest (1,1): Likely already losing money; net cash flow negative over time. Losses may be minimized by divestiture or even liquidation. Phased Withdrawal (1,2) and (2,1): Probably not generating sufficient cash to justify continuation; assets can be redeployed. Cash Generator (3,1): Equivalent to a "cash cow" in the GE planning grid. A firm or product would occupy this cell in later stages of the life cycle that does not warrant heavy investment, but can be "milked" of cash due to its strong competitive position. Proceed with Care (2,2): Similar to a "question mark;" firms falling in this sector may require some investment support but heavy investment would be extremely risky.

Growth (upper - 3.2) and (lower - 2.2): Similar to a GE planning grid "greenlight" strategy. A firm, product, or SBU in these sectors would call for investment support to allow growth with the market. It should generate sufficient cash on its own. Double or Quit (1,3): Units in this sector should become "high fliers" in the not too distant future. Consequently those in the upper rightmost corner of cell (1,3) should be singled out for full support. Others should be abandoned. Try Harder (2,3): External financing may be justified to push a unit in this sector to a leadership position. However, such a move will require judicious application of funds. Leader (3,3) (lower - 3,2): The strategy for this segment is to protect this position by external investment (funds beyond those generated by the unit itself - occasionally); earnings should be quite strong and a major focus may be maintaining sufficient capacity to capitalize on strong demand.

Prospects for sector profitability Unattractive Weak Disinvest Average Phased Withdrawal Custodial Attractive Double or Quit Try harder

Company’s Competitive Capabilities


Phased Withdrawal


Cash generation

Growth Growth



Directional Policy Matrix

The DPM can thus be used to identify strategies for single businesses as well as for plotting combinations of units in multi business or multi product firms. Locating competitors on the DPM can provide useful insights into the nature of corporate-level strategic configurations. However, there is room for error in the positioning of a firm or product on the two axes, and thus DPM location should be interpreted with an open mind and not in isolation. The Directional Policy Matrix (DPM) developed by Shell Chemicals; U.K. uses the two parameters of “business sector prospects” and “company’s competitive abilities.”

A number of factors such as market growth, market quality, market supply, etc. are used to rate the business sector prospects as unattractive, attractive or average. A company’s competitive abilities are similarly judged as weak, average, or strong on the basis of several factors. The 3 x 3 matrix when plotted form the basis for recommending baseline strategies. One advantage on DPM is that one of its extension; “risk matrix” provides alternative way to analyse environmental risk. In a risk matrix, environmental risk is taken as the third dimension and is divided into four categories from low risk to very high risk. Each risk position is determined on the basis of environmental threats and the probability of their occurrence. Business Profile matrix: This matrix is more flexible than the growth/share matrix and uses competitive position and industry maturity as the two dimensions. It uses twenty cells for clarity of resource allocation. Empirical determination of the correlates of the two dimensions is superior to the growth/share matrix.

Stage of Industry maturity Embryonic Dominant Strong Competitiv e Position Favourable Tenable Weak Growth Maturity Aging

Business Profile Matrix

Designing a portfolio:

In order to design a portfolio, the following guidelines are suggested by Yoram Wind and Vijay Mahajan:
Establishing the level and unit of analysis and determining what links connect them Identifying the relevant dimensions, including single-variable and composite Determining the relative importance of the dimensions To the extent that two or more dimensions are viewed as dominant, constructing a matrix based on them

Locating the products or businesses on the relevant portfolio dimensions Projecting the likely position of each product or business on the dimensions if (a) no changes are expected in environmental conditions, competitive activities, or the company’s strategies and if (b) changes are expected Selecting the desired position for each existing and new product and developing how resources might best be allocated among these products. In order to establish a matrix out of the available information from both the company and the market, the GE matrix can be constructed using the following steps: Identify the factors making for an attractive market Establish the business position factors Give agreement among managers to factors Make a priority list and give each a weightage as in the following table 9.6. Measure each factor- by market research, internal discussion or external information 6. Apply the weightage to the measurement and arrive at a total 7. Apply the totals to the matrix and 8. Start a discussion on what the figures show. Factors Weight (%) .20 .20 .15 .15 .15 .05 .10 must be acceptab le 1.00 Measuremen t 4.00 5.00 4.00 2.00 3.00 2.00 1.00 Value 1. 2. 3. 4. 5.

Market attractiveness
Overall size Annual growth Competitive intensity Technological requirements Inflationary pressures Energy need Historical margins Social/Legal/Economic/ Political/Technological impact

0.80 1.00 0.60 0.30 0.45 0.10 0.10


Business Strength
Market share Share growth Product quality Brand reputation Distribution strength Promotional effectiveness

0.10 0.15 0.10 0.10 0.05 0.05 0.15

2.00 4.00 4.00 5.00 3.00 2.00 3.00

0.20 0.60 0.40 0.50 0.15 0.10 0.45

Production capability Unit costs R & D strength Management effectiveness

0.15 0.10 0.05 1.00

5.00 4.00 4.00

0.75 0.40 0.60 4.15

Market attractiveness and business position measurement Using the above, a case of Digital Theatre System (dts) product to be sold in the theatres of Mumbai, the following done to find out about the investment proposition: Product Market theatres : Digital theatre system : Recommended for investment- Mumbai

Attractiveness factors

Market size
Current coverage

Information available Yes

Importance scale 1

Competition Current systems Social aspects Legal aspects

Yes Yes No No

3 4 5 6

Business strength factors Market share Product quality Brand reputation Distribution network Promotional effectiveness Costs Managerial personnel

Five-point measure 2 4 5 5 2 3 2

Weightage Value 5 15 10 15 10 10 60 50 75 20

5 15 10 20 70 250 Possible total: 350

Market attractiveness factors Market size Coverage Competition Current systems Social aspects Legal aspects

Five-point measure 5 4 2 4 2 2



15 15 5 10 5 5 60

75 60 10 40 10 10 205 Possible total

Investment matrix scales

Industry attractiveness 300 200 0 High High Medium

100 Low


+ Medium 233 Business Strengths 117


The next stage was to use the matrix to compare the present markets with Mumbai as a potential investment by using the same basis. Hence the + in the matrix clearly gives evidence for investment in the market concerned.

3.6. New Product Management

New products provide new life for otherwise aging organizations and propel entrepreneurs to the top of new industries. The rate of new product introductions varies across industries, but new and better ways to serve needs and wants are ultimately introduced in all industries. Introducing a product can mean moving into an industry leadership position. Thus, few decisions in an organization are fundamental, pervasive, and long lasting as those concerning products. Still, the number of new products each year is striking. Just in the food industry, it is common to see over 2,000 new product introductions in a year and such that in pharmaceutical industry also. The risks, opportunities and strategies associated with a product will partly depend on the type of newness in question. At one extreme, newness could simply involve a new pack size or colour, while at the other extreme, the product could represent a break through innovation. Hence it is pertinent to note the type of newness as follows: 1. New to the company; new to the market: Technological developments often provide the basis for such radical new products. Those products like CD player, Personal computer, Internet, which have made a huge impact on the life style of people, are examples. At the first instance, many customers will not obtain the product for the want of reason to use the product. Hence it was only appropriate to target the right audience who are not price-sensitive. Companies will get lot of time to convince the customers since competition is less. Pond’s black head remover is a new product for HLL and also new to the market. 2. New to the company; a significant innovation for the market: Customers may be aware of the core concept but an improvement in the product creates a market. Hence the companies need to only communicate the nature of innovation and the added benefits it provides to the product. Consumers can compare the new product with the old from their own experience and reach an opinion as to the value of the innovation. Stain-free clothes, wrinkle free ready-made garments and first car fitted with a catalytic converter are some examples. 3. New to the company; a minor innovation for the market: A minor innovation for the market is always required to stay tuned to the vagaries of the markets and hence many companies in the consumer durable, automobiles always try to opt for minor innovations. AKAI introduced TV with VCR as combined equipment but however due to the risk involved in the product, customers were not interested and was withdrawn. Products like FMCG where the risk is less, minor innovations can work out. 4. New to the company; no innovation for the market: “Me-too” products come under this category. For small companies with limited resources, it makes sense to let the big competitors spend the time, effort and money developing the radical new concepts. When the market is established and known, it

can launch a slightly cheaper imitation and get a foothold in the lower end of the market. Walkman now has as many as 100 brands of imitations. There are plethoras of soap brands, which are me-too in the market.
Categories of new products:

Booz, Allen & Hamilton, Inc., an international management and technologyconsulting firm with extensive experience in new product development conducted a major study manufacturing companies. It identified six categories of new products in terms of their newness both to the company and to the customers in the market place. 1. Additions to the existing product lines: Products that supplement a company’s established lines (26% of total). Lakme Lever ltd. Unveiled a new brand identity. It launched a range of premium skin care products, reconstituted its existing range, and got itself a new logo and a new positioning statement: “The source of radiant beauty”. Margo Natural Moisturizer was launched in November 2000,apart from Margo original Neem. The variant is pale green, translucent soap retaining the Neem, but with glycerin and the scent of lime. Research had revealed that Margo tended to dry skin in the winter and the variant sought to redress this complaint well. 2. Improvement in/revisions to existing products: Products that provide improved performance or greater perceived value and replace existing products (26% of total). ) New upgraded version of Pentium 4 from Intel inside. HLL considered most Indians tend to oil their hair before they shampoo and tried to tap this trend by introducing a Ceramides based oil brand called “Ceramics Sunsilk hot oil treatment”. 3. New product lines: Products that allow a company to enter an established market for the first time (20% of total). Bal Pharma is all set to launched 'Ketovate' a novel anti dandruff and seborrhoeic dermatitis of the scalp. The product is expected stand out in the crowded anti-dandruff market with its unique formulation and competitive pricing. Initially, the product will be introduced through the dermatologists. But the company will slowly bring it to the OTC segment, considering the consumer awareness on the anti-dandruff shampoo market. 4. Cost reductions: New products that provide similar performance at lower cost (11% of total). Usha group launched a fan which will save 50 per cent electricity (the company already has a model-Windsor-which consumes 25 per cent less energy); a shank-less fan, where the blades wrapped around a triangular shaped motor; a fan with propeller-like blades, each revolving at 360-degree, giving a two-way breeze; 5. New to the world products: Products that create an entirely new market (10% of total). MinerWa ,a miniature mineral water machine launched by Softel was commercially launched almost three years after the concept stage
Repositioning: Existing products that are targeted to new markets or market segments (7% of total). The mid- market CTV brand of LG, ‘Sampoorna’, directed at rural and semi urban consumers, was repositioned to appeal to middle and lower middle income urban consumers too. HLL’s lime soap ‘Rainfresh’ does not highlight any natural ingredient. It was basically a perfumistic soap, which smells

fresh. Rainfresh does not connote lime freshness; hence it was decided to change to blue colour a new repositioning.

3.7. New Product Development

Booz, Allen and Hamilton Consulting Company’s experience with more than 4,000 companies since 1914 has given the insights about the stages in the new product development process. They are: Exploration Screening Business Analysis Development Testing and Commercialisation

No Company can survive on new products alone. It will also need to upgrade its existing products on a continuous basis making incremental improvements. Sometimes there are accident grades like microwave oven but without a good process in place it cannot work. The above mentioned stages are sequential in nature and in each stage, management should be gathering additional information to reduce uncertainty about demand, product-company fit, or even cannibalization of its own products. The concept of ‘stage-gate’ process involves the maintenance of control over the expenditures involved in new product development by balancing the company’s investment against the value of additional information. That is, by assessing each idea after each stage based on the information acquired, management can reevaluate the idea’s prospects for success. In this stage-gate system, managers can open the gate to the next stage in the process or can kill the new product at that point, thus avoiding the further expenditure of time and money if the demand or profit prospects for the new product seem unfavorable.
Stage 1: Exploration This stage is the one, which decides the fate of a company in the process of its commitment to new product development. Hence, companies need to first determine the product fields of primary interest to the company. Here the question of new products in-house or using acquisitions as a route to new product development needs to be addressed. Companies have to analyse the major problems confronting them. They have to evaluate the company’s principal resources. At this stage, it is necessary that external growth opportunities like expanding markets, technological breakthroughs, rising profit margins be identified. If found acceptable, such a route needs to be planned. In order to do so, companies have to establish a planned programme for idea generation. The sources of new product ideas are many and varied. Following is the table of new product idea generation possibilities:

Table 11.1.Sources of new product ideas

INTERNAL SOURCES Research and engineering Sales, marketing and planning Production Other executives and board of directors

EXTERNAL SOURCES Customers and prospects Contract research companies and consultants Technical publications Competitors Universities Inventors Unsolicited sources Advertising agency Suppliers Government agencies

Companies have to identify the idea generating groups and give them a clear concept of the company’s interest fields. It is important that the creative personnel are exposed to idea generating facts. These people are kept away from the distractions from the current problems the company might face. Some companies designate an idea collection point. Many companies in India in the manufacturing sector have a suggestion box or idea box in the factory/office premises. Some companies even provide incentives/ bonuses for the employees whose suggestions have been carried forward to the next stage. To find and nurture REALLY BIG ideas, organizations should
Start with a clear strategic imperative Add a culture conducive to cross-functional creativity Feed in forecasting from trends, technology mapping, and outside learning Invite customer wisdom, intuition, understanding and input

Launch "idea engine" along the trajectory of Stage Gate
Anticipate success

In addition, a company’s scientists and technicians often make discoveries that lead to new products. Mahindra & Mahindra uses the nomenclature of “sandpit projects” where the R&D staff is encouraged to act freely around with new concepts. This is the way they had made Bijlee. At Titan, ideas can originate with the marketing brief on the shop floor as a spin off from a new material or process, in a lab, as an R&D idea no matter where it comes from. Blow Plast, in the first week of the month begins with a meeting headed by the CEO and attended by the functional heads of manufacturing, sales, R&D and marketing purely for the purpose of product development brain storming. They have the policy of set the standards and the creativity will follow. The most common methods of idea generation in companies are:

Brain storming: This method developed by Alex Osborn uses the recognition that the really new ideas often mix several ideas to produce something that is nonobvious and exciting. Group discussions are held to generate as many new ideas as possible. The group generally consists of six to ten people. The group members are encouraged to be as wild as they want in suggesting solutions. No idea is criticised and hence no ideas are held back. As ideas start to flow, one leads to another. Within a short time, hundreds of ideas can be on the table. Only after ideas are generated freely, the group can then look forward to critically evaluate later on for the purposes of practicability. A specific problem or goal is set at the beginning of the meeting, which is known as synectics. Market Research: Companies have to identify the needs of the customers through the use of market research. Most of the companies rely on this method since the customer analysis is the best way of offering a product to their need. Nowadays, there are many consultants and agencies that provide the necessary support to companies. The Persona toothpaste from Amway uses accu pressure point was developed based on market research. The research revealed that people tend to apply excessive pressure while brushing. This adversely impacts teeth and gums. The accupressure point in Persona toothbrushes allows the brush to bend, absorbing excess pressure. In addition to the USP of accue pressure point, the Persona toothbrush has an angular design, and a slender neck, which allow easy access to all regions of the mouth. The toothbrush also has rounded bristles, which prevent gums from being grazed. A non-slip grip helps support the thumb, providing for better control. Long range planning studies: Often a long term forecasting by companies can yield the required results. The customer life style changes over the years, the changing societal trend etc., can be forecasted and products brought accordingly. Dishwashers, Microwave ovens are examples to this category of research. Market Gap Analysis:

Gap analysis is a technique which plans maps of the market and used to determine how various products are perceived by how they are positioned on the market map. This method helps in understanding the flaws in the existing products and the need for a new product. The advent of Satellite television showed the need of nearly 100 channels and host of other attributes which was immediately worked upon by companies like BPL, Onida etc. Dabur developed Lemoneez lemon juice using market research to identify the gaps felt most keenly by its target customer, as the lady in a house worked in the kitchen. From this process the idea for Lemoneez, the lemon substitute converted into a product by its laboratories.

Think Tank:

Companies are now employing the use of think tanks that assess the company’s resources and objectives and devise concepts. Some times, top managers of the companies often act as the source of new product ideas by identifying the consumer needs and changing society. They also act as the think tanks.
Activity Analysis:

This technique is used by companies in ascertaining the usage of a product. Maruti Omni was intended as a cargo vehicle but however, the usage of the product showed that it was more used as a passenger vehicle. Hence the positioning and the product itself was changed to the requirement. P & G studied the washing habits of 3000 customers in the target segment for its middle market laundry brand, Ariel Gain Super Soaker, to identify the one critical need – removing grease stains – that the brand addresses.
Foreign Search:

Some times, many multi national companies translate their experience from another country. Some Indian companies search the various products, which are not available in India and offer this product after obtaining the necessary agreements. It is often found that many products, which are successful in one country, may not succeed in another due to the cultural and social differences. Soya bean milk was successful in USA but when in India, it failed confirming the above reasons.
Morphological analysis:

This method analyses the structural dimensions of the product, which helps in getting to the relationships between them. When a writing instrument is analysed, the extent of its length, clarity and convenience become the relationship factors from where a new product can be found out. Research on the old Ford Escort indicated that a three – box design found favour than a hatchback. Apart from more space for luggage, consumers felt the boot also provided more safety than a hatch. Indian customers also told Ford that rear seats used for 70 % of the time. In other markets, the rear seat is used less than 10% of the time, whereas in India it is used extensively to cram in people. So, the Ikon was to have a roomier rear seat with full roll –down windows, reading lights and comfortable centre seating as well. And the rear door openings were claimed to be the largest in the industry while the height of the chassis was such that it will be easy to get in and out. The new Ford Ikon car’s design had also taken care of the poor road conditions during the monsoons in India.
Stage 2: Screening:

Screening is the second stage in the new product development model. During the screening process, a company evaluates the commercial potential of a new product. The commercial potential of a product includes such criteria as profitability, marketability,

and costs of production. Screening also calls for the participation of other departments within the company in the development of new ideas. The ideas and advice of people at different levels of production will aid the product in areas such as its eventual effectiveness, ease of production, and production costs. Allowing all levels of employees to be involved in the process increases the empowerment within the company. After the necessary ideas are generated, the next stage is to reduce the number to a manageable size. It is important to expand each idea into a full product concept. New product ideas should fit into the company’s overall strategy. They should also build on the company’s resources and skills. They have to collect facts and opinions, which are quickly available, bearing on the product ideas as business propositions. This stage should translate the idea into business terms. At this stage it is important to identify the best sources of facts and qualified opinions. Quick and inexpensive fact gathering methods using the principle of “diminishing returns” is better to be resorted. The checklist for the screening of new product ideas is depicted in the following table.

No. Element The idea represents high value-added products, not 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
commodity products It requires consumer-oriented development and presentation of products utilising existing marketing capabilities The idea has high advertising or promotional content that allows for intensive communication of products It is not a major capital investment for the consumer There is opportunity for logical extensions to be developed The product offers a significant ‘plus’ that is discernible by a large majority of consumers There is an opportunity to expand into many overseas markets The idea ties in with existing company functionstechnology, marketing, sales force Labour will be of average or lower intensity relative to national standards Capital will be of average or lower intensity relative to national standards The product is compatible with company’s physical packaging capabilities The product is preferably non-perishable The idea is related to the area of operation of the company The product utilises existing distribution channels There is an extended product life cycle The product can be a building block for a multiproducts line or business



The Checklist for screening new –product ideas At Titan Industries, every idea is made to pass through a stringent 5 – point test covering Styling Costing Sourcing Schedules and Resource requirements At HUL it was the sheer systematic approach to idea management that ensured the development of Close up toothpaste sachet with a nozzle. The idea for the product, which originated with a marketing team, was forwarded to one of the three innovation centres in HUL. A cross-functional team examined it, approved it and allotted the required resources.
Stage 3: Business Analysis

In business analysis, the company decides whether the new product will fit well within the company's product line, distribution methods, and promotion methods. Marketers also further test the potential for sales, profits, market growth, and competitiveness. Human welfare is also considered in the operation of the company. The ideas are made more specific in this stage. Universal Air Technology, an Indian American firm in the USA has developed an innovative new technology called Phototech using the concept- it disinfects and cleans indoor air by photocatalytic oxidation. It is a revolutionary concept that is effective against indoor air pollutants such as bacteria, viruses, and molds, dust mite allergens and odors. It won the 1999 New Product Award in the small business category by the National Society of Professional Engineers. This was made possible only after the deluge of ideas were carefully screened and developed further into a business proposition. This is the stage where the concept has to be further refined and made into business terms. The aspects that need to be formulated for making an idea into a concept are:
Target audience of the new product The primary benefit of the new product The usage pattern of the new product

Based on these, once the concept has been developed, it has to be tested. Consumer reactions are obtained by using a verbal description or a picture of the product and asking for unbiased opinions. In the major manufacturing industry, the products are brought to business or industrial consumers at a designated test sites, and developers work closely with these consumers to spot the problems and refine the designs. After this, the company has to project costs, profits, return on investment and cash flow if the product is placed on the market. Projections of potential sales at various prices need to be made, as well as detailed cost projections for different volumes of production. Start-up and continuing

costs, fixed and variable costs and the impact of economies of scale need to be determined. Tentative marketing plans need to be set, along with the costs associated with them. Lastly, a set of full-blown budgets is required to estimate the potential return on the product. Thus business analysis must include an assessment of the amount of risk the company will face if the new product is introduced. If the new product can be produced using existing production and marketing capabilities, the risk is lower. Less investment in new plant and equipment will be needed, and the marketer can benefit from already acquired knowledge of the market. TVS Suzuki and Bajaj Auto use the technique of target costing to determine the price of the product and working backwards to fix the maximum acceptable cost to develop new products.
Stage 4: Development:

Once a company reaches prototype process development-the fourth stage of newproduct development-they are committing to spend a lot of money on the initial production of a still unproven product. Product development aimed at better serving through a disciplined process, with clearly defined targets for every stage, continuous interaction with other functions and more than one eye on costs, delays and the extent of manufacturablity. During this stage, many companies implement computer-aided production programs. Not only do these reduce overall costs in production, but also should a flaw be found with either the product or the production process, computer-aided production systems can easily correct the problem. This saves valuable time in redesign and production restructuring. By getting the product to the market more quickly, a company can turn potential profit into realized profit. Production engineers and R&D specialists construct a model; the marketing department develops a brand name to match the idea or concept; packaging is designed; and the major elements of the marketing mix are put together. The positioning strategy is also identified. At this stage, many different functional areas of the company are called upon to cooperate in the creation of prototypes and development of production or delivery processes, marketing plans and other elements required to make the idea a reality. After the laboratory tests on the basic performance against specifications are over, the new product should be released. At this stage it is important to note the commercial rather than scientific standards to determine the product release point. TI Cycles of Chennai put the Hercules top gear in shops, a product that has fuelled 20-fold growth in the segment in quick time as a new product to overcome the depressing cycle sales. When this was identified as the lack of reliability of gears, TI cycles decided to use the best and safest gears and design its product around its component. Managing cost was a critical issue, because the gears were being imported. This was achieved by maintaining best control on material cost and cheaper outsourcing. Both the decision taken as a part of product development and not as a production process. At Bajaj Auto, product development is about five parallel activities like product definition and design, manufacturing process development, marketing, planning and tooling. Different departments work on different application areas, industrial design on styling, engineering design on structural and engine components, product engineering on machine tool design and systems on system configuration. A potent technique for ensuring product quality at

the development stage is benchmarking. For instance M&M is benchmarking Scorpio against Tata Sumo for passenger comfort against its own vehicle for fuel economy, against the Maruti Gypsy for comfort and ease of driving, against Tata Sierra for acceleration. Philips applies the fault-mode effect analysis technique to check the various things that could go wrong with a specified product and chalk out an optimum solution.
Stage 5: Test Marketing:

Test marketing is a tool for new product launch and new product development. The company can develop new product in own laboratories and independent researcher develops a new product. Test Marketing has been defined as a “research technique in which the product under study is placed on sale in one are more selected localities or areas, and its reception by customer and trade is observed, recorded and analysed”. This test market will allow managers to see how the product might perform when released to the entire market. From this information, managers can also decide if they have the right target market, the right price, and the right level of advertising. In this stage the new product and relevant marketing programme is tried out for the first time in well selected market segments under representative marketing environments. Hence test marketing is the process of introducing a new product or service to a small “test market” (i.e.) considered to be representative of the large target market. Test marketing have many alternative forever like advertisement with coupon and samples. Launching the new product in the market is risky one, Because the product development are variable to changing customer needs and taste, New technology, shortage product life cycle, and lastly the increased domestic and foreign competition. Seventh aspect of product development is launching the market product. Test marketing is done mainly to identify the following: • • • • • • • Potential sales volume generation. Identification of innovative buyers. Comparison of target and actual number/types of buyers. Recognition of strong points of product by buyers. Ability of advertising message to transmit products strong points. Competence to attain planned distribution. Potentials for repeat purchases.

Rationale for test marketing:

a. Test marketing should be conducted when the potential financial loss to the company through new product failure, or though the failure of market plan or approach is significantly greater than the cost of the proposed test marketing procedure. b. Where the cost and risk of product failure are high relative to the profit and probability of success.

c. Where the difference in the scale of investment involved in the test versus national launch route has an important bearing on deciding whether to test. If the company investment for a national launch is far greater than the test launch, testing should be preferred. d. When the possibilities of and the speed with which copying of the test product by competitors are great, testing may be avoided. This is particularly relevant in soft technology industries.

Objectives of test marketing: Find out the consumer needs of buying Evaluate impact of local advertising and promotion during the test. Evaluate the market potential for other competition product Find out the area coverage for sales Find the consumer ability to buy the product based on price. Process Of Test Marketing: 1. 2. 3. 4. 5. City selection Select the sales representatives. Duration of the test. Select suitable data. Implementation

The test market to be selected should be a restricted geographical area, which represents the national market. In India, cities like Bangalore, Mumbai, Chandigarh, Delhi and Calcutta are usually selected by companies to test market their products. There should not be fewer than two markets for each variation to be tested. However, where the purpose of the test is to estimate the sales potential of a product to be nationally marketed markets in, at least, four geographic areas should be used. Pepsodent failed in the first test marketing mainly because it was test marketed only at Calcutta. As the significance of the variables to be tested decreases, the number of markets necessary to reflect the effect of these variables increases. Marketing achievements in the test-market should be recorded and then projected nation-wide. For example, if monthly volume in 2 per cent of the country were Rs.4000, then the total volume projected would be Rs.4000/. 02=Rs.2, 00,000. All available data should be carefully reviewed to make sure that the test-market is by and large representative of the whole market in terms of social class, caste, age, and other demographic variables. All available data should be reviewed also to make sure that the test-market is representative in terms of consumption of similar or substitute products. It is also advisable to be assured that competitive strength in the test-market is approximate

to those in the whole market. After having considered the above factors in test marketing, it is also advisable to check up different components of the marketing-mix to be employed in the test marketing and their probable future relationships. It is important because distortion in any one component at the commercialization stage would bring about distortion in the test results and the actual product performance. For example, if testing is accompanied by an aggressive sales promotion campaign but not so in commercialization stage then subsequent results would be different. Based on the response in the test marketing, a company can follow any of the three options: Abandonment of the product, Additional testing, and Commercialization.
The test marketing needs to incorporate the following as the tools: 1. 2. 3. 4. 5. Sales personal demonstrations Free samples Couples Local advertisement ; and Door to-door distributions

Controlling The Test Market:

The controlled test marketing allows the company to the insure factors ((i.e.) Alpha testing which means the testing for with in the company) and limited advertising on buying behaviour. A sample of consumer can be tested or interviewed later to give their impression of the product. However, the controlled test marketing provides no information on how to sell the trade on carrying the new product. This technique also exposes the product and product feature to competition. Even the company does not have to use its own sales force, give trade allowances and buying distributions.
Simulated Test Marketing:

This testing means 30 and 40 qualified shoppers have to be selected and questioning then about brand familiarity and preferences in specified consumer of product. This testing involves the interviews with the shoppers about the product that is moving fast and how to put the new product in the market. Consumers receive a small amount of money and are invited in to a store where they may buy the product or any item of product. Some weeks later, they are interviewed by phone to determined product attribute, usage, satisfaction and repurchase frequently and are offered a opportunity for repurchasing of the product, results are incorporated in forecasting to the sales levels. Colgate Palmolive used a different marketing mix in each four cities like. Colgate Palmolive after launching a new product in set of small “lead corners” and keeps rolling it out if the proves successful, and general mills have launched new product area too large for rivals to distribute.

An average amount of advertising coupled free samples. Heavy advertising with free samples Average amount of advertising linked with redeeming samples. An average advertising with no the other special offers. Stage 6: Commercialisation:

At this stage, complete final plans for production and marketing has to be done. The product team if necessary needs to be expanded to cover all the departments of the company. This is the stage where the right individuals are identified who would take over the successful marketing of the product and who have the capacity to coordinate with other departments of the company. A complete activity schedule has to be prepared. Feed back mechanism has to be developed for effective control. The product has to be ready for meeting any competitive pressures and changing internal problems. In terms of launching or commercialising the product, there are two main alternatives.
Immediate national launch:

This is one way to overcome the competition and to save on the costs of launch. If considerable promotions are carried out, it will be difficult for the competition to overcome the company. The risk of national launch is that it leaves the company with many problems, which were not countered during the test marketing. Production routines that work well on the schedules may not scale up as expected. Early problems of supply may show poorly on the launch.
Rolling launch:

This is an alternative to the full national launch. It involves building towards full national coverage by starting with one or two recognised distribution areas, then gradually adding new regions to those already served as experience and success of the product further increases. This helps the company to concentrate on getting the logistics and production schedules in tune with the requirements. Coca-Cola, Kellogg’s’ and several other major players including HLL use this strategy effectively.

In April 1999, Mahindra & Mahindra unveiled the Bijlee, the first ever commercially viable electrically operated 3 wheeler, a classic skunk work project, worked on by a 14 member team, without a deadline, budget or even assurance of success. The project took exactly 6 months. For example, at Titan industries which develops between 70 and 100 new watches every year every new model flows from 3 central strategic considerations viz., boosting brand value, increasing market share and profit maximisation. HUL considered most Indians tend to oil their hair before they shampoo and tried to tap this trend by introducing a ceramides based hot oil brand called Ceramides sunsilk hot oil treatment. Though the company had already stretched the equity of its largest selling shampoo, Clinic into oils, in the case of Sunsilk it is the

ceramides based hot oil concept it was trying out on its customers. It was initially test marketed in Calcutta and the product poised for a national launch at the end of 1999.The product was in the form of a blister pack in which the contents were visible .The oil was to be immersed in warm water before use. Stretching the equity of a shampoo brand into hair oils was not looked upon favorably by analysts. HUL after realising its market share in the shampoo market has slipped from 18% in 1996 to 16.75% in 1998, in a move to regain its position, launched two new variants to the brand Sunsilk- Fruitamins and Ceramides as standalone brands in 1998.
4. Have you understood type questions: 1. Raman called several airlines to compare rates and chose a flight on Jet airways as it had a better reputation for service and competitive prices. The airline ticket is an example of which type of product? A. convenience B. shopping C. specialty D. unsought 2. Industrial products are : A. purchased for personal consumption. B. frequently purchased for both their functional aspects and their psychological rewards. C. traditionally classified according to their characteristics and intended uses. D. not purchased by nonbusiness organisations. 3. Products that are used directly in the production of a final product but are not easily identifiable are categorised as A. accessory products. B. component parts. C. consumable supplies. D. assembly components. 4. Hindustan Unilever Ltd., markets a number of different brands of laundry detergents including Surf Excelmatic, Surf Excel, Rin, Ariel and Surf. Each of these specific versions of laundry detergents can be described as: A. a product item B. a product line C. a core product D. a mix item 5. A product item can be best described as a A. component of a marketing mix. B. particular type of brand. C. specific characteristics of a company's product.

D. specific version of a product. 5. Summary:

As the competition becomes more intensified in years to come, companies are gearing to face them by becoming more specialised. Hence the marketing department becomes more professionalised and in this context, product management gains prominence. The expanding markets based on liberalisation, privatisation and globalisation needs a professional approach coupled with the sophistication in technology and consumers becoming more educated, this development in product management is inevitable. A product manager has to be in the current competitive environment competent to handle diverse functions like:
Strategy development: oversee the long-term strategy for the product category, like specific competitive strategies for different market segments as well as develop product line extensions and project demand. Consumer understanding: maintain close contact with the consumer and develop an intimate knowledge of consumer attitudes and behavior. champion the cause of the consumer in the business. Product innovation: awareness of consumer needs gaps and appreciation of technological possibilities will impact the product development team and help bring about innovations with tangible benefits to the consumer. Brand equity management and communication: As a custodian of the brand, the product manager will build the image and personality of the brand and communicate it consistently through advertising over different media. He will be responsible for optimising advertising spends and the selection of the right media mix to reach the specific target audience. Team leadership: An excellent team leader and team player, he will co-ordinate with the sales and product development teams to facilitate and implement business initiatives in these areas.

Hence it is imperative that he should have a clarity over the new product management and development along with the knowledge of product life cycle.
6. Exercises

1. Prepare a product mix depth for fast moving consumer goods of any company. 2. Identify and explain strategies for the following products in different product life cycle stages: a. Ceiling fans b. Scooters c. Palm top computers d. Starch for laundry e. Digital diary f. Mobile phones

3. For a product like Vacuum cleaner, you want to conduct test marketing. This product is to be launched on a national basis. Explain how will you proceed? 4. Describe the new product development process in a pharmaceutical industry. 5. Evaluate the methodology for launching the following products on a national basis: a. Incense sticks b. Digital note books c. Mouthwash d. Anti septic lotion
7. References 1. Dhalla and Yuseph, “Forget the Product Life Cycle”, Harvard Business Review, 1976, pp.102-110. 2. John Smallwood, “The product life cycle: a key to strategic marketing planning”, MSU business topics, winter 1973, pp.29-32. 3. Joseph Gullitinan, Gordon Paul and Thomas Madden, “Marketing management- strategies and programs”, McGraw-Hill,1996, pp.182-85. 4. Glen Urban, Theresa Carter, Steven Gaskin and Zofia Mucha, “ Market share rewards to pioneering brands: an empirical analysis and strategic implications”, Management Science, June 1986, pp.645-57. 5. Ian Wilson, “Reforming the Strategic Planning Process: integration of social and business needs”, Long Range Planning, October 1974, p.3. 6. Michel Allen,” Diagramming GE’s planning for what’s WATT “in Robert Allio and Malcolm Pennington, editors,” Corporate planning Techniques and applications”, New York, 1979. 7. Philippe Haspeslagh, “Portfolio planning: uses and limits”, Harvard Business Review, January-February 1982, pp.61-63.

8. Dhawan Radhika, “How to develop the best new products “, Business Today, June 22,1999,pp.74 – 85. 9. Dobhal Shailesh & Gupta Indrajit, “David Vs Goliath ii: The soap opera”, Business Today, October 7 1999, pp.23-24. 10. Hubert Gatington, Eric Anderson and Kristiaan Helsen, “ Competitive reactions to market entry: explaining interfirm differences”, Journal of Marketing research, February 1989, pp.44-55. 11. Albert Page, “ Assessing new product development practices and performances”, Journal of product innovation and management, Spetember 1993, pp.136-145. 12. Bhushan Ratna, “Turning on the heat”, Businessline, October 12, 2000.Tom Gorman, “What will our customers think of this product idea?” Business Marketing, September 1987, pp.76-78. 13. Chakraborthy Alokananda, “Donning the war paint”, Business India, November 3 – 16, 1997, pp. 97-98. 14. Challapalli Sravanthi, "Margo dishes out a new avatar”, Businessline, January 11, 2001 15. Robert Cooper, “The new product system: the industry experience”, Journal of Product innovation and management, June 1992, pp.113-120.

16. Roger Calantone, Anthony Di Benendetto and Ted Haggblom, “ Principles of New product Management: Exploring the beliefs of product practitioners”, Journal of product innovation and management, June 1995, pp.235-240. 17. Salton, Gary J., Organizational Engineering: A New Method of Creating High Performance Human Structures. Ann Arbor: Professional Communications Inc., 1966.

Brand management
Unit structure: 1. Introduction 2. Learning Objectives 3. Branding 3.1. Branding decisions 3.2. Brand meaning 3.3. Brand platform 3.4. Brand Architecture 3.5. Brand Extensions 3.6. Brand Stretching 3.7. Brand equity 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction: Brand is a name term, sign, symbol, or design or a combination of them intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. In essence the brand identifies the seller (or) maker. Brand is considered to be a trademark or distinctive name identifying a product or manufacturer. The brand must be a bridge between the customer and the owner of the brand. Both functional and emotional satisfaction is attained through branding. A brand has the power to create interest and command an immediate second look. The value of a business is directly related to the strength of its brand. A strong brand will evoke a number of images in the mind of the prospects.

Branding is a major issue in product strategy on the one hand, developing a branded product requires a great deal of long term investment especially for promotion, advertising and packaging. On the other hand manufacturers eventually learn market power lies with building their own brands. Even when the companies can no longer afford to manufacture their products in their homelands, the brand name continues to command customer loyalty.

A brand is essentially a seller’s promise to deliver a specific set of features; benefits services consistently to the buyers. The best brand conveys warranty of quality. Brands convey even more meanings up to six levels. Attributes Benefits to the customer Producer’s values Culture Personality User 2. Learning objectives: After studying this unit, you will understand: The traits of successful brands The brand management aspects and strategies The brand equity issues and why is it important etc..

3. Brand management:

Kevin Lane Keller, brand guru identified the following ten traits as the common aspect behind the successful brands:
The brand excels at delivering the benefits customers truly desire. The brand stays relevant. The pricing strategy is based on consumers’ perceptions of value. The brand is properly positioned. The brand is consistent. The brand portfolio and hierarchy make sense. The brand makes use of and coordinates a full repertoire of marketing activities to build equity. 8. The brand’s managers understand what the brand means to consumers. 9. The brand is given proper support, and that support is sustained over the long run. 10. The company monitors sources of brand equity. Benefits Of Branding: 1. Branding makes it causes for the seller to process orders and track down problem. 2. The seller’s brand name and trademark provide legal protection of unique product features. 3. Branding gives the seller the opportunity to attract a loyal profitable set of customers. Brand loyalty gives some protection from competition. 1. 2. 3. 4. 5. 6. 7.

4. Branding helps the seller segment markets 5. Strong brands help build the corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers. Use of a successful brand:

With a successful brand, a company will usually have: 1. Improved margins through higher realisations leading to higher profits. 2. Generated better cash flows; and improved management and productivity of assets. 3. Reduced or even eliminated the need for regular infusion of fresh capital – investment needs can be met out of internal accruals, and extensions of a successful brand can give the benefits of a new product launch at reduced cost. 4. Created an entry barrier for would –be rivals, who must now spend heavily to counter the brand and 5. Insulated the brand from economic cycles, since a successful brand immediately reduces the impact of price alone on demand.
3.1.Branding Decisions: 3.1.1.Brand name decisions:

The first decision is whether the company should develop a brand name for its product. Branding is such a strong force that hardly anything goes unbranded. In some cases however there has been ‘no branding’ of certain staple consumer goods and pharmaceuticals. ‘generics’ are unbranded, plainly packaged, less expensive versions of common products. They offer standard or low quality at a price that may be as much as 20 percent to 40 percent lower than nationally advertised brands and 10 percent to 20 percent lower than retailer private label brands. The lower price is made possible by lower quality ingredients, lower cost labeling and packaging, minimal advertising. The advantages of brand naming are:
Easier for the seller to process orders and track down problems Provide legal protection against plagiarism Gives the seller the opportunity to attract a loyal and profitable set of customers Helps build corporate image Qualities of a brand name are as follows Should suggest something about products benefits like ‘fairever’ or ‘fair &lovely’ Should suggest product qualities such as action or color like ‘sunsilk’, 'Head and Shoulders’ Should be easy to pronounce like ‘Tide ‘,’surf’ Should be distinctive like Rin, Lux

Should not carry poor meanings in other countries and languages. There are certain basic categories of brand (or corporate) name: • Descriptive name A name which describes the product or service for which it is intended, e.g., MILMA brand of milk available in Kerala. • Associative name A name which alludes to an aspect or benefit of the product or service, often by means of an original or striking image or idea, e.g., VISA. • Freestanding name A name which has no link to the product or service but which might have meaning of its own, e.g., PENGUIN. • Abstract name A name which is entirely invented and has no meaning of its own, e.g.,ONIDA. Abstract names are a sub-set of freestanding names because they also have no link to the product of service. • Coined name Any name which is in some way invented. Coined names can be descriptive (3M), associative (TANCEM – Tamil nadu cements) and freestanding/abstract (ELECTROLUX). The brand name is the most important element in the branding mix. It identifies the product or service, and allows the consumers to specify, reject or recommend brands. Through time and use, a name can therefore become a valuable asset. Colgate- Palmolive company has systematically tried to harmonise the naming of its products from country to country. In general, it uses the Colgate name for oral care products, such as toothpaste, and the Palmolive name for body care products, such as shampoos and conditioners. When Nissan Motor Company introduced its cars into the United States, its management did not have total confidence in the quality of its cars, so the name Datsun was used for fear of losing face. However, after 20 years of promoting the Datsun name and building a quality image, the company decided to phase out the Datsun name and substitute the corporate name, Nissan. For a time, the company’s cars carried both names, until the Nissan name was firmly established in consumers’ minds. Inter brand in the 1980s helped pioneer a shift in pharmaceutical naming trends through the creation of the name Prozac for Eli Lilly’s anti-depressant. Prior to this, pharmaceuticals names were scientific sounding with usually some reference to the chemical compound. Prozac was coined from “Pro” for professional, pro-active and “Zac” for the ability of the medication to target exactly the area needing treatment. It was one of the first names to suggest a benefit in a way that was approachable to consumers. Over 10 years later, Prozac still remains the world’s leading antidepressant with over $3 billion in annual sales. Hence naming a brand is very important. The various stages in naming a brand are: 1. Decide what job the new name need to perform, now and in the future. 2. Isolate those naming themes that are relevant to the consumer and appropriate in branding and positioning terms.

3. Use Delphi technique or focus groups, name development specialists, computers and an existing name library to create names. 4. Once a vast list of names are identified, it needs to be pruned to manageable proportions. 5. Names that have difficulty of pronounciation, legibility, memorability or meaning need to be discarded. 6. Eliminate those names that are unregistrable as trade marks, that are too close to existing competitive marks or that fail to meet other criteria like length of the name etc. 7. Choose the name upon discussion with the top management, advertising agency and the participants in the marketing system. Initially, Mitsubishi sought to sell its four-wheel-drive utility wagon as the Pajero until they learned it meant "straw man" in Spanish; it was renamed the Montero, "Mountain Man." One firm tried to sell a de-icer in the U.S. by the name "SuperPiss." The Spanish potato chip "Bum" did not do well for the same reason. Nissan also sought to sell a sports car in the U.S. in the early '70s called the "Fair Lady." It later sold better as the 240Z. In any naming process, hundreds of potential names are eliminated by some of the steps already mentioned. In coming up with a name for the old Bell Labs division of AT&T, San Franciscobased firm Landor Associates went through 700 different names before they came up with "Lucent Technologies." Finally, it makes sense to eliminate names that do not sound well or make sense in other languages. During Coca-Cola's first entrance in China, great care was taken to get the phonetics correct in pronouncing Coca-Cola. However, the name manipulators forgot the meaning of the symbols they selected only to learn they meant "kiss the wax tadpole." Qualities of a brand name are as follows Should suggest something about products benefits like ‘fairever’ or ‘fair &lovely’ Should suggest product qualities such as action or color like ‘sunsilk’, 'Head and Shoulders’ Should be easy to pronounce like ‘Tide ‘,’surf’ Should be distinctive like Rin, Lux Should not carry poor meanings in other countries and languages. 3.1.2.Brand Sponsor Decision: There are several options with respect to brand sponsorship. The products can be launched as any of the following types of brands. Manufacturer brand-called sometimes as a national brand like the Blowplast Industries’ VIP. Distributor brand-also called reseller, store, house (or) private brand.

Licensed brand name. Although manufacturer brands dominate, large retailers have been developing their own brands by contracting production from willing manufacturers.

In years past, customers viewed brands in a category arranged in a ‘brand ladder’ with their favorite brand at the top and remaining brands in descending order of preference.
Now the ‘brand ladder’ concept is being replaced by ‘brand parity’ that many brands are equivalent. 3.1.3.Brand Strategy Decision: A company has five choices with regards to brand strategy. They are, 1. Line extensions: existing brand name extended to new sizes or flavors in the existing product category like Cinthol ‘cologne’, Cinthol ‘lime’. Extensions may lead to the brand name losing in specific meaning. However there is a much higher chance of survival than brand new products. 2. Brand extensions: where a company may use its existing brand name to launch new products in other categories like the brand ‘Rin’ being extended to both detergent powders, detergent cakes. The new product may disappoint buyers and damage their report for the company’s other products. The brand name may be in appropriate to the new product. The brand name may also lose it’s special positioning in consumers’ mind trough over extension. ‘Brand dilution’ occurs when consumers no longer associate a brand with a specific product or highly similar products. 3. Multi-brands: a company will often introduce additional brands in the same product category. Sometimes the company is trying to establish different features or appeal to different buying motives. A multi-branding strategy also enables the company to lock up more distributor shelf space and to protect its major brand by setting up ‘flanker brands’. Hindustan lever limited produces three different brands of detergent powders. Company inherits different brand name in the process of acquiring competitors. SmithKline Beecham consumer health care owns the acquired brand names like ‘Viva’, ’Malt ova’. Hindustan Lever Ltd. Owns acquired brand names like Brook Bond, Hamam Kissan. A major pitfall introducing multi-brand entries is that each might obtain only a small market share and none may be particularly profitable. The company will have dissipated its resources over several brands instead of building a few highly profitable brands. 4. New Brands: New Brands are created when company launches products in a new category it may find that none of its current brand names are appropriate. Yet, the cost of establishing a new brand name in the market place is costly. 5. Co –Brands: A co-brand is a combination of two or more well known brands in an offer like the combination of SBI and GE Capital in the issue of SBI credit cards.

3.1.4.Brand Repositioning:However well a brand is currently positioned, the company may have to reposition it later when facing new competitors or changing customer preferences. The UB groups McDowell’s ‘Mera no.1’ brand was once positioned for people with ecstatic moods but now it has been repositioned as a drink for socially responsible individuals. The branding strategies for readymade garments and general lighting segments are depicted in the following figure :

Figure: Branding strategies –some examples
Strategy/decision To brand or not to brand Readymade Garments Always branding is advantageous. e.g. Arrow, Louis Phillipe, Peter England, Cambridge Licensed brand name is most common e.g. Arrow (Cluett Peabody, USA) Louis Phillipe ( Van Heusen, UK) Individual brand names e.g. Arvind mills owns – Excalibur, Arrow, Ruf and Tuf Birla group owns – Louis Phillipe, Van Heusen, Peter England Siyarams ownOxemburg, J Hampstead Multi brands e.g.. Indus League’s multi brand shirts – Schullers, Indigo nation ArvindMills - Excalibur, Arrow, Ruf and Tuf General lighting Always better to brand e.g. Philips, GE, Surya Manufacturer’s brand e.g.. Philips, Bajaj

Brand-sponsor decision

Brand name decision

Blanket family name e.g. GE, Philips, Surya

Brand strategy decision

Brand extensions used by all the players

3.2.Brand meaning:

A brand can convey up to six levels of meaning. The challenge in branding is to develop a deep set of these meanings for the brand. When the audience can visualise all the six levels, then the brand can be deemed to be a success. The following are the six levels:

1. The key attributes based on its recognition, reputation, affinity and expertise needs to be communicated to the customers. Hence if Maruti advertises on its MPFI engine or Bajaj advertises on its resale value, then the attributes are put across to the customers. 2. The second level is that the attributes should be translated into functional and or emotional benefits. Thus Maruti advertises that every 2 out of 3 buy a Maruti translates their key attributes across the customers. 3. The third level of meaning is about the producer’s values. By advertising that even in Himalayas, Maruti has a service centre, they show that they care for the customer and their concern to have as many service centers across the country. 4. The fourth level is in its culture. Johnson and Johnson had always focussed on the bondage between the mother and the child while advertising their child care products, it represents their culture. Hyundai Santro focussed their Korean culture intitally and then used a celebrity to drive home their product differentiations. When Dabur Amla hair oil advertises, the non-chemical requirements of the Indian women got translated in their culture. 5. The fifth level of meaning is on the brand personality. The brand is portraying the personality of an individual who owns it. Hence if surf is to be related to God Shiva, Nirma is related to Goddess Kali and their relationship will reflect the true identity of the brands. 6. The last level is the kind of person who buys or uses the product. He/She does it based on the product’s values, culture and personality. That is the reason why Raymond advertises the ‘complete man’ factor to get the premium-ness it expects from the market. “Three roses” tea portrays what the totality of tea is all about. “Vim” bar is also an example which shows the middle class women’s thriftiness and quality consciousness. 3.3.Brand Platform: Interbrand's proprietary model for defining brands. The Brand Platform consists of the following elements: • Brand Vision: The brand's guiding insight into its world. • Brand Mission: How the brand will act on its insight. • Brand Values: The code by which the brand lives. The brand values act as a benchmark to measure behaviors and performance. • Brand Personality: The brand's personality traits • Brand Tone: That of voice. How the brand speaks to its audiences. 3.4.Brand Architecture:

Brand Architecture is the vehicle by which the brand team functions as a unit to create synergy, clarity and leverage. How an organization structures and names the brands within its portfolio is also known as the brand architecture. There are three main types of brand architecture system: monolithic, where the corporate name is used on all products and services offered by the company; endorsed, where all sub-brands are linked to the corporate brand by means of either a verbal or visual endorsement; and freestanding, where the corporate brand operates merely as a holding company, and each product or service is individually branded for its target market. Brand architecture is an organizing structure of brand portfolio that specifies the brand roles and relationship among the brands and different product market context. It is mainly defined by the three major dimensions viz. Portfolio roles, Product market context roles and the Portfolio structure. Brand portfolio: Brand architecture involves the management of brand portfolio. Brand portfolio includes all the types of brand viz. Brands and sub-brands as well as co-brands with other firms. For example, the brand portfolio of HLL consisting of 110 brands with 950 of different types of packs which are operating under different market context like healthcare, personal care, beverages, etc. During the annual year 2001-2002, HLL has taken a decision to further prune down their 110 brands to 36 brands only over a three year period. A brand portfolio can be strengthen by the addition of brand keeping in view the portfolio perspective. Some international brands are being planned to be strengthened in HLL.Similarly brands can be deleted by identifying the superfluous brands which are contributing nothing to the brand portfolio. Some of the brands to be deleted by HLL include Jai soap, Captain cook salt and Aim toothpaste. Portfolio roles:

For building effective brand architecture it is necessary to identify the portfolio roles of each brand. A strategic brand or a mega brand is a currently dominating brand that represents a meaningful future level of sales and profit. For ex: Lux and Lifebuoy are strategic brands for HLL, TATA consultancy services (TCS) is a strategic brand of TATA group of cos. because the vision of the firm is to move beyond traditional steel and automobile business. A linchpin brand unlike strategic brand does not necessarily represent a meaningful future level of sales and profit but it is a leverage point of a major business area. It indirectly influences a business by providing a basis for customer loyalty. For ex. ‘Premium’, a brand extension of JK.It is a linchpin brand for JK because it has extended the JK’s credibility in different businesses from chemicals to men’s toiletaries. A silver bullet is a brand or sub-brand that positively influence the image of another brand.it can be a powerful force in creating, changing and maintaining a brand image. For example, when iMaC was launched it has provided a significant boast in public perception of the Apple brand. Strategic, Linchpin and Silver bullet brands involves investments and active management for fulfilling their strategic mission. The

cash cow brands on contrast does not require any investment because it has a significant loyal customer base. The role of a cash cow brand is to generate marginal resources that can be invested in other brands, which will help for future growth and vitality of brand portfolio. For ex; Fair and Lovely fairness cream the core product of HLL, a brand that has been extended to soaps. Similarly, Dettol as a cash cow brand has been extended in order to gain the maximum out of the equity.
Product market context roles

There are four steps of product market context roles that work together to define a specific offering:
a) Endorser and sub-brands roles: An endorser brand is an established brand that provides credibility and substance to the offering. Endorser brands usually represents organizations rather than products because organizational associations such as innovation, leadership and trust are particularly relevant in endorsement context for example, Tata has 80 different companies operating in seven business sectors, which are endorsed under the mega brand TATA. The sub brands on the other hand stretches endorser brands that add associations, a brand personality or any other quality which creates brand identity of it for ex. Nestle’s Cerelac, Gillette’s Mach 3 and Cadbury’s Bournvita. The understanding and use of endorser brand and sub brands is a key in achieving clarity, synergy and leverage in the brand portfolio. b) Benefit brands: The benefit brand is a brand which offers either features, component ingredients or services which becomes the unique selling proposition (USP) of offering. For example, Johnson and Johnson brand ‘Indicator’ toothbrush, has a branded feature which shows the time to replace the toothbrush. c) Co-Brands: Co- branding occurs when brands from different organizations combine to create an offering in which each plays a driver role. The impact of co-branding can be greater than expected when the associations of each brand are strong and complementary. d) Driver role: Driver role is an extent to which a brand drives the purchase decision and defines the use experience. Brand with a driver role will have some level of loyalty. Nirma washing powder for Nirma Chemicals and Lifebuoy for HLL are driver brands. Brand portfolio structure:

The brands in the portfolio have a relationship with each other. Brand architecture also involves designing a structure of all the brands, which will provide clarity to the customer rather than complexity and confusion. It must provide a sense of order, purpose and direction to the organization. Three approaches can be utilized to present the portfolio structure. For any firm the objectives behind designing and maintaining an effective brand architecture are: Create effective and powerful brands.

Understand the portfolio roles of each brand (strategic, silver bullet, linchpin and cash cow) and allocate the brand building resources in that manner. Create synergy between brands by enhancing visibility, creating and reinforcing associations and cost efficiencies. Advance clarity of product offering to the customers and organization. Leveraging the brand equity by proper brand and line extensions exercise. Provide a platform for future growth option to the organisation.
3.5.Brand Extension: In today’s fiercely competitive marketplace, brand extensions have become a standard strategy for new product introductions. Brand extensions have proliferated over the past decade, and the rationale behind endowing a new product with a well-known brand name is to provide consumers--and the trade-with a sense of familiarity and security by leveraging positive brand characteristics in a new product category. Brand extensions have become a standard strategy for new product introductions in today’s fiercely competitive marketplace. It is considered as a marketing strategy in which a company uses one of its established brand names on a modified product i.e., a new line, or on an entirely related new product. It is done so because the new products entering the market place are well supported and well – recognised. Core brands are being referred to as assets with profit generating capabilities. A Company may decide not to position the brand explicitly against any competitor. In implementing this strategy, the firm may advertise the brand and its benefits on its own grounds rather than in a comparative fashion. In this respect, brand-extension research has shown that the positive affect of a brand may be transferred to the extension. Moreover, affect transfer is most likely to occur when the brand’s old and the new categories are perceived to be similar. Finally, brand-specific associations are another important factor to consider; they may dominate the effects of brand affect and category similarity, especially when consumers are knowledgeable about the brand.

Line extensions and brand extensions are different as such. Line extensions should refer only to additions to an existing product like new sizes, styles or related products – to fill out the line. Thus, Fair Glow is an addition to the Godrej toilet soap line, which already included Cinthol and Ganga. Wheel was a line extension to HLL’s line of detergent bars, which already contained Rin and Surf. By contrast, brand extension refers to using an existing brand name to enter another product market category altogether viz., Dettol antiseptic liquid and Dettol soap.
Product line extension: Adding related products to an already established brand. Arrow After hours shirts being added to business shirts. Product form extension: Providing the same product in another forms variant. Pond’s soap cake offered as a liquid soap is an example.

Product category extension: Launching a different product under an already successful product’s brand name. BiC disposable razors under the same brand name as BiC disposable ball pens. Shivaki watches after entering TV market as Shivaki TV. Amul Ice creams after the success of Amul Butter.

The most common form of brand extension is family branding. A family brand is assigned to an entire range or mix of all product items. Godrej makes soaps, locks, furniture etc. In all these products, Godrej brand extensions are carried out. A powerful name, however, is no guarantee that family branding will succeed. Xerox tried to extend its powerful brand name to computers and printers but failed. Murphy suggests that brand extensions constitute an estimated 95 per cent of the 16,000 new products launched in the Untied States every year. Extensions are popular because they can provide new products with a ready-made image while helping existing products through increased brand exposure. However, extending a brand name to inappropriate products may result in product failure and/or reduced brand value. There are three key factors that a company must consider in the implementation of a brand-extension strategy: (1) competitive brands in the extension categories (2) the attributes of the extension brand and (3) The perceived fit between the brand and the extension.
3.6. Brand Stretching:

Brand stretching is applying an existing brand to a completely different business area or a new product or service- such as Cadbury’s entry into cola market. The risk attached to brand stretching is that failure in the new field may affect the core product. NEPC is one such example. Its failure in the Television, aviation and agricultural businesses affected the very credibility of NEPC brand. One aspect of brand stretching is that, once a brand personality becomes strongly associated with a product category, it becomes difficult to stretch the brand to another category like Hero Honda shampoo.
3.7. Brand equity:

Brand equity is a set of assets and liabilities linked to a brand’s name and symbol that add to subtract from the value provided by a product or service to ad firm and / or that firm’s customers. According to David A. Aaker, brand equity is "a set of brand assets and liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a product or service to a firm and/or that firm's customers". Lance Leuthesser, et al wrote that "Brand equity represents the value (to a consumer) of a product, above that which would result for an otherwise identical product without the brand's name. In other words, brand equity represents the degree to which a brand's name alone contributes value to the offering (again, from the perspective of the consumer)". In America, there is a now an influential body called the Coalition for Brand Equity (founded 1991), which evangelists for the importance of building brand relationships and brand loyalty. The Marketing Science Institute defines brand equity as, “The set of

associations and behaviors on the part of the brand's customers, channel members, and parent corporations that permit the brand to earn greater volume or greater margins than it could without the brand name and that gives the brand a strong, sustainable, and differentiated advantage over competitors”. Joel Axelrod defines brand equity as ‘the incremental amount your customer will pay to obtain your brand rather than a physically comparable product without your brand name’. The assets and liabilities on which brand equity is based differ from context to context. They can be usefully grouped into four categories viz., Perceived quality, brand awareness, brand identity, and brand loyalty. Brand equity refers to a “set of assets and liabilities linked to a brand, its name and symbol that add to or subtract from the value provided by a product or service to a firm and or to that firm’s competitors. In other words brand equity provides (or negatively subtract) value to a firm in the form of price premium or trade leverage or competitive advantage. The most important assets of any business are intangible: its company name, brand, symbols, and slogans, and their underlying associations, perceived quality, name awareness, customer base, and proprietary resources such as patents, trademarks, and channel relationships. These assets, which comprise brand equity, are a primary source of competitive advantage and future earnings. The overall description of Brand Equity incorporates the ability to provide added value to a company's products and services. This added value can be used to the company's advantage to charge price premiums, lower marketing costs and offer greater opportunities for customer purchase. In FMCG products, brand equities are relatively stronger as the consumer is reluctant to try unknown brands and even unbranded products as most of these products are for personal use. It is often difficult to differentiate a product on technical or functional grounds and therefore there is little reason to switch from a known brand. A successful brand generates strong cash flow, which enables the company brand to reinvest a part of it in the form of aggressive advertisement or promotion in order to reinforce the perceived superiority of the brand. The worth of a brand is manifested in the consumers’ insistence on a particular brand or willingness to pay a price premium for the preferred brand. A badly mismanaged brand can actually have negative Brand Equity, meaning that potential customers have such low perceptions of the brand. Many people may think that building and maintaining brand equity is solely the responsibility of brand managers, but it is actually a cross-functional team effort. Financial managers are important because they can fully analyze the costs of maintaining and building brand equity. For example, launching a new brand is extremely consuming in terms of money and time. It may be more cost effective to extend a current brand than introduce a new brand. Marketing research is critical for many obvious reasons. It develops most, if not all, of the research and data that companies will use for deciding strategic issues. Marketing research can also help determine how brand equity is actually measured. Once a definition of brand equity is established, the responsibility of tracking and measuring it will belong to the marketing research department. Brand managers ultimately bring all of the parts together and decide the direction of the brand.
4. Have you understood type questions:

1. Which of the following is NOT a desirable feature for a brand name? A. it can facilitate the introduction of new products B. it can become used as the generic name for all products in the category C. it can make it possible for the firm to engage in non price competition D. it can help develop brand loyalty amongst buyers 2. Own label brands are initiated and owned by A. manufacturers only. B. manufacturers and retailers. C. wholesalers only. D. wholesalers or retailers. 3. Firms that use ----- are less likely to damage their reputations if a new product fails. A. individual branding B. overall family branding C. line family branding D. brand extension branding

4. Do you think brands can create companies or vice-versa? Justify. 5. “Brand naming is a scientific process. However, it is found that 90% of the organizations do on their own without looking into the scientific process”- Is the statement true or false? Justify.
5. Summary:

A customer orientation will lead to concern for existing customers and programs to generate brand loyalty. A prime enduring asset for some businesses is the loyalty of the installed customer base. Competitors may duplicate or surpass a product or service, but they still face the task of making customers switch brands. Switching costs would be a consideration for a software user, for example, when a substantial investment has already been made in training employees to learn a particular software system. Another development is Co-Branding. It is also called ‘dual branding’. Here two or more wellknown brands are combined in an offer. It is a form of cooperation between two or more brands with significant customer recognition, in which all the participant brand names are retained. Co-branding lies between the two extreme points of marketing alliances. It is of medium to long term duration and its shared value potential is not as low as a temporary nature nor it is as high as to justify the culmination into a joint venture. Each brand sponsor expects that the other brand name will strengthen preference or purchase intention. If the two brands are such that the brand values are difficult to be shared, the success of a co-branding exercise between them is remote. In case of co-packaged products, each brand hopes it might be reaching a new audience by associating with other brand. If an organization has a strong brand, it can last for years. If it is not having a brand and only physical infrastructure, it is destined to be in loss.

6. Exercises:

1. There are certain characteristics for a brand. Keeping these characteristics, find out whether the following brands have them or not. Justify your answer a. Kitply b. Close-up c. Dabur d. Maltova e. Pepsodent f. Style-Spa 2. Explain the brand extensions done by companies in India. 3. “Brand stretching will damage the companies in the long run”- Explain with examples. 4. Do you think brand equity is needed for short run gains? Explain. 5. Brand dilution can lead to brand deletion- with examples explain.
7. References: 1. Balaji Prasad & M.Chandrasekhar, “ The power of brand”, Indian management, August 1998, pp.88-89. 2. Bruce Horovitz and Melanie Wells, “ Long after their sales stop sizzling, some brand names linger in… product purgatory”, USA Today, May 2, 1995, p.1. 3. Chris Roush, “ At Timex, they are positively glowing”, Business Week, July 12, 1993, p.141. 4. deChatnatony and McDonald, “Creating powerful brands”, Oxford Butterworth, 1998. 5. John A.Quelch & David Harding, “Brands versus private labels: fighting to win”, Harvard Business Review, Jan-Feb, 1996, pp.105-109. 6. Kevin Goldman, “ Old Spice’s familiar sailor is lost at sea”, Wall Street journal, September 10, 1993, p.2. 7. Kevin Lane Keller, “ Managing Brands for the long run: Brand reinforcement and revitalisation strategies”, California Management Review, spring 1999, pp.120-122. 8. Kevin Lane Keller, Susan Heckler and Michael Houston, “ The effects of brand name suggestions on advertising recall”, Journal of marketing, January 1998, pp.48-56. 9. Kotler, Philip; ‘Marketing Management’, Prentice Hall of India private limited, New Delhi, 1999, pp. 414 – 417. 10. Kumar, .S. Ramesh , “Importance of Techno-branding”, Business Line Catalyst, Thursday, March 16,2000. 11. Laura Bird, “Tambrands plans global advertising campaign”, Wall Street Journal, June 22, 1993, p.8. 12. Mahaswetha Ghosh Roy, “ Second coming”, Business World, 20 March-2April 1996, pp.44-46.

13. Michael McCarthy, “ Pepsi is returning to younger generation”, Wall Street journal, January 22, 1994, p.2. 14. Mohan Ramamurthy, “Sweet taste of victory”, Business India, May 18-21, 1998. 15. Mukul Gupta, “ Tug of war”, Indian management, September 1997, pp.37-39. 16. Nielson, “Brand stretching can be fun- and dangerous”, The Economist, 5 May, p.105. 17. Pratap Ravindran, “ Brands, The corporate ‘trust mark’”, Business Line, January 9, 1999.

Unit structure: 1. Introduction 2. Learning Objectives 3. Pricing 3.1. Basic principles of pricing 3.2. Importance of pricing 3.3. Factors influencing pricing decisions 3.4. Setting pricing 3.5. Pricing methods 4. Have you understood type questions 5. Summary 6. Exercises 7. References

1. Introduction: Most people simply use the word price to indicate what it costs to acquire a product. The pricing decision is a critical one for most marketers, yet the amount of attention given to this key area is often much less than is given to other marketing decisions. One reason for the lack of attention is that many believe price setting is a mechanical process requiring the marketer to utilize financial tools, such as spreadsheets, to build their case for setting price levels. While financial tools are widely used to assist in setting price, marketers must consider many other factors when arriving at the price for which their product will sell. 2. Learning Objectives:

When you finish this unit, you should be able to: • Understand the basic principles of pricing • Understand the importance of pricing

• • •

Understand the factors influencing pricing by organisations Understand the price setting process Understand the various methods of pricing.

3. Pricing: Price is considered as a component of an exchange or transaction that takes place between two parties and refers to what must be given up by one party (i.e., buyer) in order to obtain something offered by another party (i.e., seller). Price means different things to different participants in an exchange. One is the buyer. Their view for those making a purchase, price refers to what must be given up to obtain benefits. In most cases what is given up is financial consideration (e.g., money) in exchange for acquiring access to a good or service. But financial consideration is not always what the buyer gives up. Sometimes in a barter situation a buyer may acquire a product by giving up their own product. For instance, two farmers may exchange chicken for crops. In the case of the seller, price reflects the revenue generated for each product sold and, thus, is an important factor in determining profit. For marketing organizations price also serves as a marketing tool and is a key element in marketing promotions. For example, most discount retailers highlight product pricing in their advertising campaigns. Price is what a buyer pays to acquire products from a seller. Cost concerns the seller’s investment (e.g., manufacturing expense) in the product being exchanged with a buyer. For marketing organizations seeking to make a profit the hope is that price will exceed cost so the organization can see financial gain from the transaction. While product pricing is a main topic for discussion when a company is examining its overall profitability, pricing decisions are not limited to for-profit companies. Not-for-profit organizations, such as charities, educational institutions and industry trade groups, also set prices, though it is often not as apparent. 3.1. Basic principles of pricing:

Before any discussion on pricing, it is important to know what really drives pricing. Every organization is involved in a cost component before the ultimate product comes to the market. Now we need to know how the cost is calculated. The components that are considered in costing include cost of materials that you have issued for order, activity you have performed in terms of labour hours that you entered while confirming the order (the rates for the labour vary..) which is generally associated with a formula key and attached to a work center that is linked to a cost center also and the overhead as applicable with respect to that cost center based on a predetermined cost center planning and its rate.
A break-even analysis examines the interaction among fixed costs, variable costs, prices, and unit volume to determine that combination of elements in which revenues and total costs are equal. Fixed costs are those expenses necessary to keep the business open, and are not impacted by sales volume. They will include such things as rent, basic telephone expenses and utilities,

wages for core employees, loan or lease payments, and other necessary expenditures. An entrepreneur should also include a living wage for himself/herself as a fixed cost. Variable costs include those expenses that change as a result of sales volume. Variable costs can also be very complex; for example, higher sales in one area of our business may increase long distance charges. Labor costs may be fixed for full-time employees, then, as sales increase, some overtime is incurred until additional personnel can be justified. Generally, an initial break-even analysis focuses on a relatively narrow range of sales volume in which variable costs are simple to calculate. A general term often used for the difference between selling price and variable cost is "contribution margin," or the amount that the unit sale contributes to the margin available to pay fixed costs, and generate profit. Selling price is determined based on all this above considerations. The extent of contribution margin will decide the pricing of the product. 3.2.Importance of Pricing:

For a buyer, value of a product will change as perceived price paid and/or perceived benefits received change. But the price paid in a transaction is not only financial it can also involve other things that a buyer may be giving up. For example, in addition to paying money a customer may have to spend time learning to use a product, pay to have an old product removed, and close down current operations while a product is installed or incur other expenses. Pricing decisions can have important consequences for the marketing organization and the attention given by the marketer to pricing is just as important as the attention given to more recognizable marketing activities. In most companies, prices are tactically derived based on internal costs and gut reaction to competitive moves.
This is often the only element the marketer can change quickly in response to demand shifts and it is directly related to total revenue. Profits can be made only by knowing the difference between total revenue and total cost. Organizations can use price symbolically, emphasize quality or bargain. The importance of pricing depends on the image the organization wants to portray, competitive activity in the market and the changing behaviour of the customer. From a strategic aspect, pricing has more impact on positioning and ultimate profitability than any other item in the overall marketing mix. Depending on market sensitivities and current profit margins, a 1% increase in price could increase profitability by up to 10%. The key to effective strategic pricing is to leverage market based understanding of how customer's value new and existing offerings in a competitive marketplace. Customers want the best value for their money, and thus they will almost always do a quality comparison and make purchases based on the best price for the best value. How customers view the product or service and what they are willing to pay for it is based upon those perceptions. In the end, customers will tell through their purchasing behavior whether or not the prices are too high, too low or right on the money.

3.3.Factors Affecting Pricing Decision

There are both internal and external factors that affect pricing.
3.3.1. Internal Factors : These internal factors are controllable by the company and, if necessary, can be altered. However, while the organization may have control over these factors making a quick change is not always realistic. For instance, product pricing may depend heavily on the productivity of a manufacturing facility. The marketer knows that increasing productivity can reduce the cost of producing each product and thus allow the marketer to potentially lower the product’s price. But increasing productivity may require major changes at the manufacturing facility that will take time and will not translate into lower price products for a considerable period of time. Corporate objectives can be wide-ranging and include different objectives for different functional areas (e.g., objectives for production, human resources, etc). While pricing decisions are influenced by many types of objectives set up for the marketing functional area, there are four key objectives in which price plays a central role. In most situations only one of these objectives will be followed, though the marketer may have different objectives for different products. The four main marketing objectives affecting price include: • Return on Investment : A firm may set as a marketing objective the requirement that all products attain a certain percentage return on the organization’s spending on marketing the product. • Cash Flow: Firms may seek to set prices at a level that will insure that sales revenue will at least cover product production and marketing costs. This objective allows the marketer to worry less about product profitability and instead directs energies to building a market for the product. This is most likely to occur with new products where the organizational objectives allow a new product to simply meet its expenses while efforts are made to establish the product in the market. • Market Share: The pricing decision may be important when the firm has an objective of gaining a hold in a new market or retaining a certain percent of an existing market. For new products under this objective the price is set artificially low in order to capture a sizeable portion of the market and will be increased as the product becomes more accepted by the target market. For existing products, firms may use price decisions to insure they retain market share in instances where there is a high level of market competition and competitors who are willing to compete on price. • Profit maximization: Older products that appeal to a market that is no longer growing may have a company objective requiring the price be set at a level that optimizes profits. This is often the case when the marketer has little incentive to introduce improvements to the product and will continue to sell the same product at a price premium for as long as some in the market is willing to buy.

Marketing strategy concerns the decisions marketers make to help the company satisfy its target market and attain its business and marketing objectives. Price, of course, is one of the key marketing mix decisions and since all marketing mix decisions must work together, the final price will be impacted by how other marketing decisions are made. For instance, marketers selling high quality products would be expected to price their products in a range that will add to the perception of the product being at a high-level. Costing is yet another area of concern. While variable costs are often determined on a per-unit basis, applying fixed costs to individual products is less straightforward. For example, if a company manufactures five different products in one manufacturing plant how would it distribute the plant’s fixed costs (e.g., mortgage, production workers’ cost) over the five products? In general, a company will assign fixed cost to individual products if the company can clearly associate the cost with the product, such as assigning the cost of operating production machines based on how much time it takes to produce each item. Alternatively, if it is too difficult to associate to specific products the company may simply divide the total fixed cost by production of each item and assign it on percentage basis.
3.3.2. External Factors: There are many influencing factors which are not controlled by the company but will impact pricing decisions. Understanding these factors requires the marketer conduct research to monitor what is happening in each market the company serves since the effect of these factors can vary by market.

Marketing decisions are guided by the overall objectives of the company. The pricing decision can be affected by factors that are not directly controlled by the marketing organization. When it comes to adjusting price, the marketer must understand what effect a change in price is likely to have on target market demand for a product. Understanding how price changes impact the market requires the marketer have a firm understanding of the concept economists call elasticity of demand, which relates to how purchase quantity changes as prices change. Elasticity is evaluated under the assumption that no other changes are being made (i.e., “all things being equal”) and only price is adjusted. For example, competitors may react to the marketer’s price change by changing the price on their product. Despite this, elasticity analysis does serve as a useful tool for estimating market reaction. Elasticity deals with three types of demand scenarios:
1. Elastic Demand – Products are considered to exist in a market that exhibits elastic demand when a certain percentage change in price results in a larger percentage change in demand. For example, if the price of a product

increases (decreases) by 10%, the demand for the product is likely to decline (rise) by greater than 10%. 2. Inelastic Demand – Products are considered to exists in an inelastic market when a certain percentage change in price results in a smaller percentage change in demand. For example, if the price of a product increases (decreases) by 10%, the demand for the product is likely to decline (rise) by less than 10%. 3. Unitary Demand – This demand occurs when a percentage change in price results in an equal percentage change in demand. For example, if the price of a product increases (decreases) by 10%, the demand for the product is likely to decline (rise) by 10%.

Firms within the marketer’s channels of distribution also must be considered when determining price. Distribution partners expect to receive financial compensation for their efforts, which usually means they will receive a percentage of the final selling price. This percentage or margin between what they pay the marketer to acquire the product and the price they charge their customers must be sufficient for the distributor to cover their costs and also earn a desired profit. Marketers will undoubtedly look to market competitors for indications of how price should be set. For many marketers of consumer products researching competitive pricing is relatively easy, particularly when Internet search tools are used. Price analysis can be somewhat more complicated for products sold to the business market since final price may be affected by a number of factors including if competitors allow customers to negotiate their final price. Marketers must be aware of regulations that impact how price is set in the markets in which their products are sold. These regulations are primarily government enacted meaning that there may be legal ramifications if the rules are not followed. Price regulations can come from any level of government and vary widely in their requirements. For instance, in some industries, government regulation may set price ceilings (how high price may be set) while in other industries there may be price floors (how low price may be set). Additional areas of potential regulation include: deceptive pricing, price discrimination, predatory pricing and price fixing.
3.3. Pricing setting process:

Price setting process starts with understanding the company and marketing objectives. Then an initial price is to be readied. We need to also understand the standard price adjustments along with determining promotional pricing and looking for payment options. First, the overall objectives of the company guide all decisions for all functional areas (e.g., marketing, production, human resources, finance, etc.). Guided by these objectives the marketing department will set its own objectives which may include return on investment, cash flow, market share and maximize profits to name a few as stated in 3.2. Pricing decisions like all other marketing decisions will be used to help the department meet its objectives. For instance, if the marketing objective is to build market

share it is likely the marketer will set the product price at a level that is at or below the price of similar products offered by competitors. For companies selling to consumers, this price also leads to a projection of the recommended selling price at the retail level often called the manufacturer’s retail price (MRP). The MRP may or may not be the final price for which products are sold. For strong brands that are highly sought by consumers the MRP may in fact be the price at which the product will be sold. But in many other cases, as we will see, the price setting process results in the price being different based on adjustments made by the marketer and others in the channel of distributions. This will lead to which of the pricing methods best suited for the brand. That will be discussed in 3.5. In most cases standard adjustments are made to reduce the list price in an effort to either stimulate interest in the product or to indirectly pay channel partners for the services they offer when handling the product. It should be noted that many companies do not make adjustments to their list price, particularly those selling directly to final customers. There are two key reasons for this. First, the product is in high demand and therefore the marketer sees little reason to lower the price. Second, the marketer believes the product holds sufficient value for customers at its current list price and the marketer feels reducing the price may actually lead buyers to question the quality of the product. For firms that do make standard price adjustments, the possibilities include:
• Quantity Discounts • Trade Allowances • Geographic Pricing • Special Segment Discounts

Quantity Discounts This adjustment offers buyers an incentive of lower per-unit pricing as more products are purchased. Most quantity or volume discounts are triggered when a buyer reaches certain purchase levels. For instance, a buyer may pay the list price when they purchase between 1-99 units but receive a 5% discount off the list price when the purchase exceeds 100 units. The most common quantity discounts exist when a buyer places an order that exceeds a certain minimum level. While quantity discounts are used by marketers to stimulate higher purchase levels, the rational for using these often rests in the cost of product shipment. There can be discounts offered to the products. This method allows the buyer to receive a discount as more products are purchased over time. For instance, if a buyer regularly purchases from a supplier they may see a discount once the buyer has reached predetermined monetary or quantity levels. The key reason to use this adjustment is to create an incentive for buyers to remain loyal and purchase again.

Trade Discounts Manufacturers who rely on channel partners to distribute their products (e.g., retailers, wholesalers) offer trade discounts off of list price. Essentially the difference between the trade discounted prices paid by the reseller and the price the reseller charges its customer will be the reseller’s profit. Special Segment Pricing In some industries special classes of customers within a target market are offered pricing that differs from the rest of the market. The main reasons for doing this include: building future demand by appealing to new or younger customers; improving the brand’s image as being sensitive to customer’s needs; and rewarding long time customers with price breaks. For instance, many companies including railways, airways offer lower prices to senior citizens. Some marketers offer non-profit customers lower prices compared to that charged to for-profit firms. Other industries may offer lower prices to students or children. Geographic Pricing Products requiring marketers to pay higher costs that are affected by geographic area in which a product is sold may result in adjustments to compensate for the higher expense. The most likely cause for charging a different price rests with the cost of transporting a product from the supplier’s distribution location to the buyer’s place of business. Transportation expense is not the only cost that may raise a product’s price. Special taxes or tariffs may be imposed on certain products by local, regional or international governments which a seller passes along in the form of higher prices. Now with the advent of VAT, these issues will be overcome. The final price may be further adjusted through promotional pricing. Unlike standard adjustments, which are often permanently part of a marketer’s pricing strategy and may include either a decrease or increase in price, promotional pricing is a temporary adjustment that only involves price reductions. They are: Markdowns: The most common method for stimulating customer interest using price is the promotional markdown method, which offers the product at a price that is lower than the product’s normal selling price. There are several types of markdowns including:
• Temporary Markdown – Possibly the most familiar pricing method

marketers use to generate sales is to offer a temporary markdown or “sale’ pricing. These markdowns are normally for a specified period of time the conclusion of which will result in the product being raised back to the normal selling price.

• Permanent Markdown – Unlike the temporary markdown where the price

will eventually be raised back to a higher price, the permanent markdown is intended to move the product out of inventory. • Seasonal – Products that are primarily sold during a particular time of the year, such as clothing, gardening products, sporting goods and holidayspecific items, may see price reductions at the conclusion of its prime selling season.

Loss Leaders: An important type of pricing program used primarily by retailers is the loss leader. Under this method a product is intentionally sold at or below the cost the retailer pays to acquire the product from suppliers. The idea is that offering such a low price will entice a high level of customer traffic to visit a retailer’s store or website. Sales Promotions: Sales Promotion may offer several types of pricing promotions to simulate demand. These include rebates, coupons, trade-in, and loyalty programs. There is a separate unit on Sales promotions later on. Bundle Pricing: Another pricing adjustment designed to increase sales is to offer discounted pricing when customers purchase several different products at the same time. Termed bundle pricing, the technique is often used to sell products that are complementary to a main product. For buyers, the overall cost of the purchase shows a savings compared to purchasing each product individually. For example, a TV retailer may offer a discounted price when customers purchase both 29’ TV and DVD that is lower than if both items were purchased separately. With the price decided, the final step for the marketer is to determine in what form and in what timeframe customers will make payment. As one would expect payment is most often in a monetary form though in certain situations the payment may be part of a barter arrangement in which products or services are exchanged. Dynamic Pricing The concept of dynamic pricing has received a great deal of attention in recent years due to its prevalent use by Internet retailers. But the basic idea of dynamic pricing has been around since the dawn commerce. Essentially dynamic pricing allows for the point-ofsale (i.e., at the time and place of purchase) price adjustments to take place for customers meeting certain criteria established by the seller. The most common and oldest form of dynamic pricing is haggling; the give-and-take that takes place between buyer and seller as they settle on a price.

Finally marketers must decide in what form payments will be accepted. These options include cash; check, money orders, credit card, online payment systems (e.g., PayPal) or, for international purchases, bank drafts, letters of credit, and international reply coupons, to name a few. They can also offer the following:
• Ownership Options • Early Payment Incentives • Auction Pricing

Ownership Options: An important decision faced by marketers as they are formulating their marketing strategy deals with who will have ownership of the product (i.e., holds legal title) once an exchange has taken place. The options available include:
• Buyer Owns Product Outright – The most common ownership option is for

the buyer to make payment and then obtain full ownership. • Buyer Has Right to Use but Does Not Have Ownership – Many products, especially those labeled as services, permit customers to make payment in exchange for the right to use a product but not to own it.

Early Payment Incentives For many years marketers operating primarily in the business market offered incentives to encourage their customers to pay early. Typically, business customers are given a certain period of time, normally 30 or 60 days, before payment is due. To encourage customers to pay earlier, and thus allow the seller to obtain the money quicker, marketers have offered early payment discounts often referred to as “cash terms”. This discount is expressed in a form that indicates how much discount is being offered and in what timeframe. For example, the cash terms 2/10 net 30 indicates that if the buyer makes payment within 10 days of the date of the bill then they can take a 2% discount off some or all of the items on the invoice, otherwise the full amount is due in 30 days. Auction Pricing: Auction pricing is the reverse of bid pricing, which we discussed earlier, since it is the buyer who in large part sets the final price. This pricing method has been around for hundreds of years, but today it is most well known for its use in the auction marketplace business models such as eBay and business-to-business marketplaces. While marketers selling through auctions do not have control over final price, it is possible to control the minimum price by establishing a price floor or reserve price. In this way the product is only sold if someone’s bid is at least equal to the floor price.
3.5. Pricing methods:

Following are the pricing methods before the manufacturer.
Cost Pricing

Under cost pricing the marketer primarily looks at production costs as the key factor in determining the initial price. This method offers the advantage of being easy to implement as long as costs are known. But one major disadvantage is that it does not take into consideration the target market’s demand for the product. There are several types of cost pricing including:
Markup Pricing

This pricing method used by many resellers, who acquire products from suppliers, is one in which final price is determined by adding a certain percentage to the cost of the product. For many resellers, such as retailers, who purchase thousands of products it is far easier to use a markup pricing approach due to its simplicity than it would be to determine what the market is willing to pay for each product. Resellers differ in how they use markup pricing with some using the markup on cost method and others using the markup on selling price method.
• Markup on Cost – Using this method price is determined by simply

multiplying the cost of each item by a predetermined percentage then adding the result to the cost. A major general retailer, such as Bigbazzar, may apply a set percentage for each product category (e.g., women’s clothing, automotive, garden supplies, etc.) making the pricing consistent for all likeproducts. Alternatively, the predetermined percentage may be a number that is identified with the marketing objectives (e.g., required 20% ROI). The calculation for markup on cost is:

Item Cost + (Item Cost x Markup Percentage) = Price Rs.500 + (500 x .30) = Rs.650
• Markup on Selling Price – Many resellers, and in particular retailers,

discusses their markup not in terms of markup on product cost but as a reflection of price. The calculation for markup on selling price is:

Item Cost = Price (1.00 – Markup Percentage) Rs.500 (1.00 – .30) = Rs. 714.3

The astute reader should recognize that the information in markup of selling price contains the same information in markup of cost.

Cost-Plus Pricing

In the same way markup pricing arrives at price by adding a certain percentage to the product’s cost, cost-plus pricing also adds to the cost by using a fixed monetary amount rather than percentage. For instance, a contractor hired to renovate a homeowner’s bathroom will estimate the cost of doing the job by adding their total labor cost to the cost of the materials used in the renovation. Breakeven Pricing Breakeven pricing is associated with breakeven analysis, which is a forecasting tool used by marketers to determine how many products must be sold before the company starts realizing a profit. Like the markup method, breakeven pricing does not directly consider market demand when determining price, however it does indicate the minimum level of demand that is needed before a product will show a profit. From this the marketer can then assess whether the product can realistically achieve these levels. Market Pricing

Under the market pricing method cost is not the main factor driving price decisions; rather initial price is based on analysis of market research in which customer expectations are measured. The main goal is to learn what customers in an organization’s target market are likely to perceive as an acceptable price. Of course this price should also help the organization meet its marketing objectives. Market pricing is one of the most common methods for setting price, and the one that seems most logical given marketing’s focus on satisfying customers. For those marketers who use market pricing, options include:
• Backward Pricing • Psychological Pricing • Price Lining

Backward Pricing

In situations where a price range is ingrained in the market, the marketer may need to use this price as the starting point for many decisions and work backwards to develop product, promotion and distribution plans.
Psychological Pricing Certain pricing tactics “may” have a psychological effect since the results of some studies have suggested otherwise.

Odd-Even Pricing - Many times a buyer will pass along the price as being lower than it is either because they recall it being lower than the even number or they want to impress others with their success in obtaining a good value. For instance, in our example a buyer who pays Rs.299.95 may tell a friend they paid “a little more than Rs.200” for the product when in fact it was much closer to Rs.300.

• Prestige Pricing - Another psychological effect, called prestige pricing,

points to a strong correlation between perceived product quality and price. The higher the price the more likely customers are to perceive it has being higher quality compared to a lower priced product. Price Lining Price lining or product line pricing is a method that primarily uses price to create the separation between the different models. With this approach, even if customers possess little knowledge about a set of products, customers may perceive they are different based on price alone. Price lining can also be effective as a method for increasing profitability. In many cases the cost to the marketer for adding different features to create different models or service options does not alone justify a big price difference. For instance, an upgraded model may cost 10% more to produce than a base model but using the price lining method the upgraded product price may be 20% higher and thus more profitable than the base model. The increase in profitability offered by price lining is one reason marketers introduce multiple models, since it allows the company to not only satisfy the needs of different segments but also presents an option for a customer to “buy up” to a higher priced and more profitable model. Competitive Pricing

For some, competitor’s price serves as an important reference point from which they set their price. In some industries, particularly those in which there are a few dominant competitors and many small companies, the top companies are in the position of holding price leadership roles where they are often the first in the industry to change price. Smaller companies must then assume a price follower role and react once the big companies adjust their price. When basing pricing decisions on how competitors are setting their price, firms may follow one of the following approaches:
• Below Competition Pricing - A marketer attempting to reach objectives that require high sales levels (e.g., market share objective) may monitor the market to insure their price remains below competitors. • Above Competition Pricing - Marketers using this approach are likely to be perceived as market leaders in terms of product features, brand image or

other characteristics that support a price that is higher than what competitors offer. • Parity Pricing - A simple method for setting the initial price is to price the product at the same level competitors price their product. Bid Pricing

Not all selling situations allow the marketer to have advanced knowledge of the prices offered by competitors. While the Internet has made researching competitor pricing a relatively routine exercise, this is not the case in markets where bid pricing occurs. Bid pricing typically requires a marketer to submit a price to a potential buyer that is sealed or unseen by competitors. It is not until all bids are obtained and unsealed that the marketer is informed of the price listed by competitors. Bid pricing occurs in several industries though it is a standard requirement when selling to local, national and international governments. In these situations the marketer’s pricing strategy depends on the projected winning bid price, which is generally the lowest price. However, price alone is only the deciding factor if the bidder meets certain qualifications. The fact that marketers often operate in the dark in terms of available competitor research, makes this type pricing one of the most challenging of all pricing setting methods.
4. Have you understood type questions: 1. You've just invented an innovative new product and are ready to launch it into the market. You will most likely price the product high. Your pricing strategy is probably based on: A. Distribution strategy B. Promotion strategy C. Lack of relevant competition D. Quality image 2. One of the advantages of break-even analysis is the ease with which costs can be verified to be fixed or variable True/ False 3. If the formula for elasticity results in a measure of elasticity (E) equal to 1, an increase in sales will exactly offset a decrease in price, and total revenue will remain the same True/ False

4. When Indian oil reduces the price, immediately Essar group lowers the price of petrol and diesel. This strategy is called: A. Predatory pricing B. Cost plus pricing

C. Market share pricing D. Status quo pricing 5. Economies of scale will help in lowering pricing by: A. B. C. D.
5. Summary Customers want the best value for their money, and thus they will almost always do a quality comparison and make purchases based on the best price for the best value. While the beat-the-competition pricing approach may work for some, there are many other complexities involved in establishing a pricing strategy. Many players have started to use multiple pricing methodology for getting across to variety of customers. Hence pricing is a major aspect of decision to be made by organizations. 6. Exercises

Large scale companies Small scale companies Both of them Neither of them

1. Now a days, retailers are resorting to EDLP pricing. What is this pricing? Conduct a study and explain the same. 2. Trace the role of Break even analysis in price fixation. 3. Do you think cost plus pricing will help organizations? Comment. 4. Elucidate the steps to be taken for pricing strategies for services in the current context with examples.

7. References 1. Everett Rogers, “ Diffusion of innovations”, Free Press, New York, 1996. 2. Geoffery Moore, “Crossing the chasm”, Harper Business, New York, 1991. 3. Laurence P. Feldman, “Buy In and Get Well' as a Product Launch Strategy”, University of Illinois at Chicago, Journal of Product Development and Management, 1996. 4. Govindarajan, V. and Anthony, R. (1983), How Firms Use Cost Data in Price Decisions, Management Accounting, July pp. 30-36. 5. Abrams, J. (1964). A New Method for Testing Pricing Decisions. Journal of Marketing, 28(1). 6. Fürderer, R., Hermann, A., and Wübker, G. (1999). In R. Fürderer, A. Hermann, amd G. Wübker (Eds.), Optimal Bundle Pricing: Marketing Strategies for Improving Economic Performance, chapter “Introduction to Price Bundling”. Berlin, Heidelberg: Springer Verlag.



In a study of SWOT analysis conducted at some branches of CSB, the following was found: Strengths Branches Bank deliver products and services through a variety of channels ranging from extensive branch network, extension counters, ATM centre, Internet banking and Mobile banking. There are 344 branches all over India. Non performing assets of the bank is reduced. i.e, Amount of Bad & doubtful debts reduced. Supreme customer services. Employees are shareholders hence more commitment from employees. Technology Implementation Weaknesses A major part of bank’s branch network is concentrated in southern India. More than 90% of the total branches are located in Southern India. Any disruption, disturbance or breakdown in the economy of these areas could adversely affect the result of bank’s business and operations. CSB does not have any trademark for the name ‘The Catholic Syrian Bank” along with the logo and the tag line ‘support all the way’ associated with the Bank. Bank may not be able to prohibit persons from using the said trademark to their advantage and any unfavorable use of such trademark may adversely affect bank’s goodwill and business. Human resource profile is weak. Cost involved in adopting technology. Reducing Spreads. CBS is not started yet Opportunities Bank may undertake mergers or acquisitions. Bank may make acquisitions and investments to expand customer base, acquire new service or product offerings or to enhance technical capabilities. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (The Securitisation Act). With the enactment of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (The Securitisation Act), banks have been empowered to attach assets of the defaulters without intervention of lengthy and time-consuming court procedures. This has suddenly turned the tables in favour of banks. Till recently, debt recovery was one of the most hopeless jobs in India due to archaic laws, which were totally tilted towards borrowers. Banks were in fact at the mercy of borrowers' willingness to pay. Thus in spite of the fact that most borrowing is against security, the value of which is often higher than the loan, banks still could not do much except cajole and tempt borrowers to pay up. Huge NPAs were burdening the entire banking sector. Due to the fear of increasing NPAs, their willingness to lend and expand business was also adversely affected. It is expected that over the next couple of years, banks will be able to significantly clean up their NPA mess due to the Securitisation Act. Threats Delay in the rollout of bank’s core banking solutions. CSB is in the process of implementing Core Banking Solution (“CBS”) and has already succeeded in bringing a

substantial number of branches under the CBS system. This technology initiative will allow to increase interconnectivity among branches and to provide many of the products and service. In the event of any delay in the roll-out of the CBS across entire branch network, it may be difficult to expand products and services. Competition. Regulatory System Cost. Questions: 1. Do you think the SWOT gives an option for improvement by the bank? Justify. 2. Develop a SWOT for another bank and compare the same with CSB.
2.MARKS AND SPENCER "There's no need to ask the price - it's a penny" was the proud claim of Marks and Spencer a hundred years ago. From the start, it had developed a unique position in its market - an emphasis on low price, wide range and good quality. Over time, the Marks and Spencer position has been steadily developed, along with its profitability. By the 1990s it looked unstoppable as a retailer, as it progressively expanded its product range from clothing to food, furnishings and financial services. The world seemed to be waiting for M&S to exploit, and despite disappointing starts in the US and Canada, it developed steadily throughout Europe and the Far East. Then, just like any star who has been put on a pedestal, the media began to savage the company. After a sudden drop in profits and sales during 1998, critics claimed that the company had lost its position in the market place. It appeared to be like a super tanker, ploughing straight ahead with a management that had become much less adaptable to change than its nimbler competitors. Many observers had commented on the fact that the company did not have a marketing department until 1998. Marketing, at least in terms of advertising the brand, had become so important to its competitors, but had never been high on Marks & Spencer's agenda. According to Media Monitoring Services, M&S's total media spending between Dec 1997Nov 1998 was just £4.7 million, almost a drop in the ocean compared to the spending of Sainsburys (£42.1m); Tesco (£27.5m); and Woolworths (£21.5m). While other retailers had worked hard on building a brand image, M&S has relied on the quality of its stock to do the talking. The argument was that everyone knew what they were getting with M&S underwear or shirts - good quality at fair, but not cheap, prices. Similarly with food, M&S's offering was about quality rather than price. M&S believed its customers knew what the brand stood for and advertising was much less important than ensuring that it could obtain the right products at the right price. In 1998, M&S looked to marketing to help turn around its performance, describing its new marketing division for UK retail as "a significant development in our retailing philosophy". Many suspected that M&S's conversion to marketing had been encouraged by the example set by the star of modern retailing, Tesco. There are many similarities between the problems facing M&S and those which

Tesco faced a decade previously. In the early 1990s Tesco was a brand which looked like it had seen better days. The retailer's format was tired, its stores poorly laid out and the positioning of the company was still based on its founder's principle of 'pile it high and sell it cheap'. Its arch-rival, Sainsbury's, was regarded as the more upmarket store for the middle classes, who shopped for quality food in a more pleasant environment. Since then, Tesco had innovated with improved store designs, petrol stations, coffee shops, a new fascia, the Tesco Clubcard and 24-hour store opening. The list of Tesco's marketing initiatives seemed to be unstoppable, in an attempt to keep one step ahead of its competitors. In contrast, M&S had failed to keep pace with customer service. In many issues of retail development, such as out-of-town shopping centres, Sunday opening and loyalty cards, it had lagged behind its main competitors. While it has stood still, the likes of Tesco and Sainsbury's marched ahead until there was no longer much that felt exceptional about the M&S shopping experience. Analysts argued that M&S had failed to make its store layouts help shoppers bring clothing together to make outfits. In a typical M&S store, all jackets would be located in one area and all cardigans in another, for example. Its competitors had made much greater progress in bringing together coordinated sets of clothing which would encourage shoppers to spend more. M&S has also been criticised for making things difficult for customers by not accepting payment by major credit cards. In response to its current troubles, the newly created marketing department of M&S launched its first national campaign for retail towards the end of 1998. The ads followed an initial attempt at regional TV advertising earlier in the year, which the company was said to be very pleased with. The newly appointed Chief Executive claimed "It's not that people don't like what we're selling, but that we haven't got the message across. There are an awful lot of people who love us for our knickers, but they don't love our home furnishings because they don't even know they are there." Many critics thought the problems were much more deepseated and blamed the store's problems on the fact that its autumn fashions were seen as dull and uninspiring, and out of touch with consumers' preferences. Greater authority was pledged to the marketing department when it came to new product design. In response to its pledge to listen to what its customers wanted, new designers were brought in to try and give the company's ranges more sparkle. The company even thought the previously unthinkable by proposing to stock manufacturers' own branded products, instead of relying entirely on M&S's own label products. If customers wanted to obtain variety at M&S, the new thinking was that the company must adapt and offer it. Another area identified for development was direct marketing of fashion products - an area where the company had begun to lag behind its rivals who had developed interactive web sites. Serious questions remained about the company. How quickly could it change in response to its changed environment? The company had not been known for speedy decision making, so probably a major structural overhaul was

essential before it could get down to the serious business of adapting to customers' changing needs. Also, there was a great danger of changing the company's position too far and too fast, thereby alienating its traditional customers without gaining sufficient new ones. As a warning of how not to change, M&S's rival Laura Ashley had repositioned itself so radically from its original format that it now failed to gain the support of any major group. M&S had itself tried to become more fashion conscious during the mid-1980s with similar effect, and had to make a hasty retreat to its traditional, more staid image. QUESTIONS 1. What do you understand by positioning, and what tools are available to Marks and Spencer to give it a positioning advantage? 2. There has been a lot of debate bout whether the existence of a marketing department can actually be harmful to services companies because it absolves everybody else of marketing responsibilities. What then, do you make of M&S's decision to introduce a marketing department.

3. MOBILE PHONES AND MARKETING One of the oldest principles of marketing is that sellers may sell features, but buyers essentially buy benefits. This is a distinction sometimes lost on technology led organisations, and the service sector is no exception. Recent experience of the UK’s largest telecommunications company, Vodafone Airtouch, illustrates how crucial it is to see service offers in terms of the benefits they bring to customers. The company was aware of extensive research which had found high levels of confusion among purchasers of mobile phones, with a seemingly infinite permutation of features and prices. With four main networks to choose from, dozens of tariffs and hundreds of handsets, it easy to see why buyers sought means of simplifying their buying process. Throughout the 1990s, Vodafone had positioned its UK network as superior technically to its competitors. Advertising focused on high coverage rates and call reliability. Vodafone was the UK's most popular mobile phone operator, with almost eight million customers, including 4.2 million Pay as you Talk customers. It had opened the UK's first cellular network on 1 January 1985and was the market leader since 1986. Vodafone's networks in the UK - analogue and digital - between them carried over 100 million calls each week. It took Vodafone more than 13 years to connect its first three million subscribers but only 12 months to connect the next three million. Vodafone had the largest share of the UK cellular market with 33% and had more international roaming agreements than any other UK mobile operator. It could offer its subscribers roaming with 220 networks in 104 countries.

Despite all of the above, Vodafone was aware that although it was recognised as an extremely strong business in the corporate marketplace, it was not so strong in the market for personal customers. Research indicated that personal buyers bought Vodafone for essentially rational reasons rather than having any emotional attachment to the brand. The success of the competing Orange network, which had developed a very strong image, was a lesson to Vodafone that many people did not understand many of the product features on offer, but instead identified with a brand whose values they could share. Vodafone recognised that it needed to be perceived as adding value to a consumer’s lifestyle?. Given the increasing complexity of product features, positioning on technical features was likely to make life more confusing for personal customers. An alternative approach was needed which focused on image and lifestyle benefits. The company decided to hire Identica – the consultancy that originally created the One 2 One brand – to revamp its brand communications and advertising strategy in an effort to make Vodafone more appealing to personal customers. Identica created a new ‘visual language’ for the Vodafone brand. Vodafone became involved in the biggest ever TV, press, poster and radio advertising campaign in its 15 year history. Employing a completely new style, the new advertising centred around the theme: 'You are now truly mobile. Let the world come to you' and featured a new end-line - Vodafone YOU ARE HERE. The campaign demonstrated how Vodafone's products and services were designed to make life easier for its customers. The campaign, created by BMP DDB, was worth £20 million over two months alone and ran for the whole year. Bringing meaning to the Vodafone brand and what it represented, a series of advertisements, through a range of media, showed how Vodafone let the world come to its customers, enabling them to be truly mobile. This portrayed how Vodafone always pioneered to make things more possible for its customers in a wire-free world. In press and poster executions, Vodafone used arrows photographed in various real life situations to depict its flagship services, e.g. a weather vane was used to illustrate the Vodafone Interactive weather service showing how weather information could be brought to customers through their mobile. Each advertisement again had the Vodafone YOU ARE HERE end-line. The arrows indicated the directional approach of Vodafone, letting the world come to the customer. Other executions illustrated cinema listing information, sports updates, share price information, international roaming and the Vodafone Personal Roadwatch 1800 service. The change in emphasis by Vodafone seemed to be timely. The mobile phone industry was facing a new wave of confusing product features hitting consumers, with the development of Wireless Access Protocol (WAP) phones and the newer “Third generation” phones due to be launched in 2001. It seemed inevitable that all of the competing networks would be offering confusing permutations of features with their service, so Vodafone calculated that, given similar levels of reliability and sophistication by all networks, a favourable image and lifestyle association would be an important source of competitive advantage. Given the

right image with existing technology, there would be a strong probability that consumers would migrate with the brand to the new technology when it arrived. Source: adapted from “Vodafone Image Shift”, Marketing, 4th May, 2000 and Vodafone Home Page, http://www.vodafone.co.uk QUESTIONS 1. 2. Identify the principal benefits to customers which derive from a mobile phone. What differences are likely to exist between market segments? Is a strong brand identity on its own a source of sustainable competitive advantage? To what extent must this be backed up by real product features? Are goods different to services in the way that a distinction is made between features and benefits?



Channel Design and Management
Unit structure: 1. Introduction 2. Learning Objectives 3. Channels of distribution 3.1. Types of channel members 3.2. Importance of channel management 3.3. Channel arrangements 3.4. Selection of channel members 3.5. Channel members Relationship 4. Have you understood type questions 5. Summary 6. Exercises 7. References


Distribution decisions are taken by companies basically to allow customers to gain access and purchase a marketer’s product. However, marketers may find that getting to the point at which a customer can acquire a product is complicated, time consuming, and expensive. Distribution decisions are relevant for nearly all types of products. In fact, while the Internet is playing a major role in changing product distribution and is perceived to offer more opportunities for reaching customers, online marketers still face the same distribution issues and obstacles as those faced by offline marketers.
2. Learning Objectives:

When you finish this unit, you should be able to: • Understand the type of channel members • Understand the importance of channel to organisations • Understand the channel arrangments • Understand the factors in arriving at the channel members • Understand the relationships among the channel members

3. Channels of Distribution: For marketers the distribution decision is primarily concerned with the supply chain’s front-end or channels of distribution that are designed to move the product (goods or services) from the hands of the company to the hands of the

customer. Obviously when we talk about intangible services the use of the word “hands” is a figurative way to describe the exchange that takes place. But the idea is the same as with tangible goods. All activities and organizations helping with the exchange are part of the marketer’s channels of distribution. Activities involved in the channel are wide and varied though the basic activities revolve around these general tasks: • Ordering • Handling and shipping • Storage • Display • Promotion • Selling • Information feedback 3.1. Type of Channel Members: Channel activities may be carried out by the marketer or the marketer may seek specialist organizations to assist with certain functions. We can classify specialist organizations into two broad categories: resellers and specialty service firms. Resellers These organizations, also known within some industries as intermediaries, distributors or dealers, generally purchase or take ownership of products from the marketing company with the intention of selling to others. If a marketer utilizes multiple resellers within its distribution channel strategy the collection of resellers is termed a reseller network. These organizations can be classified into several sub-categories including:
• Retailers – Organizations that sell products directly to final consumers. • Wholesalers – Organizations that purchase products from suppliers, such

as manufacturers or other wholesalers, and in turn sell these to other resellers, such as retailers or other wholesalers. • Industrial Distributors – Firms that work mainly in the business-to-business market selling products obtained from industrial suppliers. Specialty Service Firms These are organizations that provide additional services to help with the exchange of products but generally do not purchase the product (i.e., do not take ownership of the product):

• Agents and Brokers – Organizations that mainly work to bring suppliers

and buyers together in exchange for a fee. • Distribution Service Firms – Offer services aiding in the movement of products such as assistance with transportation, storage, and order processing. • Others – This category includes firms that provide additional services to aid in the distribution process such as insurance companies and firms offering transportation routing assistance. 3.2.Importance of Distribution Channels Distribution channels often require the assistance of others in order for the marketer to reach its target market. While on the surface it may seem to make sense for a company to operate its own distribution channel (i.e., handling all aspects of distribution) there are many factors preventing companies from doing so. While companies can do without the assistance of certain channel members, for many marketers some level of channel partnership is needed. For example, marketers who are successful without utilizing resellers to sell their product (e.g., Dell Computers sells mostly through the Internet and not in retail stores) may still need assistance with certain parts of the distribution process (e.g., Dell uses parcel post shippers such as FedEx and UPS). In Dell’s case creating their own transportation system makes little sense given how large such a system would need to be in order to service Dell’s customer base. Thus, by using shipping companies Dell is taking advantage of the benefits these services offer to Dell and to Dell’s customers. When choosing a distribution strategy a marketer must determine what value a channel member adds to the firm’s products. Several surrounding features can be directly influenced by channel members, such as customer service, delivery, and availability. Consequently, for the marketer selecting a channel partner involves a value analysis in the same way customers make purchase decisions. That is, the marketer must assess the benefits received from utilizing a channel partner versus the cost incurred for using the services. Benefits Offered by Channel Members • Cost Savings in Specialization – Members of the distribution channel are specialists in what they do and can often perform tasks better and at lower cost than companies who do not have distribution experience. Marketers attempting to handle too many aspects of distribution may end up exhausting company resources as they learn how to distribute, resulting in the company being “a jack of all trades but master of none.” • Reduce Exchange Time – Not only are channel members able to reduce distribution costs by being experienced at what they do, they often perform their job more rapidly resulting in faster product delivery. • Customers Want to Conveniently Shop for Variety – Marketers have to understand what customers want in their shopping experience. Referring

back to our grocery store example, consider a world without grocery stores and instead each marketer of grocery products sells through their own stores. • Resellers Sell Smaller Quantities – Not only do resellers allow customers to purchase products from a variety of suppliers, they also allow customers to purchase in quantities that work for them. Suppliers though like to ship products they produce in large quantities since this is more cost effective than shipping smaller amounts. • Create Sales – Resellers are at the front line when it comes to creating demand for the marketer’s product. In some cases resellers perform an active selling role using persuasive techniques to encourage customers to purchase a marketer’s product. • Offer Financial Support – Resellers often provide programs that enable customers to more easily purchase products by offering financial programs that ease payment requirements. These programs include allowing customers to: purchase on credit; purchase using a payment plan; delay the start of payments; and allowing trade-in or exchange options. • Provide Information – Companies utilizing resellers for selling their products depend on distributors to provide information that can help improve the product. High-level intermediaries may offer their suppliers real-time access to sales data including information showing how products are selling by such characteristics as geographic location, type of customer, and product location (e.g., where located within a store, where found on a website). 3.3. Channel Arrangements The distribution channel consists of many parties each seeking to meet their own business objectives. Clearly for the channel to work well, relationships between channel members must be strong with each member understanding and trusting others on whom they depend for product distribution to flow smoothly. For instance, a small sporting goods retailer that purchases products from a wholesaler trusts the wholesaler to deliver required items on-time in order to meet customer demand, while the wholesaler counts on the retailer to place regular orders and to make on-time payments. Relationships in a channel are in large part a function of the arrangement that occurs between the members. These arrangements can be divided in two main categories: independent and dependent. Independent Channel Arrangement

Under this arrangement a channel member negotiates deals with others that do not result in binding relationships. In other words, a channel member is free to

make whatever arrangements they feel is in their best interest. This so-called “conventional” distribution arrangement often leads to significant conflict as individual members decide what is best for them and not necessarily for the entire channel. On the other hand, an independent channel arrangement is less restrictive than dependent arrangements and makes it easier for a channel members to move away from relationships they feel are not working to their benefit. Dependent Channel Arrangement Under this arrangement a channel member feels tied to one or more members of the distribution channel. Sometimes referred to as “vertical marketing systems” this approach makes it more difficult for an individual member to make changes to how products are distributed. However, the dependent approach provides much more stability and consistency since members are united in their goals. The dependent channel arrangement can be broken down into three types: • Corporate – Under this arrangement a supplier operates its own distribution system in a manor that produces an integrated channel. This occurs most frequently in the retail industry where a supplier operates a chain of retail stores. Starbucks is a company that does this. They import and process coffee and then sell it under their own brand name in their own stores. It should be mentioned that Starbucks also distributes their products in other ways, such as through grocery stores and mail order. As we will see in more detail later, Starbucks is using a multi-channel structure to market their products. • Contractual – Under this arrangement a legal document obligates members to agree on how a product is distributed. Often times the agreement specifically spells out which activities each member is permitted to perform or not perform. This type of arrangement can occur in several formats including: o Wholesaler-sponsored – where a wholesaler brings together and manages many independent retailers including having the retailers use the same name o Retailer-sponsored – this format also brings together retailers but the retailers are responsible for managing the relationship o Franchised – where a central organization controls nearly all activities of other members • Administrative Arrangement – In certain channel arrangements a single member may dominate the decisions that occur within the channel. These situations occur when one channel member has achieved a significant power position. This most likely occurs if a manufacturer has significant power due to brands in strong demand by target markets (e.g., Procter &Gamble) or if a retailer has significant power due to size and market coverage (e.g., Shoppers-stop or Reliance Fresh). In most cases the arrangement is understood to occur and is not bound by legal or financial arrangements.

3.4. Factors involved in creating Distribution Channels Like most marketing decisions, a great deal of research and thought must go into determining how to carry out distribution activities in a way that meets a marketer’s objectives. The marketer must consider many factors when establishing a distribution system. Some factors are directly related to marketing decisions while others are affected by relationships that exist with members of the channel. Let us examine the key factors to consider when designing a distribution strategy.

Marketing Decision Issues

Distribution strategy can be shaped by how decisions are made in other marketing areas. Product Issues

The nature of the product often dictates the distribution options available especially if the product requires special handling. For instance, companies selling delicate or fragile products, such as flowers, look for shipping arrangements that are different than those sought for companies selling extremely tough or durable products, such as steel beams. Promotion Issues Besides issues related to physical handling of products, distribution decisions are affected by the type of promotional activities needed to sell the product to customers. For products needing extensive salesperson-to-customer contact to (e.g., automobile purchases) the distribution options are different than for products where customers typically require no sales assistance (i.e., bread purchases). Pricing Issues The desired price at which a marketer seeks to sell their product can impact how they choose to distribute. As previously mentioned, the inclusion of resellers in a marketer’s distribution strategy may affect a product’s pricing since each member of the channel seeks to make a profit for their contribution to the sale of the product. If too many channel members are involved the eventual selling price may be too high to meet sales targets in which case the marketer may explore other distribution options.

Target Market Issues A distribution system is only effective if customers can obtain the product. Consequently, a key decision in setting up a channel arrangement is for the marketer to choose the approach that reaches customers in the most effective way possible. The most important decision with regard to reaching the target market is to determine the level of distribution coverage needed to effectively meet customer’s needs. Distribution coverage is measured in terms of the intensity by which the product is made available. For the most part, distribution coverage decisions are of most concern to consumer products companies, though there are many industrial products that also must decide how much coverage to give their products. As we will see the marketer must take into consideration many factors when choosing the right level of distribution coverage. However, all marketers should understand that distribution creates costs to the organization. Some of these expenses can be passed along to customers (e.g., shipping costs) but others cannot (e.g., need for additional salespeople to handle more distributors). Thus, the process for determining the right level of distribution coverage often comes down to an analysis of the benefits (e.g., more sales) versus the cost associated with gain the benefits. There are three main levels of distribution coverage - mass coverage, selective and exclusive. Coverage - The mass coverage (also known as intensive distribution) strategy attempts to distribute products widely in nearly all locations in which that type of product is sold. This level of distribution is only feasible for relatively low priced products that appeal to very large target markets (e.g., see consumer convenience products). A product such as Coca-Cola is a classic example since it is available in a wide variety of locations including grocery stores, convenience stores, vending machines, hotels and many, many more. With such a large number of locations selling the product the cost of distribution is extremely high and must be offset with very high sales volume. • Selective Coverage - Under selective coverage the marketer deliberately seeks to limit the locations in which this type of product is sold. To the nonmarketer it may seem strange for a marketer to not want to distribute their product in every possible location. However, the logic of this strategy is tied to the size and nature of the product’s target market. Products with selective coverage appeal to smaller, more focused target markets (e.g., see consumer shopping products) compared to the size of target markets for mass marketed products. Consequently, because the market size is smaller, the number of locations needed to support the distribution of the product is fewer.
• Mass

• Exclusive Coverage - Some high-end products target very narrow markets

that have a relatively small number of customers. These customers are often characterized as “discriminating” in their taste for products and seek to satisfy some of their needs with high-quality, though expensive products. Additionally, many buyers of high-end products require a high level of customer service from the channel member from whom they purchase. These characteristics of the target market may lead the marketer to sell their products through a very select or exclusive group of resellers. Another type of exclusive distribution may not involve high-end products but rather products only available in selected locations such as company-owned stores. While these products may or may not be higher priced compared to competitive products, the fact these are only available in company outlets give exclusivity to the distribution. 3.5.Relationship Issues

A good distribution strategy takes into account not only marketing decisions, but also considers how relationships within the channel of distribution can impact the marketer’s product. In this section we examine three such issues: Channel Power A channel can be made up of many parties each adding value to the product purchased by customers. However, some parties within the channel may carry greater weight than others. In marketing terms this is called channel power, which refers to the influence one party within a channel has over other channel members. When power is exerted by a channel member they are often in the position to make demands of others. For instance, they may demand better financial terms (e.g., will only buy if prices are lowered, will only sell if price is higher) or demand others members perform certain tasks (e.g., do more marketing to customers, perform more product services). Channel power can be seen in several ways:
• Backend or Product Power – Occurs when a product manufacturer or

service provider markets a brand that has a high level of customer demand. The marketer of the brand is often in a power position since other channel members have little choice but to carry the brand or risk losing customers. • Middle or Wholesale Power – Occurs when an intermediary, such as a wholesaler, services a large number of smaller retailers with products obtained from a large number of manufacturers. In this situation the wholesaler can exert power since the small retailers are often not in the position to purchase products cost-effectively and in as much variety as what is offered by the wholesaler. • Front or Retailer Power – As the name suggests, the power in this situation rests with the retailer who can command major concessions from

their suppliers. This type of power is most prevalent when the retailer commands a significant percentage of sales in the market they serve and others in the channel are dependent on the sales generated by the retailer. Channel Conflict In an effort to increase product sales, marketers are often attracted by the notion that sales can grow if the marketer expands distribution by adding additional resellers. Such decisions must be handled carefully, however, so that existing dealers do not feel threatened by the new distributors who they may feel are encroaching on their customers and siphoning potential business. For marketers, channel strategy designed to expand product distribution may in fact do the opposite if existing members feel there is a conflict in the decisions made by the marketer. If existing members sense a conflict and feel the marketer is not sensitive to their needs they may choose to stop handling the marketer’s products. Overall Distribution Design

Mindful of the factors affecting distribution decisions (i.e., marketing decision issues and relationship issues), the marketer has several options to choose from when settling on a design for their distribution network. We stress the word “may” since while in theory an option would appear to be available, marketing decision factors (e.g., product, promotion, pricing, target markets) or the nature of distribution channel relationships may not permit the marketer to pursue a particular option. For example, selling through a desired retailer may not be feasible if the retailer refuses to handle a product. For marketers the choice of distribution design comes down to selecting between direct or indirect methods, or in some case choosing both. Direct Distribution System

With a direct distribution system the marketer reaches the intended final user of their product by distributing the product directly to the customer. That is, there are no other parties involved in the distribution process that take ownership of the product. The direct system can be further divided by the method of communication that takes place when a sale occurs. These methods are:
• Direct Marketing Systems – With this system the customer places the

order either through information gained from non-personal contact with the marketer, such as by visiting the marketer’s website or ordering from the marketer’s catalog, or through personal communication with a customer representative who is not a salesperson, such as through toll-free telephone ordering.

• Direct Retail Systems – This type of system exists when a product

marketer also operates their own retail outlets. Arrow, Zodiac and others are examples in this category. • Personal Selling Systems – The key to this direct distribution system is that a person whose main responsibility involves creating and managing sales (e.g., salesperson) is involved in the distribution process, generally by persuading the buyer to place an order. While the order itself may not be handled by the salesperson (e.g., buyer physically places the order online or by phone) the salesperson plays a role in generating the sales. • Assisted Marketing Systems – Under the assisted marketing system, the marketer relies on others to help communicate the marketer’s products but handles distribution directly to the customer. The classic example of assisted marketing systems is eBay which helps bring buyers and sellers together for a fee. Other agents and brokers would also fall into this category. Indirect Distribution System With an indirect distribution system the marketer reaches the intended final user with the help of others. These resellers generally take ownership of the product, though in the some cases they may sell products on a consignment basis (i.e., only pay the supplying company if the product is sold). Under this system intermediaries may be expected to assume many responsibilities to help sell the product. Indirect methods include: • Single-Party Selling System - Under this system the marketer engages another party who then sells and distributes directly to the final customer. This is most likely to occur when the product is sold through large storebased retail chains or through online retailers, in which case it is often referred to as a trade selling system. • Multiple-Party Selling System – This indirect distribution system has the product passing through two or more distributors before reaching the final customer. The most likely scenario is when a wholesaler purchases from the manufacturer and sells the product to retailers. Multi-channel or Hybrid System In cases where a marketer utilizes more than one distribution design the marketer is following a multi-channel or hybrid distribution system. The multichannel approach expands distribution and allows the marketer to reach a wider market, however, as we discussed under Channel Relationships, the marketer must be careful with this approach due to the potential for channel conflict. Since channel members must be convinced to handle a marketer’s product it makes sense to consider channel partner’s needs in the same way the marketer considers the final user’s needs. However, the needs of channel members are much different than those of the final customer. They are:

• Delivery – Resellers want the product delivered on-time and in good

condition in order to meet customer demand and avoid inventory out-ofstocks. • Profit Margin – Resellers are in business to make money so a key factor in their decision to handle a product is how much money they will make on each product sold. They expect that the difference (i.e., margin) between their cost for acquiring the product from a supplier and the price they charge to sell the product to their customers will be sufficient to meet their profit objectives. • Other Incentives – Besides profit margin, resellers may want other incentives to entice them especially if they are required to give extra effort selling the product. These incentives may be in the form of additional free products or even bonuses (e.g., bonus, free trips) for achieving sales goals. • Packaging – Resellers want to handle products as easily as possible and want their suppliers to ship and sell products in packages that fit within their system. For example, products may need to be a certain size or design in order to fit on a store’s shelf, or the shipping package must fit within the reseller’s warehouse or receiving dock space. Also, many resellers are now requiring marketers to consider adding identification tags to products (e.g., RFID tags) to allow for easier inventory tracking when the product is received and also when it is sold. • Training – Some products require the reseller to have strong knowledge of the product including demonstrating the product to customers. Marketers must consider offering training to resellers to insure the reseller has the knowledge to present the product accurately. • Promotional Help – Resellers often seek additional help from the product supplier to promote the product to customers. Such help may come in the form of funding for advertisements, point-of-purchase product materials, or in-store demonstrations. 4. Have you understood type questions:

1. In a simple economy of five producers and five consumers, there would be __________ transactions possible without an intermediary and __________ transactions possible with one intermediary. A. ten; twenty-five B. thirty; ten C. twenty-five; fifteen D. twenty-five; ten 2. What is the relationship that is seen among the manufacturers, wholesalers and retailers? A. Short term B. Medium term C. Long term D. Minor commitments

3. Large retailers such as Big Bazzar and Subhiksha are MOST likely to participate in which of the following channels? A. Producer, industrial distributors, retailers, consumers B. Producer, consumers C. Producer, wholesalers, retailers, consumers D. Producer, retailers, consumers 4. Louis Phillipe shirts are sold through department stores as well as in its own specialty shops. The company uses __________ as a channel strategy.
A. channel extension B. intermediary exclusion C. broker utilisation D. dual distribution 5. NIIT follows the franchising route. State whether it is True of False. 5. Summary India is home to six million retail outlets, including 2 million in 5,160 towns and four million in 627,000 villages. Reaching all these markets will be a stupendous task for the marketer. Hence he has to rely heavily on the middlemen. In spite of the difficulties and problems posed by the middlemen, it is imperative to keep them and have now become more organised. This makes logistics particularly for new players extremely difficult. It also makes new product launches difficult since retailers are reluctant to allocate resources and time to slow moving products. Critical factors for success are the ability to build, develop, and maintain a robust distribution network. An organised retail chain which is explained in the next section have set up systems for inventory management and quick servicing, thereby offering the opportunity for a company/supplier to reduce distribution cost by reducing intermediaries such as wholesalers/distributors and supplying directly to the warehouse of retail chain. 6. Exercises 1. What do you think of the distribution strategies adopted by the following companies? Comment on their strategies. A. Bata B. VIP luggages C. TI Cycles D. Essar Oil E. Cease Fire F. Zodiac garments 2. Explain the need for Franchising with some Indian examples. 3. Classify the vertical integration that is done by some of the Indian companies and explain the same. 4. Evaluate the role of company like VOLTAS in the distribution chain. 5. Describe the importance of player like Shopppers stop in the distribution system.

7. References 1. Rebecca Gardyn , “There’s No Place Like Home”, American Demographics, 22 (March 2000), pp. 40–42, 44–45. 2. Coughlan, Anne T., E. Anderson, Louis W. Stern and Adel I. El-Ansary. 2006. Marketing channels. 7th ed. Upper Saddle River, N.J.: Pearson Prentice Hall. 3. Van den Poel, D., Leunis, J. (1999), "Consumer acceptance of the Internet as a channel of distribution", Journal of Business Research, Vol. 45 pp.249-56. 4. Ford, D. - Understanding business marketing and purchasing (3rd ed.) : Thomson Learning, 2001

Retailing and Wholesaling

Unit structure: 1. Introduction 2. Learning Objectives 3. Retailing and Wholesaling 3.1. Retailer types 3.2. Concerns of Retailers 3.3. Retailer formats 3.4. Wholesalers benefits 3.5. Categorisation of Wholesalers 4. Have you understood type questions 5. Summary 6. Exercises 7. References

1. Introduction: Retailing is defined as selling products to consumers for their personal use. A retailer is a reseller (i.e., obtains product from one party in order to sell to another) from which a consumer purchases products. In the majority of retail situations, the organization from which a consumer makes purchases is a reseller of products obtained from others and not the product manufacturer. While consumers are the retailer’s buyers, a consumer does not always buy from retailers. For consumers the most important benefits relate to the ability to purchase small quantities of a wide assortment of products at prices that are considered reasonably affordable. For suppliers the most important benefits relate to offering opportunities to reach their target market, build product demand through retail promotions, and provide consumer feedback to the product

marketer. Wholesaling is defined as the activities involved in selling to organizational buyers who intend to either resell or use for their own purposes. A wholesaler is an organization providing the necessary means to: 1) allow suppliers (e.g., manufacturers) to reach organizational buyers (e.g., retailers, business buyers), and 2) allow certain business buyers to purchase products which they may not be able to otherwise purchase. 2. Learning objectives: When you finish this unit, you should be able to: • Understand the need for retailing and whlesaling. • Understand the various types of retailing and wholesaling. • Understand the issues involved in both forms . • Understand the relevance to the channel management.

3. Retailing:

Currently, India does not possess a very high percentage of organized retail segments. Even by the most optimistic estimates, the figure stands at less than 3%. But suddenly the biggest business houses of India have woken up to the great potential of this Rs. 1 lakh crore retail sector. Today the likes of Wal-Mart and Tesco are all set to debut in India. The rising per capita income of middle and lower middle class has propelled the growth of retail in India. They form a large chunk of people visiting the malls and food joints on any day. The emergence of many Tier-2 and Tier-3 cities has given the fillip to the development of organized retailing in India. The concepts of malls and super-stores have now gripped the entire nation and the number is increasing. The organized retail sector is expected to grow at 6% by 2010 and touch a retail business of $ 17 billion as against its current growth level of 3% which at present is estimated to be $ 6 billion, according to the study undertaken by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). It has emerged as one of the most dynamic and fast-paced industries with several players entering the market. Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centers, multistoried malls and huge complexes offering shopping, entertainment and food all under one roof.
3.1. Retailers Types: There are many ways retailers can be categorized depending on the characteristics being evaluated. For our purposes we will separate retailers based on six factors directly related to major marketing decisions: • target markets served • product offerings

• pricing structure • promotional emphasis • distribution method • service level

and one operational factor:
• ownership

However, these groups are not meant to be mutually exclusive. 3.1.1.Target Markets Served The first classification looks at the type of markets a retailer intends to target. These categories are identical to the classification scheme we saw in Part 8 when we discussed the levels of distribution coverage. • Mass Market – Mass market retailers appeal to the largest market possible by selling products of interest to nearly all consumers. With such a large market from which to draw customers, the competition among these retailers is often fierce. • Specialty Market – Retailers categorized as servicing the specialty market are likely to target buyers looking for products having certain features that go beyond mass marketed products, such as customers who require more advanced product options or higher level of customer service. While not as large as the mass market, the target market serviced by specialty retailers can be sizable. • Exclusive Market – Appealing to this market means appealing to discriminating customers who are often willing to pay a premium for features found in very few products and for highly personalized services. Since this target market is small, the number of retailers addressing this market within a given geographic area may also be small. 3.1.2.Products Carried

Under this classification retailers are divided based on the width (i.e., number of different product lines) and depth (i.e., number of different products within a product line) of the products they carry.
• General Merchandisers – These retailers carry a wide range of product

categories though the number of different items within a particular product line is generally limited (i.e., shallow depth). • Multiple Lines Specialty Merchandisers - Retailers classified in this category stock a limited number of product lines (i.e., narrow) but within the

categories they handle they often offer a greater selection (i.e., deep) than are offered by general merchandisers. For example, a consumer electronics retailer would fall into this category. • Single Line Specialty Merchandisers – Some retailers limit their offerings to just one product line, and sometimes only one product. This can be seen online where a relatively small website may sell a single product such as computer gaming software. Another example may be a small jewelry store that only handles watches. 3.1.3.Pricing Strategy Retailers can be classified based on their general pricing strategy. Retailers must decide whether their approach is to use price as a competitive advantage or to seek competitive advantage in non-price ways. • Discount Pricing – Discount retailers are best known for selling low priced products that have a low profit margin (i.e., price minus cost). To make profits these retailers look to sell in high volume. Typically discount retailers operate with low overhead costs by vigorously controlling operational spending on such things as real estate, design issues (e.g., store layout, website presentation), and by offering fewer services to their customers. • Competitive Pricing – The objective of some retailers is not to compete on price but alternatively not to be seen as charging the highest price. These retailers, who often operate in specialty markets, aggressively monitor the market to insure their pricing is competitive but they do not desire to get into price wars with discount retailers. Thus, other elements of the marketing mix (e.g., higher quality products, nicer store setting) are used to create higher value for which the customer will pay more. • Full Price Pricing – Retailers targeting exclusive markets find such markets are far less price sensitive than mass or specialty markets. In these cases the additional value added through increased operational spending (e.g., expensive locations, more attractive design, more services) justify higher retail prices. While these retailers are likely to sell in lower volume than discount or competitive pricing retailers, the profit margins for each product are much higher.

3.1.4.Promotional Focus

Retailers generate customer interest using a variety of promotional technique, yet some retailers rely on certain methods more than others as their principle promotional approach.
• Advertising – Many retailers find traditional mass promotional methods of

advertising, such as through newspapers or television, continue to be their

best means for creating customer interest. Retailers selling online rely mostly on Internet advertising as their promotional method of choice. • Direct Mail – A particular form of advertising that many retailers use for the bulk of their promotion is direct mail – advertising through postal mail. Using direct mail for promotion is the primary way catalog retailers distribute their materials and is often utilized by smaller local companies who promote using postcard mailings. • Personal Selling – Retailers selling expensive or high-end products find a considerable amount of their promotional effort is spent in person-to-person contact with customers. While many of these retailers use other promotional methods, in particular advertising, the consumer-salesperson relationship is key to persuading consumers to make purchase decisions. 3.1.5.Distribution Method Retailers sell in many different formats with some requiring consumers visit a physical location while others sell to customers in a virtual space. It should be noted that many retailers are not tied to a single distribution method but operate using multiple methods. • Store-Based Sellers – By far the predominant method consumers use to obtain products is to acquire these by physically visiting retail outlets (aka brick-and-mortar). Store outlets can be further divided into several categories. One key characteristic that distinguishes categories is whether retail outlets are physically connected to one or more others stores: o Stand-Alone – These are retail outlets that do not have other retail outlets connected. o Strip-Shopping Center – A retail arrangement with two or more outlets physically connected or that share physical resources (e.g., share parking lot). o Shopping Area – A local center of retail operations containing many retail outlets that may or may not be physically connected but are in close proximity to each other such as a city shopping district. o Regional Shopping Mall – Consists of a large self-contained shopping area with many connected outlets. • Non-Store Sellers – A fast growing method used by retailers to sell products is through methods that do not have customers physically visiting a retail outlet. In fact, in many cases customers make their purchase from within their own homes. o Online Sellers – The fastest growing retail distribution method allows consumer to purchase products via the Internet. In most cases delivery is then handled by a third-party shipping service. o Direct Marketers – Retailers that are principally selling via direct methods may have a primary location that receives orders but does not host shopping visits. Rather, orders are received via mail or phone.

Vending – While purchasing through vending machines does require the consumer to physically visit a location, this type of retailing is considered as non-store retailing as the vending operations are not located at the vending company’s place of business. 3.1.6. Service Level

Retailers attract customers not only with desirable products and affordable prices, but also by offering services that enhance the purchase experience. There are at least three levels of retail service: • Self-Service – This service level allows consumers to perform most or all of the services associated with retail purchasing. For some consumers selfservice is considered a benefit while others may view it as an inconvenience. Self-service can be seen with: 1) self-selection services, such as online purchasing and vending machine purchases, and 2) selfcheckout services where the consumer may get help selecting the product but they use self-checkout stations to process the purchase including scanning and payment. • Assorted-Service – The majority of retailers offer some level of service to consumers. Service includes handling the point-of-purchase transaction; product selection assistance; arrange payment plans; offer delivery; and many more. • Full-Service – The full-service retailer attempts to handle nearly all aspects of the purchase to the point where all the consumer does is select the item they wish to purchase. Retailers that follow a full-price strategy often follow the full-service approach as a way of adding value to a customer’s purchase.

3.1.7. Ownership Structure

Finally, we can categorize retailers based on the ownership structure of the business.
• Individually Owned and Operated – Under this ownership structure an

individual or corporate entity owns and operates one or a very small number of outlets. Single ownership of retail outlets most frequently occurs with small retail stores, though there are some cases, for instance in the automotive or furniture industries, where single ownership involves very large outlets. • Corporate Chain – A retail chain consists of multiple retail outlets owned and operated by a single entity all performing similar retail activities. While the number of retail outlets required to be classified as chain has never been specified, we will assume that anyone owning more than five retail locations would be considered a chain.

Structure – This classification covers large retailers predominantly operating in the non-store retail arena such as online, catalog and vending. • Contractually Licensed and Individually Operated – The contractual channel arrangement has lead to a retail ownership structure in which operators of the retail outlet are not the out-right owners of the business. Instead, the arrangement often involves a legal agreement in which the owner of the retail concept allows the operator to run the owner’s business concept in exchange for financial considerations such as a percentage of revenue. This structure is most often seen in retail franchising. 3.2.Concerns of Retailers Retailers are faced with many issues as they attempt to be successful. The key issues include:

• Corporate

Even though India has well over 5 million retail outlets of all sizes and styles (or non-styles), the country sorely lacks anything that can resemble a retailing industry in the modern sense of the term. This presents international retailing specialists with a great opportunity. Retailing in India is thoroughly unorganised. There is no supply chain management perspective. According to a survey by AT Kearney, an overwhelming proportion of the Rs. 400,000 crore retail market is UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is organised. As much as 96 per cent of the 5 million-plus outlets are smaller than 500 square feet in area. This means that India per capita retailing space is about 2 square feet (compared to 16 square feet in the United States). India's per capita retailing space is thus the lowest in the world. Just over 8 per cent of India's population is engaged in retailing (compared to 20 per cent in the United States). There is no data on this sector's contribution to the GDP. From a size of only Rs.20,000 crore, the ORGANISED retail industry will grow to Rs. 160,000 crore by 2005. According to AT Kerney, the total retail market, however, as indicated above will grow 20 per cent annually from Rs. 400,000 crore in 2000 to Rs. 800,000 crore by 2005 Given the size, and the geographical, cultural and socio-economic diversity of India, there is no role model for Indian suppliers and retailers to adapt or expand in the Indian context. The first challenge facing the organised retail industry in India is: competition from the unorganised sector. Traditional retailing has established in India for some centuries. It is a low cost structure, mostly owner-operated, has negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector. In contrast, players in the organised sector have big expenses to meet, and yet have to keep prices low enough to be able to compete with the traditional sector. High costs for the organised sector arises from: higher labour costs, social security to employees, high quality real estate, much bigger premises,

comfort facilities such as air-conditioning, back-up power supply, taxes etc. Organised retailing also has to cope with the middle class psychology that the bigger and brighter a sales outlet is, the more expensive it will be. The above should not be seen as a gloomy foreboding from global retail operators. International retail majors such as Benetton, Dairy Farm and Levis have already entered the market. Lifestyles in India are changing and the concept of "value for money" is picking up.
3.3. Retail Formats: These categories are designed to identify the primary format a retailer follows. In some cases, particular with the advent of the Internet, a retailer will be involved in more than one formats. • Mom-and-Pop – Represent the small, individually owned and operated retail outlet. In many cases these are family-run businesses catering to the local community. • Mass Discounters - These retailers can be either general or specialty merchandisers but either way their main focus is on offering discount pricing. Compared to department stores, mass discounters offer fewer services and lower quality products. • Warehouse Stores – This is a form of mass discounter that often provides even lower prices than traditional mass discounters. In addition, they often require buyers to make purchases in quantities that are greater than what can be purchased at mass discount stores. These retail outlets provide few services and product selection can be limited. Furthermore, the retail design and layout is as the name suggests, warehouse style, with consumers often selecting products off the ground from the shipping package. Some forms of warehouse stores, called warehouse clubs, require customers purchase memberships in order to gain access to the outlet. • Category Killers – Many major retail chains have taken what were previously narrowly focused, small specialty store concepts and have expanded them to create large specialty stores. • Department Stores – These retailers are general merchandisers offering mid-to-high quality products and strong level of services, though in most cases these retailers would not fall into the full-service category. While department stores are classified as general merchandisers some carry a more selective product line. • Boutique – This retail format is best represented by a small store carrying very specialized and often high-end merchandise. In many cases a boutique is a full-service retailer following a full-pricing strategy. • Catalog Retailers – Retailers like Otto Burlington’s have built their business by having customers place orders after seeing products that appear in a mailed catalog. Orders are then delivered by a third-party shipper.

• e-tailers - Possibly the most publicized retail model to evolve in the last 50

years is the retailer that principally sells via the Internet. There are thousands of online-only retail sellers of which Amazon.com is the most famous. These retailers offer shopping convenience including being open for business all day, every day. Electronic retailers or e-tailers also have the ability to offer a wide selection of product since all they really need in order to attract orders is a picture and description of the product. That is, they may not need to have the product on-hand the way physical stores do. Instead an e-tailer can wait until an order is received from their customers before placing their own order with their suppliers. This cuts down significantly on the cost of maintaining products in-stock. • Franchise – franchise is a form of contractual channel in which one party, the franchisor, controls the business activities of another party, the franchisee. Under these arrangements, an eligible franchisee agrees to pay for the right to use the franchisor’s business methods and other important business aspects, such as the franchise name. For instance, NIIT is a wellknown franchisor that allows individuals to use the NIIT name and methods to deliver food to consumers. Payment is usually in the form of a one-time, upfront franchise fee and also on-going percentage of revenue. While the cost to the franchisee may be quite high, this form of retailing offers several advantages including: 1) allowing the franchisee to open a retail outlet that may already be known to local customers, and 2) being trained in how to operate the business, which may allow the franchisee to be successful much faster than if they attempted to start a business on their own. For the franchisor, in addition to added revenue, the franchise model allows for faster expansion since funds needed to expand the business (e.g., acquiring retail space, local advertising) are often supported by the franchisee’s upfront franchise fee. • Convenience – As the name implies these general merchandise retailers cater to offering customers an easy purchase experience. Convenience is offered in many ways including through easily accessible store locations, small store size that allows for quick shopping, and fast checkout. The product selection offered by these retailers is very limited and pricing can be high. • Vending – Within this category are automated methods for allowing consumers to make purchases and quickly acquire products. While most consumers are well aware of vending machines allowing customers to purchase smaller items, such as beverages and snack food, newer devices are entering the market containing more expensive and bulkier products. These systems require the vending machine have either Internet or telecommunications access to permit purchase using credit cards. 3.4. Wholesaling benefits:

While many large retailers and even manufacturers have centralized facilities and carry out the same tasks as wholesalers, we do not classify these as wholesalers since these relationships only involve one other party, the buyer. Thus, a distinguishing characteristic of wholesalers is they offer distribution activities for both a supplying party and for a purchasing party. For our discussion of wholesalers we will primarily focus on wholesalers who sell to other resellers such as retailers. The benefits wholesalers offer to members of the channel can be significant and there are two particular benefits – one for suppliers and one for retailers - that are common to most wholesale operations and are worth further discussion: • Provide Access to Products - Wholesalers are in business to provide products and services to buyers (e.g., retailers) who either cannot purchase directly from suppliers because their purchase quantities are too low to meet the supplier’s minimum order requirements or, if they purchase directly from suppliers, will pay higher prices compared to bigger retailers who obtain better pricing by purchasing in greater quantities. Since wholesalers sell to a large number of buyers their order quantities may match those of large retailers thus allowing them to obtain lower prices from suppliers. Wholesalers can then pass these lower prices along to their buyers, which can enable smaller retailers to remain competitive with larger rivals. In this way transacting through wholesalers is often the only way certain retailers can stay in business. • Provide Access to Markets – Providing smaller retailers access to products they cannot acquire without wholesaler help offers a benefit for suppliers as well since it opens additional market opportunities for suppliers. Namely, suppliers can have their products purchased and made available for sale across a wide number of retail outlets. More importantly, for a company offering a new product, convincing a few wholesalers to stock a new product may make it easier to gain traction in the market as the wholesaler can yield power with the smaller retailers convincing them to stock the new product. Considering a wholesaler can serve hundreds of small retail customers, the marketing efforts persuading the wholesaler to adopt a new product may be far more efficient compared to efforts needed to convince individual store owners to stock the new product. 3.5. Categorize Wholesalers: Similar to how retailers can be categorized, wholesalers can also be classified by the width and depth of product lines they handle. The categories include: • General Merchandise – Wholesalers carrying a very broad line of products fall into the general merchandise wholesaler category. Like general merchandise retailers, the product lines these wholesalers carry may not offer many options (i.e., shallow depth). These wholesalers tend to market to the smaller general merchandise retailer such as smaller convenience or general stores.

• Specialty Merchandise – Wholesalers focusing on narrow product lines

but offering deep selection within the lines fall into the specialty merchandise category. Most specialty merchandise wholesalers direct their marketing efforts to specific industries. For example, specialty wholesalers supply such industries such as electronics, seafood, and pharmaceuticals. Wholesalers can be separated based on the importance promotion plays in generating demand for products handled by the wholesaler. Two basic categories exist:
• Extensive Promotion – The main job of some wholesalers is to actively

locate buyers. This occurs most often where a wholesaler is hired to find buyers for a supplier’s products or where the wholesaler is very aggressive in finding new customers for their business. Under these arrangements the most common promotional activity is personal selling through a sales force, though advertising may also be used. • Limited Promotion – Nearly all wholesalers engage in some promotional activities. Even in situations where a wholesaler dominates a channel and clients have little choice but to acquire products from the wholesaler, some promotion will still occur. For instance, at times a wholesaler may need to use their salespeople to persuade buyers to purchase in larger volume than normal or to agree to stock a new product the wholesaler is handling. In other cases, especially for wholesalers selling products for business use, promotional activities may be more extensive and include advertising and other promotional methods. Wholesalers can be distinguished by the number and depth of services they provide to their customers. • Full-Service – Wholesalers in this category mainly sell to the retail industry, and in most cases, require a strong, long-term retailer-wholesaler relationship be established. In addition to basic distribution services, such as providing access to an assortment of products and furnishing delivery, these wholesalers also offer customers additional services that aid retail store operations including offering assistance with: in-store merchandising; retail site location decisions (e.g., find best geographic location for a new store); store design and construction; back-end operations (e.g., payroll services); financial support; and many more. • Limited Service – Compared to full-service wholesalers, buyers dealing with limited service firms offer far fewer services. Most offer basic services, such as shipping and allow credit purchasing, but few offer the number of service options found with full-service wholesalers. • No Service – Some wholesalers follow a business model whose only service is to make products available for sale and only on a cash basis. In these instances, the buyer handles their own transportation of the product.

4. Have you understood type questions:

1. State whether True/ False Wholesaling activities must be performed during distribution of all goods, whether or not a wholesaling institution is involved. Wholesaling is an inefficient process that should be eliminated from the marketing channel in India. manufacturers prefer to deal direct with retailers in India. 2. By using a wholesaler, some firms have a distinct advantage because the specialised services performed by the wholesaler allow the firm to: A. focus on developing and manufacturing products that match consumers' needs and wants. B. focus on increasing production capacity and efficiency C. reduce manufacturing costs to retailers and provide quality merchandise to consumers. 3. A merchant wholesaler A. takes title and assumes risk and is generally involved in buying and reselling products. B. takes title and possession of goods and sells only to retailers. C. does not take title and possession of goods but may facilitate exchange between any two parties. D. deals exclusively with industrial products.
4. After shopping in the same store for nearly two hours, members of a family indulge in activities that they like viz., lunch, play and watch cinema and engage in these activities without leaving the store in which they have been shopping. They are most likely in a: A. B. C. D. superstore. hypermarket. department store. general merchandise retailer

5. An arrangement in which a supplier grants a dealer the right to sell products in exchange for some type of consideration is: A. licensing. B. retailing. C. franchising. D. wholesaling. 6. Location is extremely important to a retailer because: A. suppliers charge more to service stores in certain trading areas. B. a desirable location appeals to consumers' emotions and encourages them to buy. C. location is the major determinant of store image.

D. location determines the trading area from which the store must draw its customers. 7. The strategy of identifying an attractive market segment and serving it in a way that differentiates the retailer from others in consumers' minds is termed: A. product positioning B. niche retailing C. retail positioning D. merchandise policy

8. A retailer mails brochures and coupons to potential consumers who can then purchase products by mail or by phone. This illustrates which of the following methods of selling retail products? A. Direct-response marketing B. Party plan C. Catalogue marketing D. Speciality retailing

5. Summary

Retailing in India is growing at a faster speed as compared to wholesalers and would in all probability be replaced by retailers. almost all retail players (especially in food) have been region-specific. So whether it is FoodWorld, Nilgiris, Margin Free Market, Giant, Varkey's and Subhiksha in the South, Sabka Bazaar only in and around Delhi, Haiko and Radhakrishna Foodland which are Mumbai-centric; or Ahmedabad-based Adani, they have clearly battled with scalability. Choosing the right format is very important. RPG is having a combination of formats, emphasizing the most successful one during the implementation phase. A mix of supermarket and discount stores would most probably fit the Indian market although the type of format depends on the retailer's competitive advantage. The key is to switch between formats according to circumstances. For example, in Thailand, Tesco entered with hypermarkets (Tesco Lotus), then convenience stores; it now plans to expand with supermarkets. Casino entered with its Big C hypermarkets and is now launching a Leader Price discount store. In future, it will be retailing in an organised way that will develop as compared to any other middlemen. There will be multiple roles for retailers in the future also.

6. Exercises 1. Identify the issues wholesaling by visiting a nearby wholesaler and explain the future of wholesalers. 2. Wholesalers will not perish in India- comment. 3. Explain the steps to be taken in making a wholesalers mover forward to a retailer status. 4. Enumerate the functions done by a cash and carry outlet. 5. With suitable examples, explain the various retail formats in India.

6. Prakash has a group of farmers who provide him with a regular supply of fresh vegetables. He picks up their produce and has a regular route of grocers and restaurants who inspect and purchase quantities of the items he has on any given day. Prakash’s operation belongs to a specific type of wholesaler. Explain. 7. Compare and contrast Shoppers Stop with Big Bazzar.
7. References

1. Knapp Duane E. ( 2000 ) The Brand Mindset, McGraw Hill New York NY. 2. Christopher Knee (2002) Learning from experience: five challenges for retailers, International Journal of Retail and Distribution Management, Vol.30 No. 11, pp. 519-29. 3. ‘What’s eating Indian retailing?’ Business Standard , 10 July 2001. 4. Betancourt, R. & Gautschi, D. (1988) The economics of retail firms, Managerial and Decision Economics, 9, June, 133–142. 5. Macintosh, G. & Lockshin, L. S. (1997) Retail relationships and store loyalty: a multilevel perspective, International Journal of Research in Marketing, 14, pp. 487–497. INTEGRATED MARKETING COMMUNICATION
Unit structure: 1. Introduction 2. Learning Objectives 3. Integrated Marketing Communication 3.1. The need for IMC 3.2. Future of IMC 3.3. IMC Campigns 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction:

Marketing communication has become the backbone of the effective functioning of an organisation in the information technology era. Many companies are very much dependent on the services provided by these players in the market. This is only in the nascent stages and once the technology grows, it will also grow in the same proposition. We are now talking about going “global” which means every such organisation should start looking at the basic impediment of language problems. The complexities of business increase to the maximum and hence top management of research organisations should give more importance to cross cultural communication. What is considered okay in one society may be a taboo in another one. This is where tourism products can be affected. With the advent of sophisticated technologies, it becomes easier for a manager to communicate. We are now living in the era of interactive communication. A person at

Venice can easily talk with a person in Baroda through a video terminal. Technology has shaped the way communication is dealt.

2. Learning Objectives: When you finish this unit, you should be able to: • Understand the need and scope of IMC. • Understand the past marketing communications. • Understand the future of marketing communication and the role of IMC. 3. Integrated Marketing Communications: Today, communication goes beyond the specific promotion tools/marketing communication mix. The product’s design, its price, the shape and colour of its package and the stores sell it – all communicate something to buyers. Hence, although the promotion mix is the company’s primary communication activity, the entire marketing mix – promotion and product, price and place – must be coordinated for the greatest communication impact. Each brand contact will deliver a message – and their impact can be positive, negative or neutral on the consumer. Therefore, the company needs to deliver a consistent positive message at all contact points. This is possible when organizations develop a total marketing communication strategy that requires how all of a firm’s marketing activities not just promotion, communicate with its customers. Thus, the practice of Integrated Marketing Communication (IMC) was encouraged. Advocates of IMC argue that it is one of the easiest ways a company can maximize the return on its investment in marketing and promotion. This is achieved by building long-term relationship with the customers. The media both deliver the messages and provide ways for customers to send messages to the company. Customers respond to the brand messages by buying its products, asking questions, placing complaints, having repairs made and so on. Thus, brand experiences are created. Each brand experience either strengthens or weakens the brand relationship. Strengthened relationships lead to increased sales and profits, enhancing brand equity. Weakened relationships result in lost sales and lost customers, undermining brand equity. All through the years, the clients were leading the advertising agencies and the role of consumers was relatively insignificant in designing the brand communication. Also the agencies are doing what they feel comfortable to do. It is high time the agencies need to follow customers and create competencies in the customer’s preferences. If the customer is more convinced with the online information about the brand then the agency should focus on that media and should take the lead to integrate all other brand communications. Jagdish Seth and Rajendra Sisodia, in their ‘Four As of Marketing’, have emphasized on the integration of the various aspects of marketing to get the

desired results. They say, “Marketers cannot make a trade-off by building an acceptable product that is not affordable; or a product that is affordable but of cheap quality; or a product that is affordable and acceptable but cannot be accessed through appropriate distribution channels. Today, the biggest fights are between marketing, sales and customer support, not between marketing and engineering or sales and engineering. But having done with the marketing mix will not ensure necessary integration, even though these are the primary factors to be integrated. Even integrating the elements of marketing communication mix and coordinating all the brand communication will move half-way through. The companies have to go beyond these integrations. Identify the factors need to be integrated by throwing light into the firm’s internal and external environments. Here are a few Indian examplesBharti Airtel, seems to have integrated three factors viz., connectivity, affordability and innovation, which reinforce each other in bringing the expected results. The brand recognition, market share and the brand being in the top of consumers’ mind, point to the effective integration of the marketing mix and communication mix variables, which Airtel has already done. Their network coverage is wide and the service is offered at affordable rates. They are catering to the needs of almost all customers from the enterprise segment to the villagers. Life time prepaid is one way to make it affordable. This, along with the song catcher is their innovative measures in the industry. Thus, these three factors support each other to make Airtel in positioning it among the leaders in the industry. Kellogg India Ltd. was having their toughest time during their initial period. Through the pricing and availability in premium retail stores, Kellogg tried to convey the product quality to the target market. But there was lack of integration of the marketing variables which resulted in rejection of the product because of bad taste, in spite of the managerial, technical and financial support from the parent company. Their frantic media activity proved to be a failure when the consumers referred to their wheat and rice varieties as rice corn flakes and wheat corn flakes. Learning from these mistakes Kellogg restructured their marketing activities by integrating all the marketing elements. Indianised versions of the product were launched; different packs of varying quantities were introduced; media advertising along with symposiums, community oriented programmes, etc. were organized; sales inducers were identified as children and free gifts for them were offered; price reduction without compromising on the quality but by changing the packaging was made; products were made available in premium and small retail stores; one-serving sample packs were distributed. All these resulted in converting the experimenters to regular users and Kellogg made the India Cereal Breakfast market to grow to almost tribled its size in five years. 3.1. The Need For Ingrated Marketing Communication:

Marketing Communication Process: Communication is the process of influencing other's behaviour by sharing ideas, information or feeling with them. The two major participants in the communication are sender (marketer) and the receiver. The communication occurs : (a) when sender transmits the message, and (b) a receiver receives that message and (c) the sender and the receiver have a shared meaning.

ENCODING THE MESSAGE Ad display or Sales promotion

MESSAGE CHANNEL Advertising media or sales force

DECODING THE MESSAGE Compare to frame of reference, memory &


NOISE Competing advertisements, other sales people distractions

MESSAGE AS RECEIVED Knowledge, beliefs, or feelings

FEEDBACK Sales reports, attitude research RESPONSE Interest, desire, or purchase

Marketing communication process

Fundamentally, in the communication process there are five elements : (a) The message (b) The sender (c) The receiver (d) Communication channel, and (e) Feed back. The message which is being sent by the sender is being encoded into a transmitted form and then it is being passed through channel and then the message is being received and decoded. All stages can be affected by the noise—the factor which resist the flow. In

marketing communication the information source is an ‘idea’ to be communicated. It is then encoded into the transmittable message as sales promotion, advertisements and display. The channel is advertising media through which the message is transmitted. The receiver receives the messages and the message is decoded on the basis of his perception memory and experience. At various stages in the process, the message is being filtered, distorted or blocked by several barriers (noise), in the form of competing advertisements, other sales people distractions etc.

The objectives and importance of marketing communication can be understood by following points : Behaviour Modification : Promotion seeks to modify behaviour and thoughts and reinforces existing Behaviour. The company hopes to create the favourable image for itself and also to motivate purchases of the company's goods and services. Objective to Inform: All promotional communications are designed to inform the largest market about the firm's product or services. Informative promotion is more prevalent in the early stages of product life cycle of a product or service. It is necessary to increase the primary demand. The first thing which the customer needs is the information about the product itself, its features etc. It leads the customer in making more intelligent purchase decision. Objective to Persuade: It is designed to stimulate purchase. Sometimes firms want to create a positive image for the long term gain rather than the immediate purchase. Persuasion objective is the main objective when the product reaches the growth stage of its product life cycle because at that time the consumer formation objective and consumer retention objective both has to be taken simultaneously. Objective to Remind: It is used to keep the product brand name in the public's mind and is used in the maturity stage of the product life cycle. This type of promotion is used to refresh the memory of the target customers assuming that they know the product. Specific Objectives: The goal of promotion is to change the pattern of demand for a product by Behaviour modification - informing, persuading and reminding. In Economic terms, the basic purpose of promotion is to change the location and shape of the demand curve, means to shift the demand curve upward or to make a change even temporarily. For years, even for companies with good market shares, advertisement was the other name for marketing. Firms in the FMCG sector, including those who have understood the concept of marketing were practicing mass production and hence adopted mass marketing strategies. For selling highly standardized products to masses of consumers, these marketers developed effective mass media advertising techniques. It was their routine practice to invest huge amounts in the mass media with a single advertisement for a big number of customers. Mass media advertising enjoyed a dominant role among the promotion mixes of

consumer product companies those times. And only companies which were financially sound used expensive media to reach the market. This was sufficient in producing satisfactory results to the companies those times. But almost all of them faced the problem of the message getting lost because of the advertisement reaching the non-targeted people also. In spite of this, many companies proved themselves to be experts in mass marketing.

With the increase of competition and when the customers tend to gain more and more importance, marketers felt the necessity of maintaining healthy customer relationship. To enhance better relationship with their customers marketers advanced their objective from customer satisfaction to customer delight. Researches on consumer behaviour show the tendency of the consumer to stick on to the company which treats him individually. The consumer, as he is a human being, needs to be cared personally by the marketer. There are always prospects and customers who have question, complaints and suggestions which must be heard and given a timely and satisfying response. If this is the trend in the market, the marketers have to definitely tune their marketing activities accordingly. So, in order to delight their customers through building closer relationships with them, marketers are now moving away from mass markets and are focusing on more narrowly defined micro markets. This trend in marketing is supported by the improvements in information technology by providing more information about consumers at the individual and house hold levels. Also new technologies provide new communication avenues for reaching smaller customer segments with more tailored messages.

Both marketers and consumers have identified the benefits of feedback in communication. Consumers in the past were reluctant to respond to the marketers’ messages – whether it is advertisement or feedback coupons or even consumer surveys. The reason for these is partly due to not recognizing their own needs and partly because of distrust in the marketers. Many consumers believed that their suggestions and opinions will go to the marketers’ waste-bins without producing any positive results. But now, with the advent of new interactive communication channels, like internet, and realizing their role in marketing, many consumers are letting the marketer know about their specific needs, opinions and complaints in addition to responding to the feedback profile. Many of these responses are quicker and the marketers are also reacting to them in a faster pace than before. These changes in the consumer market have forced many marketers to customerise their organizations. Levi’s is now able to produce customized jeans based on a person’s measurements. P&G, on its reflect.com site, allows a person to specify needs for a shampoo by answering a set of questions, and then formulates a shampoo for that person. Now, promotion results through two way communication. Encouraging communication from the customers resulted in using the term ‘marketing

communication’ in place of ‘promotion’. The changed scenario has made the companies analyse their marketing communication activities. Messages delivered via different promotional approaches (marketing communication mix), such as advertising, personal selling, sales promotion, public relations and direct marketing – all become part of a single message about the company. Conflicting messages from these different sources can result in confused company images and brand positions. But in most cases companies fail to integrate their various communication channels. Mass advertisements say one thing, a sales promotion sends a different signal, the product label creates still another message, company sales literature says something altogether different, and the company’s website seems out of harmony with everything else. This is obviously discouraging. The problems are because of the different sources for each of these communication – advertising messages are planned and implemented by ad agency or ad department; PR is the responsibility of the PR department or another agency; personal selling messages are set by sales department and the like. All these will finally see the confused consumers moving away from the brand. Search for new communication strategies Advertising It is a paid form of non-personal mass -communication by an identified sponsor. The mass media used include print media, direct mail, audio visual media, bill boards etc. Sponsors may be non-profit organization, a political candidate, a company or an individual. Advertising is used when sponsors want to communicate with a number of people who cannot be reached economically and effectively through personal means. Merits - Can reach many consumers simultaneously - relatively low cost per exposure. - Excellent for creating brand images. - High degree of flexibility and variety of media to choose from - Can accomplish many different types of promotion objectives. Demerits - Many consumers reached are not potential buyers (waste of promotion money) - High visibility makes advertising a major target of marketing critics. - Advertising exposure time is usually brief - Advertisements are often quickly and easily screened out by consumers. Personal Selling Personal selling is face to face contact between a seller’s representative and those people with whom the seller wants to communicate. Non-profit organization, political candidates, firms and individuals use personal selling to communicate with the public. Merits - Can be the most persuasive promotion tool; sales people can directly influence purchase behaviours.

- Allows two way communication. - Often necessary for technically complex products. - Allows direct one-on-one targeting of promotional effort. Demerits - High cost per contact. - Sales training and motivation can be expensive and difficult. - Personal selling often has a poor image, making sales force recruitment difficult. - Poorly done sales presentations can hurt sales as well as company, product and brand images. Sales Promotion Sales promotion includes activities that seek to directly induce or indirectly serve as incentives to motivate, a desired response on the part of the target customers company sales people and middle men and their sales force. These activities add value to the product. In sales promotion the activities like discounts, gifts, contests, premiums, displays and coupons are included. Some types of Sales Promotion - Temporary price reductions via coupons, extended, interest free or low interest credit; refunds, rebates; price off deals, combination offers; bonus packs, multiple packs; other methods. - Promotions designed to get trials, such as coupons, refunds, rebates, price off deals, bonus packs. Samples, offers, trial sizes, free trials, special guarantees, premium, self liquidating premiums, reusable containers, and souveniers. - Business, industrial, trades and magazines and technical papers; Journals, publications. - Directories and buyers guides. - Trading stamps redemption coupons, divided coupons and continuity premiums. - Displays, point of purchase, show windows, and in store signs and banners. - Catalogs, book lets, brochures, bulletins, post card, price lists, flyers/handouts, etc - Sponsorship, special events and charity linked sales promotions. Merits - Excellent approach for short term price reductions for stimulating demand. - A large variety of sales promotion tools to choose from. - Can be effective for changing a variety of consumer behaviours. - Can be easily tied in with other promotional tools. Demerits - May influence primarily brand-loyal customers to stock up at lower price but attract few new customers. - May have only short term impact. - Over use of price related sales promotion tools may hurt brand image and profits. - Effective sales promotions are easily copied by competitors.

Publicity Publicity is news carried in the mass media about a firm and its products, policies, personnel or actions. The unique feature about the publicity is that it is a non-paid form of promotion, Organizations frequently provide the material for publicity in the form of news, releases, photographs and press conferences. Merits - As "free advertising", publicity can be positive and stimulate demand at no cost. - May be perceived by consumers as more credible, because it was not paid for by the seller. - Consumers may pay more attention to these messages, because they are not quickly screened out as are many advertisements. Demerits - Publicity is not always possible because it is not in the hand of the seller. - Limited repetition of publicity messages. - Publicity can be negative and hurt sales as well as company product, and brand images. - Company cannot completely control the content of publicity messages. Public Relations It is a planned effort by an organization to influence the attitudes and opinions of a specific group by developing a long term relationship. The target may be customers, stock holders, a government agency or a special interest group.
Characteristics of Promotional Types

Audience Message Cost

Mass Uniform Low per viewer or reader

Mass Uniform None for media space and time; can be moderate costs for press releases and promotional materials but not met by the advertiser No formal sponsor Low None (controlled by media) High To reach a mass audience with an independently reported message

Personal selling Sales promotion
Small (one-to-one) Varies Specific Varies High per customer Moderate per customer

Sponsor Flexibility Control over content and placement Credibility Major goal

Company Low High

Company High High

Company Moderate High

Moderate To appeal to a mass audience at a reasonable cost, and create awareness and

Moderate To deal with individual consumers, to resolve questions, to close sales

Moderate To stimulate Short-run sales, to increase impulse purchases

favourable attitudes

In this new communication environment, marketers need to rethink the roles of various media and promotion mix tools. They have to put in efforts to create a consistent and coordinated communication programme. Today, although television, magazines, and other mass media remain very important, their dominance is now declining. Many companies recognize the value of being customer focused, of integrating their marketing efforts, and of no longer depending on traditional advertising. Fragmentation of mass markets has reflected in media fragmentation with the effect of more focused media that better match today’s targeting strategies. Now, advertising appears to be giving way to other elements of the promotion mix. Today, media advertising captures only 26% of total promotion spending. The rest goes to other marketing communication mix elements, which focus on individual consumers and trade segments. To quote Philip Kotler, companies are doing less broadcasting and more narrowcasting. For most companies, the question is not whether to communicate but rather what to say, to whom and how often. They have recognized that to achieve their objectives they must ask not only ‘how can we reach our customers?’ but also ‘how can our customers reach us?’. Even the best practitioners of mass marketing noticed that a single marketing communication tool rarely gives the maximum result. For promotion to be effective, each element of the MC mix should reinforce the other through a well planned communication programme. Marketers understood that a combination of tools will give the desired output – maximum sales. Now a days consumers are being exposed to a greater variety of marketing communications from and about the company from a variety of sources. But unlike the marketers, customers do not distinguish between the message sources of a company. In the consumer’s mind, advertising messages from different media such as TV, magazines or online sources blur into one. This again necessitates the messages send by a company to be consistent and coordinated so that the consumer is not confused. 3.2. Future of marketing communication: Following are the possible ways of looking at how marketing communication is going to be in the near future: 1. Earlier only one promotional tool was used but now integrated communication strategy is being increasingly adopted which heavily relies on the use of information technology with the advent of Internet. 2. Electronics has taken a major share of the business communication and it is expected that communication possibilities, which are fast and cheap is, expected to help the business sector. 3. Due to the increasing complexities in dealing with the trade unions and other workers associations, it is now considered that informal communication is





also to be given importance. When we take into consideration the influence of domestic partners of tourism and the local dialects as well as ecotourism participants it becomes more important. Organisations in future will allow for this communication openly. Every sales people will have to be fully conversant in the case of communication and are expected to give feedback to the management. If we take the case of Kerala, of the total number of tourists visiting per year, domestic tourists account for not less than 75%. At this juncture there is a need for a hardsell in this market. All those who are part of the Travel and tourism wing have to get their act better. Hence they should continuously upgrading or changing the report formats. Letter writing style to overcome structuing and monotony and with the use of multimedia and laptop computer, there is a possibility of changes happening in the basic mindset with which they are going to be looked. Since technology has pervaded every aspect of life, new technological devices will help the sales people or ‘Tailor-made’ devices for the sales people will be introduced for effective communication. With the arrival of Internet, sales people are expected to be conversant on the same as the tourists are becoming more Internet savvy. More organisations will start to utilise the services of ‘missionary’ sales people. This will help in developing a good information base for the company with its clients. Direct marketing will have to be strengthened in the years to come since the competition is increasing. As most of the people as what happens in “Dubai shopping festivals” the ultimate beneficiary is directly contacted for all the benefits offered. To overcome competition, well-written communication sent by direct marketing can have a positive result in the market. We are entering an era where ‘paperless’ or ‘fileless’ offices are going to be in vogue. This means that all correspondence will be undertaken via the networking of computers. The employees of an organisation especially in the case of Tourism and travel agencies and other related areas need to know about these aspects.

The Kerala State Government understanding the importance has sanctioned an amount of Rs 18 lakh for the development of the Kerala Tourism Web site. According to an official release, the amount will be spent on improving the site, www.keralatourism.org. The Tourism Department's site, launched in 1998, has already come in for recognition from several information technology magazines, the release adds. The appearance of the Web site, which contains over 1.2GB of information on the State, was recently revamped. In addition to pictures and video clips on Kerala, the site also contains a gallery of audio clips that showcases sounds of Kerala including traditional folk songs. With Hyderabad emerging as a major information technology destination, the demand for rooms has been on the rise. Indian Hotels manages the operations of all the three hotels under the Taj brand — Taj Krishna, Taj Bandra and Taj Residency. Indian Hotels is now focussing on becoming asset-light, owning less properties. This means that some of its future undertakings would be owned by its

subsidiaries or by way of joint ventures. With more information technology being added, this will be a major attraction.

There is escalation in the cost of media and there is a clutter of competitive activity all over the market. When more companies fight for the customers’ money, those who put across the message alone stand in getting profitability. By constantly contacting the customer and packaging the product, promoting differently each time, the actual cost of promotion comes down. Constant communication creates a building up effect. The use of a combination of marketing communication techniques with the use of information technology gives more opportunity to increase the number of times the product/brands are known to the customer. The build-ups effect of delivering the same message through several media or techniques not only increases the efficiency of the transmission of message but is the sum total of integrated marketing communication. For example, in the tourism market, Singapore tourism has covered a place in the minds of the customer. These communications spanning TV and cinema commercials, newspaper advertising and magazine advertising, indoor promotion and many other techniques always delivers the same core message. In integrating any campaign, proper positioning of the product in the mind of the consumer, the personality and proposition need to clearly understood. It is a commonplace argument now about the use of information technology in the field of marketing. With the advent of Electronic Data Interchange (EDI), now even retail outlets can target their customers without many problems. Developments in the area of infrastructure and attraction will boost the consumer confidence in tourism. The Internet is going to be a boon in the communication front. The use of digital technology as like digital theatre systems have made people flock to the cinema halls which earlier were considered to be a declining industry. As part of tourist attractions, now Ramoji film city has got into the guide’s schedule. This gives more room for the marketer to effectively target, differentiate and position his product and services in the market place. We have already witnessed the evolution of virtual market places and it is expected that the e-commerce will provide fillip to industry to a large extent. People today are prosperous and they want to spend on leisure. They are tired of visiting the same place and want to explore new areas. Tourism sector should take note of this aspect. In India, middle class tourists form a major component in the tourism circuit. If a person in Haryana wants to explore the tourist destinations of Karnataka, he/she should be given adequate facilities. He should be able to know all the aspects through the Internet. Infrastructure at the destination should be good.

3.3. IMC Campaigns:
1. According to DM Asia,LG Electronics has launched a new global integrated marketing campaign focusing on the company's 'Full HD' 1080p flat-panel high-definition televisions (HDTVs). The global campaign will be


first seen in the United States and will roll out to more than 70 countries worldwide over the next month. LG will invest approximately $25m in the US and more globally to highlight the ultimate viewing experience delivered by LG's 1080p liquid crystal display (LCD) and plasma HDTVs. Key elements of the campaign include a series of broadcast, print, outdoor and online advertisements in three creative concepts all featuring an LG Red Couch, which serves as a symbol of the consumers' all-encompassing high-definition viewing experience. The campaign also incorporates LG's corporate sponsorship of the Cannes Film Festival and targeted public relations activities highlighting LG's 1080p Full HD technology and stylish flat-panel designs. Coca-cola India has launched the following campaign:

a. Campaign designed to renew the focus on the thirst-quenching, no nonsense, and unpretentious attitude of the brand- ‘Sprite Bhujaye Pyaas…Baaki All Bakwaas . Clear Hai ?!’ b. The special online “Sprite-itude” zone provides Sprite consumers unlimited opportunities for online gaming, express creativity and to do their own thing etc. c. Strategy includes building a stronger connect with the youth, who prefer Sprite because of its unmatched thirst quenching ability. d. Integrated marketing communication program to also include mass media advertising on all leading TV channels, complimented by a range of on the ground initiatives including road shows and contests across all key markets e. New advertising campaign conceptualized by Ogilvy & Mather and has been shot in Leh- Ladhak 4. Have you understood type questions

1. A mature product like Tide detergent should use ________ promotion to keep the brand name in the public's mind. A. Influence B. Reminder C. Informative D. persuasive 2. A brand like Tide detergent should use ________ promotion to keep the brand name in the public's mind
A. informative B. influencive C. reminder D. persuasive 3. Public relations will have its greatest impact in the ________ stage of the AIDA model. A. Attention B. Desire C. Impact D. Action

4. Do you think above the line promotion will alone work in IMC? Yes/ no

5. Firms in the FMCG sector, including those who have understood the concept of marketing were practicing mass production and hence adopted mass marketing strategies. Yes /No
5. Summary The success story of Samsung India Electronics Ltd. speaks the benefit of integrating wide variety of electronic items and innovation with the marketing mix elements. In 2002, ICC sold the marketing rights of cricket matches from 20022007 to LG Electronics, Hero Honda, Pepsi and South African Airlines. Consequently, Samsung was barred from using cricket celebrities in its ad campaigns during cricket tournaments to be conducted between 2002 and 2007, as it is the direct competitor of LG Electronics. This was a major setback for the company, since they have already signed seven celebrity cricketers as their brand ambassadors (Team Samsung). But Samsung proved to keep up its growth in the Indian market through its integrated efforts. They offer almost all electronic items (unlike their LG and Whirlpool) from audio music players to air conditioners. They launched the ‘Bio’ range of home appliances. The company have with them products in the premium range as well as for price-conscious customers. Promotional efforts such as phod ke dekho (during deepawali 2001), dabake jeeto (during World Cup 2002) were supported by media advertisements with brand ambassador Tabu. Also they conducted road show showcasing their latest high tech digital products and customer relations based direct marketing programmes. All these integrated communication efforts helped Samsung in creating a strong brand image in the market. This indicates the importance of IMC. 6. Exercises 1. You are the brand manager of a national consumer brand whose very large target market is dispersed around the country. You have ample resources to communicate with the consumer. What will be your integrated marketing communication methodology? 2. As a brand manager of LG in India, devise a IMC strategy for them. 3. Do you think IMC will replace the major promotional tools? Justify. 4. What according to you is the most favourable campaign for consumer durables? Cite examples. 5. Discuss the evolution of IMC in India. There are many agencies which have become full fledged MNC agencies like Grey World wide which have done enough of IMC campaigns. Identify any three such campaigns and explain their benefits to organizations. 7. References 1. C. Raja Rajeshwari , “TajGVK Hotels: Buy”, The Hindu businessline, July 27, 2003

2. Devkamal Dutta, “Building and sustaining competitive advantage in the knowledge-era –can information technology help?”, The journal of Indian Management and Strategy, July- September, 1999, pp.10-12. 3. Simon George, “Lifestyle marketing”, Indian Management, March 2000, pp.81-85. 4. Bangalore Bureau, “ Karnataka Govt, BIAL to sign pacts for land lease tomorrow”, The Hindu businessline ,Jan. 19, 2005 5. Kerala Bureau, “Kerala tourism Web site to be updated”, The Hindu businessline, June 19, 2003. 6. Delhi Bureau, “A silver lining for tourism sector”, The Hindu businessline ,Feb 27, 2003. 7. Jim Bessen, “Riding the marketing information wave”, Harvard Business Review, September-October 1993, pp.156-160. 8. Robert Blatberg and John Deighton, “Interactive marketing: exploiting the age of addressability”, Sloan Management Review, Fall 1991, pp.10-14. 9. Vinita Chawla, “Indian IT industry”, Computer World, No.17, 1998, pp. 512. 10. Prathajit, :LG launches integrated marketing communication”, DM Asia, 03/05/2007.

ADVERTISING Unit structure: 1. Introduction 2. Learning Objectives 3. Advertising Management 3.1. History of advertising 3.2. Benefits of advertising 3.3. Advertising classification 3.4. Ethical and social issues in advertising 3.5.Five M’s of advertising 3.6. Advertising agencies 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction:

Advertising is one of the form of mass selling, employed when the use of direct, person-to-person selling is not at all practical, impossible, or simply inefficient. It is to be distinguished from other activities intended to persuade the public, such as propaganda, publicity, and public relations. Advertising techniques range in complexity from the publishing of simple, straightforward notices in the classified advertisement columns of

newspapers to the concerted use of newspapers, magazines, television, radio, direct mail, and other communications media in the course of a single advertising campaign. From its unsophisticated beginnings in ancient times, advertising has burgeoned into a worldwide industry. Modern advertising is an integral segment of urban industrial civilization, mirroring contemporary life in its best and worst aspects. Advertising is an indicator of the growth of civilisation and a pointer of attempts at its betterment and perfection. It is a part of our social, cultural and business environment. Not only advertising mirrors this environment but also it affects and gets affected by our style of living. In today's environment, not only are advertisers closely examined by the target audiences for whom the advertisements are meant, but by society in general. Advertising is considered to be costly but with its reach, it gives the return to the employer in a very short span of time.
2. Learning Objectives: When you finish this unit, you should be able to:

• • • • •

Understand the use and issues in advertising Understand the five m’s of advertising Understand the relevance of advertising to marketing Understand the relevance of advertising agencies Understand the ways of advertising the product

3. Advertising management:

Advertising is the one of the major industries across the world. As long as media is there, advertising, advertisers and advertising agencies will be there. 1. American Marketing Association proposed the following definition of advertising : "Advertising is any paid form of non-personal presentation and promotion of ideas, goods, and services by an identified sponsor." 1. John S Wright, Willis L Winter, and Sherilyn K Zeigler defined Advertising as : "Advertising is controlled, identifiable information and persuasion by means of mass communications media." 2. John J Burnett defined Advertising as : "Advertising is the non-personal communication of marketing related information to a target audience, usually paid for by the advertiser, and delivered through mass media in order to reach the specific objectives of the sponsor." These definitions have used certain words or phrases that need some elaboration. "Any paid form": The paid aspect of the definition reflects the fact that the space or time for an advertising message generally must be bought. "Non-personal presentation and promotion": In case of personal selling, there is face-to-face presentation and promotion of product or service by the salesperson. Advertising is totally non-personal, offering no personal interaction,

delivered through media and often viewed as intrusion. Of course, advertising may help the salesperson in his/her selling efforts. "Ideas, goods, and services": Advertising, being a powerful mass communication tool, is used not only to present and promote goods and services with the intent of selling them, it is also increasingly used to further the goals of public interest and social causes. "An identified sponsor": These words clarify the difference between advertising and propaganda. Just like advertising, propaganda attempts to present certain opinions and ideas, which may influence the attitudes and actions of people. However, the source of propaganda mostly remains unknown and hence its authenticity is often doubtful. People in general do not know who the originator of these opinions and ideas is. In case of advertising, the sponsor of ideas or opinions is known. "Controlled": The advertiser controls the content of advertising message, its time, and direction. In case of publicity, it is not under the control of the advertiser. The story may be presented in a manner not to the liking of the advertiser, or not at a time chosen by the advertiser. "Mass communications media": The broad group of audience can best be reached by mass media such as newspapers, magazines, television, radio and outdoor displays. This qualification separates advertising and personal selling. The multiple messages are delivered to thousands of people simultaneously. 3.1. History of Advertising: The development of technology and research has led to increased sophistication in advertising in recent decades. Modern advertising is largely a product of the twentieth century. During ancient and medieval times advertising was crude if measured by present day standards. However, the basic reason for using advertising was the same then as it is now. The recorded history of advertising covers a period of about 5000 years including the modern satellite and Internet age. Our knowledge of advertising in ancient times is in fragments. The urge to advertise has been a part of human nature since ancient times. The diggings of archeologists in the countries rimming the Mediterranean sea have unearthed a Babylonian clay tablet of about 3000 B C, bearing inscription for an ointment dealer, a scribe and a shoemaker. Romans and their predecessors knew that "it pays to advertise." Papyri found in the ruins of Thebes (Egypt) show announcements' offering rewards for the return of runaway slaves (about 3000 B C). Before the invention of printing, there were three forms of advertising : i. Trademarks : Craftsmen in early times wanted to be identified for their skills and placed their individual marks on goods they crafted. Buyers learnt to look for the distinctive mark just as we look today for brand names and trademarks on products. ii. Signs : Phoenicians and other traders painted commercial messages on prominent rocks along trade routes that they used. These messages highly praised the products that were for sale. This is an example of ancient outdoor advertising.

iii. Town criers : The system of town criers was perhaps present in all developed civilisations of ancient world. In Greece during the Golden Age, town criers were paid to go around spreading news and making announcements in the streets of Athens. Epics and history books about ancient India reveal that the system of town criers was used by the rulers in India to inform the public of various public interest matters. In rural India, town criers were used till 1950s. The first known printed advertisement in the English language appeared nearly forty years after the invention of the movable type writer. William Caxton of London printed the first advertisement. The first ad in any language to be printed on a circulated sheet appeared in German news pamphlet in about 1525. The ad praised the virtues of a mysterious drug. It was from such beginnings that the printed newspaper emerged and the first printed newspaper in English came out in 1622, the Weekly News of London. The first advertisement appeared in an English newspaper in 1625. Advertising as we know it really had its beginnings in mid 19th century. Volney B Palmer was the first advertising agent who established an office in Philadelphia. For a fee, he worked as an agent of the newspapers numbering about 1400. He sold space to advertisers throughout the country. He did not provide any creative or planning services to clients, except the media selection. During the 1920s, modern marketing research entered the world of advertising. As a result of this new development, advertising of this period started stressing on the outcome of consumer purchases such as health, happiness, status and love, etc. Advertisements contained bold headline, artwork, photography and plenty of colour. 3.2. Benefits of advertising: Advertising is multi-faceted. To be effective, advertising programmes need to be specific in their goals, specific in their audiences and specific in their means. Advertising can particularly help in the following areas: • To create awareness: it can help to make things known. On the whole, people do not deal with things they have never heard of, or they prefer not to. • To create or develop favourable attitudes: it can help to foster a positive view of the product or service. • To develop a brand identity: advertising can help introduce a product with a special image or characteristic. • To position a product in a market: where a market is segmented, advertising can help position a product with a particular segment and identify with it. • To sustain relationships: it is a force to build and strengthen producer-customer relationships over time. • To persuade: advertising puts up a case for the customer to be interested in the product on offer. • To create demand: Advertising makes the product seem desirable, worthwhile and attainable.

• To build up enquiries: often advertising is a bridge between the product and a sales call. Its function is to obtain enquiries for a sales call, or for literature, or for a sample, or for a price estimate. • To support distributors: where there is a distributive chain, the distributor may require reinforcement in the local marketplace. Advertising is one of the forces that can supply this. • To sustain the organisation: a company may need to consolidate, or reestablish, or explain or reposition or rebuild relationships. It wishes to strengthen old relationships or build new ones. Here advertising may have a strong corporate role. • To launch new products: advertising is a key weapon in the battery of services used to launch products into the marketplace. • To offset competition: Advertising helps meet competitors and match competitors, by persuading the customer or providing a counter-claim. In an increasingly competitive world, suppliers must advertise to protect themselves against primary competition, and sometimes against other categories of product too. • To help provide a point of difference: people do not favour 'me-too' products. The brand needs a difference, a unique personality, a point of interest, a feature which will isolate it from a multitude of others. These can be powerfully conveyed through advertising. • To help reach people: in some cases, an organisation may need to reach an important contact group. Advertising can help the organisation in this regard.

3.3. Advertising classification: The targets of an organisation's advertising efforts often vary, as do its role and function in the marketing programme. One advertiser may seek to generate immediate response or action from the customer; another may want to develop awareness or a positive image for its products over a longer period. Marketers advertise to the consumer market with national, retail/local, and direct response advertising, which may involve stimulating primary or selective demand. For business/ professional markets, they use industrial, professional and trade advertising. Various types of advertising are as follows :
i. Advertising based on demand influence level

A major portion of advertising effort is designed to increase the demand for a product or service. There are two kinds of demand : Primary and selective. Primary demand refers to the demand for the generic product such as milk, magazine, radio, television set. Selective demand is designed to gain acceptability for a particular manufacturer's brand.
Primary Demand Advertising

When the product is in the introduction stage, the best promotional strategy may be to use advertising that is designed to gain acceptability for a product group

rather than a particular brand. Frequently primary demand advertising is conducted by an industry, group or trade association in order to promote a product.
Selective Demand Advertising

Most new product introductions today are accompanied by selective demand advertising, which promotes a specific manufacturer's brand. Most advertising for various products and services is concerned with stimulating selective demand and emphasizes reasons for buying a particular brand. Advertisers generally assume that there is a favourable level of primary demand for a product class and focus attention on increasing their market share.
ii. Advertising based on the audience to which it is directed
Consumer Advertising

Consumer advertising is that type of advertising that is directed towards the ultimate consumers.
Industrial Advertising

It is done by manufacturers or distributors of industrial goods and is designed to stimulate demand among the industrial buyers of such goods as raw materials, machinery, equipment, supplies or fabricated parts.
Trade Advertising

Trade advertising is done by manufacturers to obtain aggressive promotion and sale of manufacturer's line of products by the wholesalers and retailers who are logical outlets for such products.
Professional Advertising

It is targeted to the professional groups such as doctors, lawyers or engineers to encourage them to use the advertiser's product or specify it for other's use. Professional groups are important because they constitute a market for products and services they use in their businesses.
iii. Objective based advertising
Product Advertising

It is designed to promote the sale of a particular product or brand. The objective of product advertising is to promote particular products or services that the organisation sells. The marketer may use such promotion to generate exposure, attention, comprehension, attitude change or action for offering. It may be of three types : (a) Informative product advertising (b) Persuasive product advertising (c) Reminder product advertising. Informative product advertising is meant for giving information about the product or service. This type of advertising is generally used in the introductory stage of the product life cycle. Persuasive product advertising is competitive type of promotion used in the growth stage of product life cycle. Reminder Product advertising generally adopted in the maturity stage of the product life cycle to remind the customer about its presence in the market.
Institutional Advertising

It is directed toward the complete institution with the aim to increase the good will of the institution rather than on a specific brand in the eyes of the customers, shareholders, employees, suppliers etc. Institutional advertising is often closely related to the public relation function of the enterprise.
Public Service Advertising

Public Service Advertising is designed to operate in the public interest and promote the public welfare. Public service advertisements emanates from various commercial as well as non-commercial organisations. It involves sponsoring public welfare activities such as safe driving, good health, how to prevent epidemic etc.
Advocacy Advertising

It is also called as issue advertising. It is concerned with the propagation of ideas and the classification of controversial social issues of public importance. In other words, it can be said to be another form of public service advertising. It is done when a commercial or non-commercial organisation present a point of view about economic or social problems or be defensive in order to dispel existing prejudices or to correct wrong impressions about a firm or industry.
Comparative Advertising

It compares specific product attributes with competitor's brands. Today comparative advertising is used widely. Here the advertiser put the competitor's name (sometimes not) and tell the benefits of his and competitor's offerings. Negative comments concerning competitors are viewed as unprofessional or unethical.
Competitive Advertising

It focuses on stimulating selective demand within a product .category. In this type of advertising the emphasis is on positioning their product on the same attributes as competitor is doing.
iv. Advertising based on timing of response it elicits
Direct Action Advertising

Advertising designed to obtain some immediate response from the target customer is called direct action advertising. All sales promotion advertising and mail order advertising is of this type. In mail order advertising, the seller attempts to induce the reader to mail in his order for the goods advertised. An advertisement that attempts to get the reader to send in a coupon for a sample of the merchandise would be the example of direct action advertising.
Indirect Action Advertising

It is designed to influence the reader to have a favourable opinion or image of the brand so that when the reader does decide to buy that product, he will buy the advertiser's brand rather than the competing one.
iv. Advertising based on geographical coverage
National, Regional & Local Advertising

Advertising reaches people through media that are classified as national, regional or local. National Advertising is done on nation-wide scale to stimulate the demand for the product among ultimate buyers. If the advertising is confined to one region of the country, it is called as regional advertising. Local advertising is confined to one trading area or city. This type of advertising is done by local manufacturers.

3.4. Ethical and Social aspects of Advertising The essence of a free marketplace and a free society is the freedom to make decisions of various kinds or the freedom to select or not select a particular brand. There are arguments that this freedom is circumscribed by the "power" of advertising. Advertising is so effective that it can manipulate a buyer into making a decision against his or her will or at least against his or her best interests in allocating his financial resources. This argument takes several forms. First, there is concern with the use of motivation research, the appeal to motives at the subconscious level. Second, there is the use of indirect emotional appeals. Finally, there is the more general claim of the power of scientific advertising to persuade- to make people believe things and behave in ways that are not in their own or society's best interests. The communication of factual information about a product's primary function is usually accepted as being of value to the consumer. However, when advertising utilizes appeals or associations that go beyond such a basic communication task, the charge of manipulation via "emotional appeals" is raised. There exists a general feeling that advertisers have the raw power to manipulate consumers. Many companies have the capacity to obtain large numbers of advertisement exposures. Some believe that these companies can utilize highly sophisticated, scientific techniques to make such advertising effective. Some critics feel that advertising is objectionable because the creative effort behind it is not in good taste. Advertisements may be annoying and offensive. Annoying advertisements are too loud, too long, too repetitious, or involved unpleasant voices, music, or people and may be inappropriate for children. To some people, advertising, especially television advertising, is often like a visitor who has overstayed his welcome. It becomes an intrusion. Greyser postulates a life cycle wherein an advertising campaign moves with repetition from a period of effectiveness, and presumably audience acceptance, to a period of irritation. The cycle contains the following stages : i. Exposure to the message on several occasions prior to serious attention (given some basic interest in the product) ii. Interest in the advertisement on either substantive (informative) or stimulus (enjoyment) grounds iii. Continued but declining attention to the advertisement on such grounds iv. Mental tune-out of the advertisement on grounds of familiarity v. Increasing re-awareness of the advertisement, now as a negative stimulus (an irritant) vi. Growing irritation. The number of exposures between the start of a campaign and the stage of growing irritation is obviously a key variable. Advertising by its very nature receives wide exposure. Furthermore, it presumably has an effect on what people buy and thus on their activities. Because of this exposure and because of its role as a persuasive vehicle, it is argued that it has an impact on the values and life-styles of society and that this impact has its negative as well as positive

side. The key issues are what values and life-styles are to be encouraged as healthy, which are to be avoided, and what relative impact or influence advertising has on them. Three issues that have attracted particular attention are the relationship of advertising to materialism, the role that advertising has played in creating harmful stereotypes of women and ethnic minorities, and the possible contribution of advertising in promoting harmful products. Materialism is defined as the tendency to give undue importance to material interests. There is a corresponding lessening of importance to non-material interests such as love, freedom, and intellectual pursuits. Bauer and Greyser argue that although people do spend their resources on material things, they do so in the pursuit of nonmaterial goals. The distinctive aspect of our society is not the possession of material goods, but the extent to which material goods are used to attain nonmaterial goals. Bauer and Greyser thus raise the issue of whether material goods are a means to an end rather than an end in themselves. In making, such an evaluation it is useful to consider how people in other cultures fulfill nonmaterial goals. The leader in a primitive culture may satisfy a need for status in a different away from someone in our culture. Associating advertising with materialism does not demonstrate a causal link. Such a link is impossible to prove or disprove. It is true that advertising and the products advertised are a part of our culture and thus contribute to it in some way. It is also true; however, that advertising does not have the power to dominate other forces (family, literature, and so on) that contribute to the values of society. The accusation that advertising has contributed to the role stereotyping of women and ethnic minorities has been supported by several studies. One such study found that the advertisements reflected the stereotype that women do not do important things, are dependent on men, are regarded by men primarily as sex objects, and should be in the home. There is a national concern with the problems of alcohol and cigarettes. In India, there are certain restrictions over the advertisements of alcohol and cigarettes. Alcohol is unhealthy for the individual and is indirectly responsible for injuries and deaths resulting from drunk drivers. There are a variety of counterarguments. First, there is no evidence that advertising, which is geared toward brand choice rather than increasing consumption, affects total alcohol consumption. Other arguments are : - A ban of advertising would prohibit product innovation that may be helpful. - The real goal is to return to alcohol prohibition. - Many other products could be criticized on similar grounds. Although social and ethical criticisms of advertising are by no means new, the nature & seriousness of the complaints made has in recent years increased significantly. This trend has in turn been supported and reinforced by the attention paid by successive governments to the role of advertising and the rise of consumerism. Followings are the criticisms which are made most frequently and because they bear the direct relationship to the ethics of advertising are most pertinent to such discussion. These criticisms are : - Advertising is frequently false and misleading.

- Advertising concentrates on selling products to people who neither need nor want. - Advertising exhibits bad taste. - Advertising stresses small and insignificant differences between products and has resulted in an unnecessary and wasteful proliferation of brands. - Advertising is too persuasive. - Advertising can be used, to take advantage of children (bad effect on children). - Much advertising is irrelevant and unnecessary. 3.5. Five Ms of Advertising Marketing managers must always start by identifying the target market and buyer motives. They can make five major decisions in developing an advertising programme. These are known as five Ms of Advertising. They are : - Mission - Money - Message - Media & - Measurement. 3.5.1. Mission: The objectives of the advertising programme includes : - To increase support : Advertising increases the morale of the sales force and of distributors, wholesalers and retailers. It thus contributes to enthusiasm and confidence attitude in the organisation. - To stimulate sales amongst present, former and future consumers. It involves decision regarding the media. - To retain the loyalty : To retain the loyalty of present and former consumers. Advertising may be used to reassure buyers that they have made the best purchase, thus building loyalty to the brand name or the firm. - To project an image : Advertising is used to promote an overall image of respect and trust for an organisation. This message is aimed not only at consumers but also at the government, share holders and general public. - To communicate with consumers : This involves decision regarding Copy.

Approaches to setting advertising objectives
Management By Objectives (MBO)

The management by objectives concept was first presented by Peter Drucker in 1954. MBO was designed to help management establish clear and measurable goals with time component to constrain the period in which the objective is to be met. These clear & specific objectives are then compared with the actual achieved results to know how far the objectives are met and what are the limitations in achievement. Another key aspect of MBO encompasses the

relation between the superior and the subordinate persons in the management hierarchy. This aspect is very important in relation to advertising because goals are often set by the client and given then to the agency. It is not a fruitful exercise. If both client and the agency come to the mutual benefit and optimum results in the long run, the results can be achieved in much better way.
Defining Advertising Goals for Measured Advertising Results (DAGMAR)

DAGMAR was the study of Association of National Advertisers (ANA) that the goal of advertising is to achieve specialized objectives and it recognized that different advertisements can have a number of objectives. "Advertising's job, purely and simply, is to communicate to a defined audience information and a frame of mind that stimulates action. Advertising succeeds or fails, depending on how well it communicates the desired information and attitudes to the right people at the right time and at the right cost." Russell H.

DAGMAR Approach can be summerized as follows : (i) Advertisine goals are virtually always communication goals : Colley pointed out that advertising is only one part of the marketing mix for all companies. He assumed that specific goal for advertising in virtually all situations would have to be represented in terms of some communication objective. (ii) Goals should be written down : The goals should be made very clear in form of writing, so that every one understands what is being done. (iii) Advertising should be measured in terms of effects, not exposures : Colley pointed out that in reaching out a certain number of potential consumers, no matter how astronomical that number seems to be, is meaningless unless there is some effect in terms of communication goals. (iv) Advertising operates through a hierarchy of communication effects : There is a series of mental step through which a brand or objects must climb to gain acceptance. The initial task of the brand is to gain awareness to advance one step up in the hierarchy. The next step is brand comprehension, which involves the audience member learning something about the brand. The next step is the attitude and conviction step and intervenes between comprehension and final action. The action phase involves some overt move on the part of the buyer like trying the brand for the first time, visiting a show room or requesting information. (v) Creative planning considerations should come before media decisions in the advertising planning process : When media considerations come first, there is a tendency to be concerned about the amount of reach an advertising campaign can develop rather than the effects that are to be generated. The creative or message strategy decision is always intimately related to the communication effects that are intended. Therefore, the creative planning decision should occur first. (vi) Benchmark measurements should be developed before the campaign is implemented : Colley suggested a particular research procedure for measuring

advertising effectiveness. This involved developing a measurement of the level of an objective before the campaign and then measuring deviations from the measurement as an indicator of communication effect. (vi) Specific criteria must be developed : It is impossible to develop benchmarks unless the objectives are stated specifically in terms of some operational measurement. This means that the advertising objective should state the specific target market segment, the marketing goal in some percentage terms over sometime period and the advertising goals, in terms of a percentage attainment in a particular time period. Colley identified following advertising tasks or advertising objectives that a firm can pursue : - Perform the complete selling function (take the product through all the necessary steps toward a sale). - Announce a special reason for "buying now" (price, premium, etc.). - Remind people to buy. - Stimulate impulse sales. - Tie in with some special buying event. 3.5.2. Money: Advertising budget’s fundamental purpose is to aid in securing control over advertising and is accompanied by comparing actual attainments against the projected allocation and using it as a yardstick in determining the effective use of advertising. Advertising budget is an estimate of future advertising expenditure that will be used to implement managerial decisions to maintain or improve profit results. In advertising budget the money must be allocated to various promotional forms in such a manner as to minimize the waste and maximize the utility of such budgets. Advertising allocation must be considered as a capital investment rather than current expense. Investment is a capital asset that brings benefits in the future. The usual starting place for management in setting the advertising budget is to decide the overall objectives of the company. The objectives can be e.g., the growth, profits, net return investments, attracting personnel etc.

Budgetary process The advertising budgeting process involves the following steps : - Step 1. Preparation of Budget : It is generally prepared by advertising manager in consultation with marketing manager. The advertising budget made is based on inputs provided by marketing research people. The budget is generally made on annual basis. Primary input would depend upon type of product, new or established one, target market, demographic composition, advertising copy and media selection etc. - Step 2. Presentation and approval of Budget : After the budget is made, it is presented to top management for the approval of the budget.

- Step 3. Execution of the Budget : After the budget is approved by the top management, it is executed. Various channels and media for budget allocation are considered. The task of preparing advertising messages and acquiring advertising time and space is given to advertising agency. - Step 4. Control of Budget: After the budget is executed, the results come out. Control of budgets involves comparing the desired advertising objectives and actual advertising objectives. The purpose is to know the effectiveness of advertising in terms of money allocated to advertising. If it is found that the allocated budget is on the higher side or on the lower side, the appropriate corrective action can be taken. Factors influencing the advertising budget allocation: Following factors should be taken into consideration while allocating the advertising budget: - Marketing mix of the company - The sales forecast - Affordability - The product life cycle - Quality of the campaign - Level of competition - The budgeting cycle - Contingency planning - Type of product (i) Marketing mix of the company : The important factor influencing the amount to allocate to advertising is the general marketing mix of the company for marketing the product (s) involved. (ii) The Sales forecast : While making the final budget, it is important to correlate the amount needed to sales forecast. It is needed to know what may be expected to happen in the light of past experience, present conditions and any changes in factors that were influential in the past. This forecast is developed to provide the following data : - Sales in units rather than Rupee volume : Used whenever possible in order to be more specific in allocating the budget to various items. - Sales by customer classes : Data for ascertaining the advertising cost in reaching various customer groups. - Sales by product lines : In order to determine how much advertising will be needed to attain the volume projected. - Sales by territories : Helpful in deciding what advertising expenditures should be made in each area. (iii) Affordability : The most important and the foremost factor while deciding the budget is how much funds are available to the company. (iv) The Product life cycle : When the product is introduced, high level of advertising is required because the product is new and the market is to be informed and persuaded to purchase the product. When the product reaches to the maturity stage, more advertising expenditure is required to reduce the dropping of sales and to maintain the status quo.

(v) Quality of the campaign : If the advertising message is of high quality and a USP widely recognized and established, even a small budget can be effective. (vi) Level of competition : If the competitors advertising budget is immense and is advertising heavily, the higher budget would be required to counter attack. (vii) The budgeting cycle : Budget appropriation would also depend upon the time period for which the budget is allocated. If the budget is made for six months, lesser money is required than the budget for one year. (viii) Contingency Planning : There are many external uncontrollable restraints that must be taken into consideration while planning the budget. (ix) Type of the Product: If the product is one for which a strong consumer demand can be stimulated, so that the pull strategy of marketing can be used effectively, the budget for advertising might constitute virtually the entire marketing budget. But for a standardised basic industrial product, the use of advertising may play a negligible part of the marketing strategy, and it might be advisable to use other promotional means, such as direct sales efforts.
Methods of determining budget appropriation: The total amount of the advertising appropriation is a major question to be answered each year. There is no research technique that will provide an exact answer as to what is the right amount. Logically, advertising expenditures should go up as long as they are capable of increasing returns. Methods of determining budget appropriation are : - The Percentage of sales method - Unit of sales method - Competitive parity method - Objective task method - Arbitrary allocation method - The affordable method - Sales response & decay model Communication stage model - Pay out planning method. i. The Percentage of Sales Method : This method is most widely used method of setting the appropriation. In the past, the method enjoyed wide spread use. Today, although many firms use a combination of methods, they frequently report their advertising expenditures as a percentage of sales. Percentage of sales method is based on previous year's sales, on estimated sales of coming year or on some combination of these two. If virtually all conditions in the firm's market including the general economic conditions and the competitive activity, remain rather constant, then it is quite possible that the same correlations will remain between the advertising and other sales and promotional activity expenditures and the resulting sales volume.

Merits - There is a consistency between this approach and the standard accounting practice of handling advertising as one of the "operating expenses" that are usually analyzed in terms of the ratio to total sales volume. When the total marketing budget is determined in the over all marketing plan this method assigns a fixed proportion of that budget to advertising. - Percentage of sales is simple to calculate, and it is almost the nature of management to think of costs in percentage terms. Moreover, when it is wide spread throughout the industry, it results in advertising becoming proportional to market shares. Demerits - This method also presents a static approach to advertising rather than one that responds to the particular needs of market conditions. With a fixed multiplier, advertising expenditure increases as sales increases, and the tendency is to spend the exact ear marked amount, which may or may not be profitable. - As sales decline the expenditures of advertising decline, despite the possibility that it is at this point the demand may require that extra effort toward stimulation. - The percentage of sales method is not consistent with the basic marketing principle that advertising is an important factor in stimulating demand, and, as such precedes sales rather than being determined by sales. ii. Unit of Sales Method : A variation of the percentage of sales method is the "fixed-sum-per-unit" appropriation technique. This method is also based on the premise that a specific amount of advertising is related to the marketing cost of each unit produced rather than total sales volume. It does not reflect price changes as does the percentage-of-sales method and it assumes that the amount of advertising effort needed to move a unit of merchandise is not closely related to increase or decrease in price. The advantage is that the manufacturer will know in advance how much the advertising cost of each unit of the product will be, which is especially useful in price determination.

iii. Competitive Parity Method : In this method, a manager establish budget amount by matching the percentage sales expenditure of the competitors. This method consists of setting the appropriation by relating it in some manner to the expenditures of the firm's major competitor or competitors. It leads to stability at the market place by minimizing marketing warfare. If companies know that competitors are unlikely to match their increases in promotional spending, they are less likely to take an aggressive posture to attempt to gain market share. This minimizes unrealistic advertising expenditure. The demerits of this method are : - It is a defensive strategy. - It is difficult to determine the competitor's budget. - It assumes that because firms have similar expenditures, their programmes will be equally effective. - It ignores the fact that advertising and promotions are designed to accomplish specific objectives by addressing certain problems and opportunities.

- It ignores possible advantages of the firm itself. - There is no guarantee that competitors will continue to pursue their existing strategies. iv. Objective task method : Most often, the funds for promotional efforts are decided upon, before the preparation of detailed plans on how these funds are to be spent. But in this approach such plans are worked out before funds are allocated. In this method objective setting and budgeting go hand in hand rather than sequentially. Objective task method is a build up approach. Here, the funds are allocated to different advertising functions and media. The major problem with this method is the difficulty of determining which tasks will be required and the cost associated with each task. With the present available methods of measuring the effectiveness of advertising, it is difficult to say with any real certainty just how much and what kind of advertising is required to achieve a certain result. But an experienced advertiser uses the research methods available to answer such questions. The objective task method offers advantages over other budgeting methods, but it has more difficulty in implementing when there is no track record for the product. So this method cannot be applicable for deciding advertising budget for the product, which is in the introductory stage of the Product life cycle. v. Arbitrary allocation method : In this method, the budget is determined by the manager solely on the basis of his judgment, intuition or without any rule or rationality. In this method there is no systematic thinking, no objective setting and there is a complete ignorance of the advertising purpose. vi. Affordable Method : Also called as ‘all you can afford’ method and the budget is based upon what the company can afford and. is generally related to company's profits or company assets. This approach is common among small firms. vii. Sales response & Decay Model : The model is based on the assumption that the shape of advertising sales response function is known and the objective is to determine such a point that would optimise the advertising out lay/sales response ratio. The model measures the incremental changes in revenues at a given time relative to changes in the advertising budget at a time under a given set of situations. The change in the rate of the sales with time is function of following factors : - The sales response constant ( sales generated per advertising rupee) - Sales decay constant (fraction of sales lost per time unit) - The advertising budget - Saturation level of sales. viii. Communication Stage Model : Designed by G. Ole, the model takes into consideration the impact of several variables that effect advertising expenditures to ultimate sales while formulating the size of the budget.

ix. Pay out planning Method : This method is widely used for making advertising budget for the new product. A pay out plan is developed to determine how much to spend. The basic idea is to project the revenues the product will generate over two or three years, as well as the costs it will incur. This method is based on the expected rate of return. This method will assist in determining how much advertising expenditures will be necessary when the return might be expected. Though the payment plan is not always perfect, it guide the manager in establishing the budget. When used in conjunction with the objective and task method, it provides a much more logical approach to budget setting than the other budgeting approaches. 3.5.3. Message: Advertisements must contain an appeal for creating human interest so that it may be followed up by the audience. Through various appeals advertisers influence the prospect's purchase decision rationally or emotionally. As the vast amount of time and money is being spent in creating the message appeal and advertising, it is important to have an impressive appeal in a advertisement so that the prospects should be directed towards the product after seeing the advertisement. Appeals are cues that provide stimulus. Appeals are developed on the basis of buying motives. Advertising message should appeal directly or indirectly to those key needs which influence behaviour. Advertising message is developed in terms of its contents by using an appeal or an idea or a unique selling preposition.
Rational Appeals

Here the functional benefits of a product are highlighted. Industrial buyers are most responsive to rational appeals. Buying motives are normally considered rational under the following circumstances : - High quality appeal - Low price appeal - Long life appeal - Performance minted appeal - Ease to use oriented appeal Emotional appeals Emotional appeals are those appeals, which are not preceded by careful analysis of merits and demerits of making a buying decision. Emotions are those mental agitations or excited states of feeling, which prompt to make a purchase. Emotional appeals are designed to stir up some negative or positive emotions, which will motivate product interest. An advertiser may try to induce a particular behavioural change by emphasising either positive or negative appeals or a combination of both.
Moral Appeals

Moral appeals are those appeals to the audience, which are directed to their sense of right and wrong. These are often used in messages to arouse a

favourable response to social causes such as adult literacy, social forestry, anti smuggling, consumer protection, equal rights for women, rural development etc. Copy writing Copy writing is a specialized form of communicating ideas that are meant to serve the requirements of modern marketing. The purpose is to inform or persuade or remind or collective. But before copy writing, the objective of the copy should to well defined. The copywriter must be familiar with the marketing goals of the advertiser and specific advertising objectives. Copy writing skill requires command over language.
Steps in Copy Writing

Creativity is of paramount importance initiating the process of writing a copy. Creative enthusiasm has to be combined with purposeful thinking. According to Clarke, there are following steps in copy writing : Step 1 Abstracting : Relevant data are obtained from the market situation, prospects and relevant media. Step 2 Synthesizing : Elements are blended and combined, ideas and approaches accepted, rejected, revised etc. Step 3 Hypothesizing : Ideas formulated into experimental patterns culminating in a working statement. Step 4 Gestation : Objection and difficulties resolved, may involve discussion with others or reference to sources of information. Step 5 Coalescence : Decisions are made for transference of ideation to physical expression; i.e. writing. Step 6 Performance : Action is taken in the form of actual writing.
Copy structure

The total advertising copy can be classified into : - Headline - Body copy - Close of the copy Head line : The head line is that part of the copy which has been made to stand out in the advertisement by the size or style of type in which it has been set. The function of a head line is to attract the favourable attention of prospective purchasers and to interest them so that they will read the advertisement. The head line style and content will vary according to the product and the purpose may be presented in the following way :

- An indirect head line that arouse the curiosity of the reader. - State benefit to the customer. - A questioning approach. - News oriented head line.

- Address to buyer directly. Body copy : Body copy is the middle part of advertisement which includes the text of the advertisement. A copy should do the following things in order to produce results : - Involve the reader - Help the reader - Conviction - Inducing a response - Inform - Persuade - Create interest Close of the copy : Close of the copy calls for action. A copy may be concluded by a specific selling approach i.e. hard sell or soft sell. Hard sell calls for instant action like 'one day sale', 'limited quantity', 'offer valid till stock lasts ', 'first come first serve' etc. Soft Sell calls for persuation in the phased manner, but does not call for instant purchase.
Copy Elements


Headline Sub head-line Body Copy Captions Blurb Boxes & Panels Slogan, logotypes & signature

Head line : Presents the selling idea. Primary function is to catch the eye of the reader. Head line need not always contain special message. Company or brand name could be used as a head line. Sub- head line : Important facts may be conveyed. It requires more space than the head line. All advertisements do not require sub-head lines. Body copy : Refers to the text in the advertisement. Contains details regarding the functions of the product/service and its benefits. Body copy can be short or long. Captions : Used with illustrations, coupons and special offers. Blurb : Display arrangement where words appear from the mouth. Boxes and panels : Special display positions to get greater attention. Slogan, logotypes & signatures : Logotype - company name, seal or trade mark also refer to signature. Logotype is an important aid in quick recognition.
Characteristics of effective Copy

A good copy should have the following characteristics : - It should be concise. - It should have aim to sell. - It should be addressed according to the type of audience. - It should influence the reader's thoughts and/or action. - It should inspire confidence. - It should be precise. - It should be sincere. - It should create desire.


It should stimulate interest.

Artwork, creative style & Advertising design

In the initial stages of the development of an advertisement, either the copywriter or the art director forms a mental image of the advertisement. The copywriter may use rough sketches to develop the theme and to convey ideas to the artist. The artist will visualize the thought sketch and provide a pictorial representation of it. Visualisation is often confused with the terms illustration and layout. Visualisation precedes both the illustration and layout and is the process of forming a mental image, picture or representation of an object or idea. The layout is the physical arrangement of the elements in an advertisement so that this mental idea may be effectively presented. The picture portion of the layout is generally referred to as the illustration. Much of the creativity in advertising evolves from the process of visualisation and the countless ways in which mental images can be made to represent ideas. Effective advertising requires that these images be consistent with a advertiser's message, which is concerned with the need or desire the product fulfills. It is the job of the layout artist to combine all the elements in the idea into a single, effective communication. This requires adding to the idea a headline, illustration, body text, logotype and occasionally a sub headline, picture caption trademark or coupons. The layout is the arrangement of the entire verbal copy elements plus the art- work (drawing, photography, logo types) on the paper. The layout shows the rough composition of the design of a print advertisement so that all of those concerned with the advertisement can evaluate it so that those who need to produce the advertisement will have the blue print to follow.
Design of Television advertisements

In composing a script for television, the writer must include both audio and video instructions. There is no layout, but there is a script, and ultimately, there is a storyboard. In writing a script, the general practice is to use the right side of the sheet(s) for audio instructions, which include the dialogue, narration, sound effects, and/ or music. The left side is used for video instructions, which include scene and character descriptions, movement and action instructions, camera movement, scene changes and other edits, and any graphics. In both the audio and video instructions, there are a number of abbreviations. These are common symbols recognized by everyone who will be working on the commercials. The script is the equivalent of the rough layout of the print advertisement. Its purpose is to allow the creative and account groups to discuss the proposed commercial without investing a great deal of expense in artwork or production. After the script has been agreed upon within the agency, a storyboard is developed for presentation to the client and to serve as a blueprint for later production. The storyboard is comparable to the comprehensive layout for the print advertisement. A storyboard has three components: (1) pictures that show the main scenes and action, (2) a written description of what occurs, and (3) the audio. The most common way to present a storyboard is with all scenes mounted on a large poster board. Alternatives might include (1) putting the scenes on

slides and synchronizing these to an audio track or (2) creating an animatic. An animatic is an animated form of the commercial that would show some of the movements, camera work, and edits of the commercial, again including a rough sound track. Of these formats, the straight storyboard is most common when working with an existing client, while the other formats are more likely to be used during a presentation to a prospective new client. Television, with sight, sound, and motion, is hard to capture in a static storyboard, yet the storyboard must often be used because the production alternatives are too expensive at this stage. One purpose of the storyboard is to help the agency sell its creative work to the client. After approval of the storyboard by the client, it goes through one more stage similar to the mechanical layout. Here, the board is given as much specificity as the agency would like the producer to have. Sets are designed and actors are cast on the basis of this board. At this stage, more scenes may be added to the board to show more detail. The final level of specificity must evolve between the creative department and the production company. Because it is difficult to visualize the entire commercial on paper, there should be some flexibility remaining for the production team, but too much flexibility means that the director may miss the essence of the story. This is a fine line, requiring a good storyboard as well as good communications between writer and director. The writer, who has been involved throughout the development of the script, is usually also around when the commercial is shot to ensure that the main issues are properly portrayed. Copy testing Copy testing is an important part of advertising management. There are three factors that have to be addressed in copy testing: (1) whether or not to test, (2) what and when to test, and (3) what criteria or test to use. Every advertising manager must consider these factors in the context of the overall advertising plan. Copy testing implies that funds will be allocated to research on consumer reactions to the advertising before the final campaign is launched. The first decision is really whether or not to spend more money on research. Most local advertising is not tested, and there are many cases in national advertising where copy is used without formal copy testing of any kind. Not only are there money costs involved in testing, but there are time costs as well. Copy testing can mean weeks or months of delay in launching a campaign.

3.5.4. Media: The selection of media has become quite intricate because of the nature of media themselves. The characteristics of each alternative must be considered carefully. For example, TV can show action, combining both sight and sound, and can produce an impact that simply is not possible in other media.

Newspapers can carry ads containing much more detailed information than TV or radio. Magazines can convey detailed information, which remains available to a potential buyer for a longer time. The process of choosing between alternatives becomes even more complicated considering the wide range of alternatives within the same medium. New and evolving media have further contributed to the difficulty of planning when, where, and how the advertising message will be delivered. Media planning refers to a series of decisions required in delivering the advertising message to the target audience. The plan specifies media objectives and media strategies to accomplish the objectives. The basic goal of media plan is to formulate a particular combination of media that would enable the advertiser to communicate the message successfully and effectively to the maximum number of potential and existing customers in the target market at the lowest cost. Any mistakes in this function may result in wastage of substantial amounts of money. Each medium offers its own distinct advantages. By carefully developing a suitable blend of media, the advertiser can introduce versatility in media strategy to increase coverage, reach and frequency levels. To effectively cover the target market, the media planner determines the segments that should get the maximum media emphasis. This requires matching the media and media vehicles most suitable to the target audience. A very optimistic goal could be full coverage of the market. However, in real situations the coverage of the media does not allow for this. Some potential customers are left without exposure to the advertising message. Media coverage reaches some non-targeted audiences who are not considered as potential customers and the advertiser is faced with the problem of overexposure referred to as waste coverage. The media planner's objective is to reach as many members of the target audience as possible and at the same time minimise the extent of any waste coverage. This is something where perfection is almost impossible. There would be situations when there is less than desired media coverage and also some situations when the most effective media would also reach people not at all intended. For advertising mass consumption products, mass media are generally very effective in reaching large numbers of target audience. In such situations there is bound to be some waste coverage. However, the cost of wastage is negligible compared to the value gained from their use. Geographic Coverage : Geography is an important consideration for the media planning process. The demand for certain types of products depends on the geographic locations of the markets. There may be regional differences in consumption and media planners select secondary localised media to supplement their national media schedule. Advertisers are often interested in presenting a local advertising message in different markets. Scheduling : It is neither necessary nor possible for companies to keep their advertising always in front of the consumers to serve as a constant reminder of their products or services. Media schedule is the calendar of advertising plan.

Scheduling is concerned with timing the insertion of advertisements in the selected media. Decisions in this area are essentially based on certain assumptions regarding how the target audience will respond to the presence or absence of the advertising messages with respect to the set advertising objectives such as product recall or attitudes. There are three approaches to scheduling 1. 2. 3. continuity, flighting, pulsing.

Continuity refers to the length of time an advertising schedule continues such as every day, every week, or every month. If the planners believe that product recall respond easily to the exposure of advertising messages and also decay easily if there was no advertising, then probably recall increasing advertising messages are needed continuously, at a low frequency level. What is required is to develop a continuous pattern of reminder advertising without any time gaps in which there is no advertising. This strategy is suitable for those product categories that are regularly consumed on an ongoing basis without any seasonal fluctuations such as washing powders, soaps, toothpaste, and soft drinks, etc. Flighting refers to a less regular schedule of advertising messages and is quite popular. There are intermittent periods of advertising and no advertising. Because of the possible S-shaped response function, initial advertising may require heavy expenditures on media to bring about desired change in attitudes, and once formed, such attitudes resist rapid decay. This suggests the need for flighting, if the advertising was intended to achieve change of attitudes. Periods of heavy advertising would be followed with no advertising believing that changed attitudes would not decay rapidly. In case of certain consumer products, both durable and non-durable, flighting pattern is often used. Examples are desert coolers, refrigerators, woolen jackets and sweaters and many other products. Flighting offers the advantages of cost efficiency as advertising covers only purchase cycles and may allow the use of more than one medium or vehicles with limited budgets. It has the disadvantages of possible wear out, possible advantage to competitors and decreased awareness, interest and retention of advertising messages during non-scheduled periods. Pulsing is a combination of continuity and flighting. The continuity is maintained as a base throughout, but during certain periods the level of advertising is stepped up. During the period just before the last date of tax return submission, advertising for cars increases to motivate customers to buy and get depreciation benefit. Pulsing offers the combined advantages of both continuity and flighting. This method is not suitable for seasonal products or for small budget companies.

Decisions about scheduling strategy are based on the advertising objectives (brand awareness, or brand attitudes), buying cycles, competitive spending, advertising decay, available budget, etc. Media Reach and Frequency : Media planners face the essential tasks that concern the optimal use of media budget while deciding about the reach, frequency, and the number of advertising cycles affordable for the year. There is no known way to determine how much reach is required to achieve desired levels of awareness, attitude change, or purchase intentions. Also, there is no certainty that an advertisement placed in a particular media vehicle will actually reach the target audience. For example, if an advertiser buys 30 or 60 seconds of TV time during a certain programme, everyone who is tuned to this programme will not necessarily see the commercial for a number of reasons. Frequency refers to the average number of times audience individuals or households are exposed to a medium in an advertising cycle, not necessarily to the advertisement itself. An advertisement may be placed in a media vehicle and the fact that an individual has been exposed to it does not mean that the advertisement has been seen. For this reason media buyers refer to the reach of media vehicle as opportunity to see (OTS) an advertisement rather than actual exposure to it. Total exposures Frequency = ______________________ Reach Media options:

An advertising medium is the vehicle used to carry the advertising message from the sender to the intended receiver. Generally, no single medium will be sufficient in reaching all potential customers and as a result, it is often necessary to use a combination of several media in an advertising campaign.
Print Media Print media includes newspapers and magazines

Newspapers are usually classified on the basis of language, frequency of publication and time of publication. There are daily newspapers, evening newspapers, Sunday newspapers and some specialized newspapers. Most papers are the morning papers carrying news of that day's important national and local events including business, entertainment, financial, social and sports activities. The morning papers usually have a wider geographical circulation than do evening newspapers. Sunday newspapers have special sections for varied interest groups. The circulation of Sunday newspapers is ordinarily greater than that of dailies although the rates are higher. Evening newspapers carry the morning and late light news. Their size is small when compared to morning newspapers.

Merits - They can be used effectively in a Co-operative advertising plan. - They have geographical selectivity. - They are one of the media in which great numbers of people look for information about merchandise. - They provide intensive coverage of the cities and surrounding areas. - They are very flexible, and copy can be tied in with latest developments. - They reach all economic classes. - They await the convenience of the reader to read. - They have relatively low cost in comparison with other media especially audiovisual. - They can emphasize the local news appeal. - They can be used, effectively for test campaigns and to check results. - They can be tied in with the sales appeals in specific localities. - They can be used even when the advertising budget is quite modest. - They appeal to the entire family. - They are the major local medium for which readers pay. - They can be used on a daily basis. Demerits

There are complex difficulties in selecting a satisfactory schedule of newspapers in a national campaign and in deciding which newspaper to use in a specific market. - For products purchased by a restricted class, there is considerable waste circulation. - Many newspapers employ publishers, representatives to represent them nationally, which results in the national advertiser having to place the advertising through an intermediary. - They are read hurriedly, and the impact of the advertisements may be relatively small. - The paper and printing techniques may make them unsatisfactory for products that require special colour and other mechanical features to show qualities of the product. - There are so many advertisements in some newspapers that it is easy for an advertisement to get buried. - There is overlapping of newspaper circulations in many sections of the country. - Newspapers are read hurriedly and have a very short life, although they reach to all classes of people. An advertisement in the newspaper is usually read but once, with the average reading times estimated to be less than 200 seconds. In this short span of time, the appeal must stimulate the reader into action.

Magazine is the other form of print media. The Newspaper appeals to all people in a particular community; the magazine appeals to particular people in all kinds of communities. The life of a daily newspaper is short-rarely more than a day. A magazine advertisement continues to live and produce results. for a week, a month, or longer as the

periodical is read and re-read not only by those who buy it, but by others who come in contact with it. Most magazines offer high quality paper and printing. The dead line for newspaper insertions is usually two or three days in advance of publication, but such flexibility is impossible with a magazine advertisement. The increased quality that goes into magazine production slows down the insertion process. The newspaper is primarily a local medium and the magazine is mainly national one. Different types of magazines are published for different types of customers e.g., women magazines, professional magazines, trade magazines general consumer magazines etc. Magazines are published in English as well as in all Indian languages from different geographical areas for meeting the needs of various sections of the society. Magazines are unique in their service in that they communicate to a distinct group of common interest, even if the member of this group are widely dispersed. For example, Photography magazine reaches most camera enthusiasts, no matter where they are, nationally or even internationally. Thus, the advertisement about a new and unique camera would be observed and noticed by prospective customers, wherever they are.

- Due to the high quality paper and improved printing, magazines offer the advertisers with the merits of quality printing, excellent pictorial reproduction and colour display. - Advertisements may be read more carefully and with greater depth of interest in magazine than elsewhere, both because magazines tend to be kept longer and some times read repeatedly and because of the specialized character of their contents. - Magazines usually have a well defined target market. They are considered largely a class media rather than the mass media as newspapers. - Magazines have a long life and the readers read it at leisure. - Magazines has a secondary and further readership or pass along readership as magazines are kept at home for the longer period than the newspaper. - Magazines generally have an aura of prestige, expertise and credibility because of the editorial support. - Magazines buying families are normally above average prospect and they are loyal to magazines to such an extent that they feel and identify themselves a distinct class. - Because of the high quality of paper in magazines, it is possible to use a variety of colours and printing techniques.
Demerits - There is a necessity of buying space and preparing copy well in advance of the date on which it is to appear. - Since there is no daily news nor any urgent sales of products advertised in magazines people tend to read them at their leisure and thus reach tends to build up slowly.

- For advertisers who do not have national distribution or wide differences in distribution and sales strength in different markets of the country, magazine advertising is a sheer waste. - As magazines are published weekly, fortnightly, monthly, quarterly and annually, the advertiser cannot communicate his message to the prospects frequently as he can in case of other media like newspapers, radio, television, cinema etc.
Broadcast Media

It includes : Radio or Audio media & Television media.

Radio is widely used by people to listen news, music and other programmes and radio is the medium, which reaches now to every nook and corner of the country. Main advantage of the radio is that it can be carried every where. Because of its portable character, it is possessed by more than 90% of the population approximately. Because of the nature of broadcasting and the distances radio waves travel, there can be many radio stations in different areas so that every owner of a radio has many signals available to him and depending upon the technical features of the radio receiver equipment, the signals from long distances can also be caught. The advertiser using radio must decide whether or not to use a sponsored programme. However, in recent years, the number of sponsored programmes on radio has declined drastically. Though a very large share of radio listening is done outside the home, it is difficult to measure the actual amount of listening. This audience can be measured by the use of personal interviews but it still makes extremely difficult to accurately determine the size of the radio audience.
Merits - Radio advertising is much less costly than most of the advertising media. - Radio is flexible and timely. The advertiser can run as many commercials in an area or during a time period and news events and special occurrences can be aired on radio almost as soon as they happen. - Radio is a selective medium in the sense that the advertiser can advertise in only those markets he desires. He can vary his messages and the intensity of coverage of different markets to meet local conditions. - It permeates all economic and social strata, thereby reaching the masses. - In country like India, where literacy rates are low and so newspapers have limited significance, radio is popular both with advertisers and audience. - Radio is a personal medium that gives human touch as human voice is the most natural way for the people to communicate with each other which has warmth, persuasiveness, liveliness and dramatisation. Demerits - Commercial time available is limited. Only 10 seconds time for the commercials is too less to retain and understand the message in one time. - Message is perishable. If the person is not listening to advertising message at the time of the broadcast, the message is lost for ever.

- Radio advertisement is of little use to products that had to be seen and demonstrated. - Short commercials in the succeeding order, form a commercial clutter, making it difficult to have an impact on the listeners. - There are possibilities of distortion in communication. Precision of script writing is very challenging task.

Television has exhibited the most rapid growth of any advertising medium. A major portion of the promotion budget is spend to advertise on television as now it has become a leading medium for national advertiser. Television is intense in nature, in the sense that it commands undivided attention and programme dedication of viewers and an eye - catching commercial is easily noticed thus creating product awareness among TV viewers. Because of an inherent life-like quality, the advertiser has almost infinite creative flexibility for this medium. That is one of the reasons why it is the medium of national advertisers. TV appeals to both the senses - sound as well as sight. As a result, it combines the two to produce high impact commercials. The fact that a product or service is promoted on TV may build a prestigious image of the product and its sponsor. The pleasure derived from watching TV is at least transferable to the advertising messages delivered through the medium.
Merits - Television has a broad reach. It has the power to reach a great number of people. - Television has a deep impact. Television is a scientific synchronization of sound, sight, motion and colour. - It is the personal medium that tries to involve the viewer by direct person-to- person selling. - Like radio, television is becoming a vehicle of mass communication. - Television has the unique characteristics of the ability to demonstrate the operations and the utility of the product. This makes it the closest medium to personal selling. - Television has a great frequency. Unlike magazines, where the message cannot be repeated until the next issue of the magazine comes out, there is no limit to message repetition. - Television has more prestige than its competitive media. - Even though the TV media is very expensive media in terms of commercial production and air time, the cost per thousand viewers can be very low given the advantage of sight, sound, colour, and action. Thus, new products can be introduced, corporate images can be built and brand names can be established at the very low cost per viewer. - Like radio and newspapers, television is highly flexible and selective medium. It can be used locally, regionally and nationally. Demerits - Even though some demographic selection of TV coverage is possible, it is still

basically a mass media. The result is a lot of wasted coverage as the message reaches people who are not the potential buyers. - Similar to radio advertising, the TV commercial is also highly perishable. It is not possible to go back and look at the commercial again as it is possible with magazine and newspaper advertising. - High cost of television advertising is another serious limitation. In recent years the rates have risen much faster and sharper than the newspapers, magazines, radio and outdoor media. - Television has been aptly described as 'Idiot Box'. Unlike other media, except screen, it makes the prospects to sit and concentrate on the television screen and does not allow to do other work. - TV restricts itself to typical purchases. Detailed enquiries cannot come. It is difficult to note either the telephone number or the address. - TV commercials have to conform to a broadcast code strictly. - Television commercials are shown back to back and most commercials are about 30 seconds long, so that if there are ten or fifteen consecutive commercials, no one commercial really stand out. Thus, retention of the message becomes a real problem.
Other than the mainstream media options, there are a number of support media referred to as non-traditional media, or alternative media, such as outdoor, transit, movie theatres skywriting, etc.
Outdoor media

Outdoor advertising represents the oldest medium. Outdoor advertising existed as early as 5000 years ago in Babylon, Greece and Egypt. Painted advertising dates at least to Pompeii, where decorated walls promoted merchandise. Outdoor advertising is one of the more permeating communications and it is almost impossible for anyone living in a civilised society in this country not to have been exposed to it. Outdoor advertising is usually used as a supportive medium by most national advertisers and includes billboards, hoardings, posters, wall paintings, transit advertising, etc. Outdoor advertising can generate considerable reach and frequency levels at a fraction of the cost of mainstream media and is most successful when it is used to accomplish narrowly defined communication objectives such as - To generate immediate brand name recognition when introducing a new product and complement other forms of advertising. - To remind customers already in the market-place about established and recognised brands of the marketer. Merits Outdoor medium combines high levels of reach and frequency at low costs, and a colourful presentation of products to audiences already in the

marketplace. It offers the advertisers the last opportunity to remind and influence the consumer prior to purchase. The audience of outdoor advertising doesn't have to spend either the money or the effort to see the advertisement. i. Reach : Outdoor advertising maximises both reach and frequency. It is estimated that with proper placement, a moderate outdoor campaign reaches 75 per cent adults in a market at a minimum of 15 times in a 30-day period. This level of exposure is beyond any other medium. ii. Geographic Flexibility : Outdoor advertising is highly flexible and can be placed almost anywhere the law permits. It can be placed near stores, on buildings, along city roads, on mobile billboards, highways, etc. Outdoor advertising can conveniently cover local, regional, or national markets. iii. Continuity : Outdoor advertising provides 24-hour coverage and cannot be turned off or ignored like any other media. Exposure to outdoor media is not dependent on audience habits, it cannot be put aside or left unopened. The outdoor advertisement message is always working for the advertiser. iv. Efficiency : From the cost point of view, outdoor advertising is the most efficient of all mass media. v. Creativity : By combining colour, art and short copy, outdoor advertising can quickly generate an association with a particular brand. If a billboard is placed at a busy point, audiences see the advertisement again and again. The more frequently the idea is repeated, the more likely it is to be retained. Demerits i. Limited Message Capabilities : Outdoor copy must be brief since it is perceived while the audience is mobile and the exposure time is short. The messages are limited to just a few words. Lengthy appeals are unlikely to be registered to have any impact. ii. Waste Coverage : Generally the purchase of outdoor ad space results in high levels of waste coverage, because not everyone driving or walking past a billboard is part of the intended target audience. iii. Limited Effectiveness : A number of uncontrollable factors may lessen the effectiveness of outdoor ads such as trees, structures and traffic signals which may distract the audience. iv. Public Criticism : Various public interest and environmental groups criticise outdoor billboards, posters, etc. claiming that they are an eyesore, nuisance, and often a cause of road accidents. Outdoor advertising has become a useful medium with the increase in the number of automobiles and improved road network. Roadside and market area billboards are increasingly in demand by advertisers, particularly, on prime locations.
Transit advertising

Transit advertising is similar to outdoor advertising as it also uses billboards, neon signs and electronic messages. Transit advertising is targeted at millions of people who are exposed to various modes of transportation such as buses, subways, trains, or air travel. Of the many variations of transit advertising, the airline ticket holder is a very effective form of advertising communication. It reaches a very captive audience and keeps the message in front of the air passenger for as long as the ticket is retained. There is an extensive public transport system in India because most people cannot afford private transportation. A very large number of commuters travel every day to their place of work and back home. A large number of people, including those who come to see off passengers, visit railway stations, bus terminals, and airports every day and are exposed to a variety of ad messages on posters, neon signs, electronic boards, etc. Posters also appear on the sides and backs of buses, commuter trains, trams and delivery vans. Merits i. Exposure Duration : A major advantage of indoor forms of transit advertising is that the duration of exposure is long. ii. Exposure Frequency : Millions who commute to their place of work and back home every day are exposed to advertisements repeatedly. iii. Geographic Selectivity : Advertisers can choose geographic areas to reach a select segment of population. This is particularly useful to local advertisers who can buy locations in certain neighbourhoods. iv. Low Cost : Transit advertising is among the least expensive media and can be purchased for a very reasonable price. Demerits i. Waste Coverage : A significant number of exposed audiences to transit advertising do not fall under the category of potential customers. In the absence of specific geographic segments for products, this form of advertising leads to considerable waste coverage. ii. Creative Limitations : The message on the outside of vehicles is fleeting and only short copy points are appropriate. This does not allow for any colourful and attractive advertisements and limits any creativity. iii. Audience Mood : Sitting or standing on a commuter train, station, or bus stand may not really be helpful to reading advertisements. The audience is likely to be engaged in other thoughts and may not be in the right mood to pay attention to advertising. Hurrying through a station or airport often causes anxiety and advertisements are unlikely to attract attention.
Cinema and videos

Cinema halls and videotapes are also used to communicate advertising messages. Commercials are shown before the film and previews, carrying messages from both local as well as national advertisers. Many local advertisers use this medium to advertise their products. Advertisers, mostly local businesses

or retailers, use prepared slides for projection. National advertisers generally use 35 mm advertisement films based on a script. These are produced by professionals or the advertising agency and are expensive. Cinema is a popular source of entertainment in India. A large proportion of cinema audience is young and comes from almost all classes of society and socio-economic groups. Like TV, cinema also combines sight, sound, colour and movement. People come to see a movie of their choice and hence are more involved. The screen size is large, picture clarity is superb, and the sound quality is superior compared to television. The combined total effect of these features creates a powerful impact on the audience. The audience also knows that the movie will not be interrupted by the commercials and for this reason they are unlikely to be irritated when the commercials are shown in the beginning or during intermission. Merits i. Exposure : As a source of entertainment, cinema is quite popular both in urban and rural areas and the number of people attending cinema halls is substantial. Similarly, households owning VCRs or DVD players are increasing and a large number of video films remain in circulation every day carrying a variety of ad messages to captive audiences. ii. Audience Mood : People deliberately plan to go to movie theatres. Their premovie mood is positive and this mood may lead to carry over effect to the advertised product. iii. Selectivity : In case of movies shown in cinema halls, advertisers can be selective in terms of region, towns and cinema halls. iv. Recall : According to Betsy Baurer, research shows that nearly 87 per cent viewers can recall the advertisements that they saw in a movie next day. v. Lack of Clutter : Most theatres limit the number of advertisements and competing brands are not screened one after the other. This eliminates the chances of clutter. Demerit i. Audience Irritation : Most people perhaps do not like to see advertisements in these media. This is particularly the case with videotapes and DVDs and for this reason zipping is a very common occurrence. Audience irritation can lead to the development of negative feelings towards the film as well as the advertised product.

3.5.5. Measurement: In recent years the investment in all forms of advertising has increased dramatically and advertisers have found advertising a powerful selling tool. But, in many cases, advertisements failed to produce the expected results. Some

advertisements, and some advertising campaigns turn out to be flops. Hence, advertisers want to weed out the poor advertisements and pick the good ones. For this, evaluation of advertising effectiveness needs to be done. Advertisers have actively and continuously sought new methods, which would help them to better evaluate the effectiveness of their advertising with the aim to eliminate waste and to increase the effectiveness of their advertising. Measurement of advertising effectiveness help management to maximize the contribution that advertising can make. For most advertising, the eventual measure of effectiveness is frequently tied to sales per rupee spent. However, before advertising can make its contribution, certain communication objectives must be met. The eventual buyer must have been exposed to advertising, it must have communicated a message, and it must have motivated or conditioned the buyer, either consciously or unconsciously to want to purchase. The effectiveness of the advertising in achieving these communication objectives will regulate its sales effectiveness. Measurements of effectiveness may be based on a single advertisement, on a campaign, or on a sequence of campaigns. They may be taken at a single point in time or compiled over short or extended periods of time. The advertisers generally want from their promotional effort an increase in marketing performance parameters such as sales, market share, profits, etc. There should not be any mistake in setting the advertising objective. Lack of clarity in setting advertising objectives may arise due to the following factors : - Apparent failure in realising that results of advertising cannot generally be measured in terms of sales. - Inadequate information about media, its qualitative focus and reach. - Problems in stating objectives in quantifiable terms. - Inability in identifying the target audience. The overall purpose of advertising in any situation must be defined first and then broken down in various stages. The type of copy used in the advertisement is clearly influenced by the medium in which it is to be used. Hence both the selection of the copy to be used and the medium or media to be used call for research to determine the best copy and the best medium and to attempt to measure the effectiveness of the advertising. Because of the large sums of money invested in advertising and the highly competitive nature of today's market, advertisers, media owners and advertising agencies are all vitally, interested in determining the effectiveness of advertising. Because of the complexities of testing advertising effectiveness, many advertisements are not tested. That is, some people engaged in advertising doubt the validity of tests designed to measure advertising effectiveness or they feel the qualities of advertising that can be tested do not truly measure the value of the advertisement to achieve its ultimate goal - the sale of the product or service and so it is not worthwhile to test. However the use of testing and measuring of advertising effectiveness has increased in recent years due to several factors. One factor is that the increased interest by top executives in getting the best

possible results with the larger advertising appropriations required today causes them to support expenditures for testing. The development of scientific methods of testing has also helped convince more agencies and advertisers to budget sufficient funds for the proper testing of their advertising. It is not always possible to measure the effect of an advertisement or advertising on sales and profits of a company. Hence it is usually necessary to establish other criteria of effectiveness for advertising and to test these. Other objectives may be established for advertising, and tests are devised to measure the effectiveness of advertising in achieving these more specific and narrower objectives such as readership, understanding, believability, and so on. In advertising effectiveness evaluation, the most important indicator of successful advertising is the increase in sales volume. But advertising in the marketing mix may not be the single or the only element responsible for the increase in sales. It is the synergistic combination of all elements of marketing strategy, which are responsible for the increase in sales. The other aspect is the effect of advertising is visible in the long-run. The effect of advertising is sometimes measured taking into account more important factors which are directly related to advertising stimulus. Such factors or elements create awareness, comprehension, liking, preference, conviction, purchase action, development of strong USP, brand image, brand personality and changing attitudes which indirectly support the sales effort. Advertising campaigns are launched with certain objectives such as creating awareness, increasing brand image, trial rate to change consumer attitudes or increasing market share etc. The advertising should achieve: the targets, fulfil the marketing and advertising objectives within a specified period of time. Advertisers spend huge amount of money to convert the prospects into active consumers, but they would be dismayed to what extent their advertisements achieved the results. Since Cable and satellite television advertisements are very expensive business, it is almost necessary for the advertisers to know the actual result of their advertisements. Hence, the measurement of effectiveness of advertising on television and Cable TV network is quite essential. Lack of feedback, interference, and translation of advertiser's language into consumer language are important problems in advertising, but they do not alter the basic requirements for successful advertising. For any idea to be transmitted effectively from the source to the receiver, whether the source is personal or non-personal, the message must meet these three qualifications : i. It must be so designed and delivered as to gain the attention of the receiver. ii. It must use signals that are understood in the same way by both the source and the receiver. iii. It must arouse needs in the receiver and suggest some ways of satisfying these needs that are appropriate to the receivers' group situation when moved to make the desired response.

In order to accomplish the communication task advertising goals are set to achieve the cognitive, affective and behavioural responses from the prospects or consumers, or viewers. Almost in all cases the above three aspects are essential for measuring the effectiveness of advertising. These aspects are also dealt in various models of advertising communication such as AIDA, DAGMAR etc. The AIDA acronym stands for Attention, Interest, Desire and Action. 3.6. Advertising agencies: An advertising agency is an independent company set up to render specialised services in advertising in particular and marketing in general. When a firm has decided upon advertising programme as part of its over all promotion mix, it needs to have a system and an organisation to implement it for the attainment of the desired objective. Firms do have an advertising department to manage the advertising function. In some small firms, there may not be a separate department in the name of advertising, but the marketing manager or the chief executive looks after the function. The company's advertising department usually relies on out side experts who prepares the advertisement messages, selects appropriate media, and arranges to release them. The advertising department of a company has only a limited creative function, primarily a liaison point in the company for the agency, though it is responsible for the advertisement budget and supervises the performance of the agency. An advertising manager has to co-ordinate with the marketing and sales function, so that the advertising efforts may be fully integrated with the firm's marketing and sales strategy. He has also to perform the managerial task of formulating advertising strategy and planning an advertising programme. The execution of such programme is managed by this department through the advertising agency. The agency often assists the advertising manager in programme formulation. Advertising agencies can range in size from one or two person operation to large organisations with over 1,000 employees. Accordingly, the services offered and functions performed will vary. There can be following types of advertising agencies : - Full service agency - In house agency - A creative Boutique - Media buying services - A La-carte agency - Special service agency
Full service agency : Full service agency offers its clients a full range of

marketing, communications and promotion services including planning, creating the advertisement, performing research and selecting media. A full service agency may also offer non advertising services such as strategic market planning, design of sales promotions, sales training and trade show materials,

package design and public relations. The full service agency is made up of departments that provide the activities needed to perform the various advertising functions and serve the client.
In-House Agency : Even though most companies use full service advertising agencies, an organisation may decide to establish its own operation for all services of an advertising agency within its own structure. The in-house agency as its name implies is owned by and operated under the direct supervision of the advertiser. It performs all the creative and media services provided by the traditional full- service agency. A major goal in adopting this approach is to reduce the total cost of the advertising. Creative Boutique : It is an agency that provides only creative services. The client

may seek outside creative talent because it believes that an extra creative effort is required or because its own employees do not have sufficient skill in this regard. Full-service agency often subcontract work to creative boutiques when they are very busy or want to avoid adding full time employees to their payroll. Creative boutiques are usually founded by members of the creative departments of full service agencies who leave the firm and take with them clients who want to retain their creative talent. Media Buying Services: There are independent companies specialize in the buying of media, particularly radio and TV time. Media buying is a niche service and these agencies are specialized in the analysis and purchase of advertising time & space. Both agencies and clients utilize their services for developing their own media strategies and using the buying service to execute them. Because media buying services purchase such large amounts of time and space, they receive large discounts and can save the small agency or client money on media purchases. Media buying services are paid a fee or commission for their work. A La Carte Agency: Some advertisers prefer to order a la carte rather than using all of an agency's services. Services can be purchased from a full service agency or from an individual firm that specializes only in creative work, media, production, research, or new product development. The two requirements most frequently obtained by a la carte are creative and media services. Special Service Agency (Group): Some agencies focus their efforts only in some selected areas and then become specialists in those areas. There is great multiplicity of firms whose objective is to provide advertisers, advertising agencies and the advertising media with a host of specialized services. These firms collectively are called special service groups and they are the least known component of the advertising industry. 4. Have you understood type questions

1. What was the growth rate of advertising during 2005? a. 11.1%

b. 12.1% c. 14.1% d. 15.1% 2. Which media according to NRS is showing higher growth rate? a. Newspaper b. Magazines c. Transit d. Outdoor 3. Which of the following is the advertising appropriation method that is most effective? a. Affordable method b. Percentage of sales c. Percentage of turnover d. Objective and task method 4. What is the expansion of LINTAS? 5. Media scheduling has become cumbersome due to advent of satellite channels. Yes/No 6. Portfolio method is one of a advertising measurement method. Yes/ No
5. Summary The advertising industry has a 15.1% growth, clocking Rs.11,915 crore in 2005. Both the leading media, Television and the Print, have grown by 15 percent each. Together they account for 90 percent of the advertisement pie. While Television and Print media have cornered Rs 5,003 crore and Rs 5,700 crore worth of advertising, respectively, the third largest media category Outdoor, has grown moderately at 8.7 percent netting Rs 870 crore. While the advertisement revenue growth of the Print media can be attributed to the significant jump in advertising spends by educational institutions, real estate developers, independent retailers, durables marketers, and automobile companies among others, the revenue growth of Television has been largely powered by the FMCG sector, which has recovered sharply in 2005 clocking a double-digit growth, on back of some heavily advertising categories like toilet soaps, hair oil, etc. Two media genres that have seen scorching growth rates are Radio and the Internet, which have grown by 33 percent and 57 percent to touch Rs 200 crore and Rs 110 crore, respectively. While for the Radio this growth has been led by a number of factors, such as vigorous activities following the liberalised regulatory regime and the faster expansion of the circles, the humungous growth of the Internet has been driven by the faster growth in the Net user-base that has touched 50.6 million. This augurs well for the industry as well the marketing function as such. 6. Exercises 1. It is said that advertising helps meet competitors and match competitors, by persuading the customer or providing a counter-claim. In an increasingly competitive world, suppliers must advertise to protect


3. 4.


themselves against primary competition, and sometimes against other categories of product too. With suitable examples, explain this aspect. One such study found that the advertisements reflected the stereotype that women do not do important things, are dependent on men, are regarded by men primarily as sex objects, and should be in the home. Identify such campaigns in the Indian context where stereotyping is done. Conduct a study to find the styles of any three leading advertising agencies in India. What are the conflicting issues advertiser have with agencies? With suitable examples, explain how it can be overcome. Prepare a story board for a campaign on quit smoking.

7. References

1. David Rutherford, Client/Agency Evaluation - A Guide to Best Practice, Institute of Communications and Advertising, Toronto, Ontario. 2. David.A.Aaker, Rajeev Batra, John. G. Myers, Advertising Management, Prentice Hall of India, New Delhi. 3. Micheal L. Rothschild, Advertising - from fundamentals to strategies, D.C.Heath & company, Canada. 4. A.D.Farbey, Handbook of successful Advertising, Crest publishing House, New Delhi.

SALES PROMOTION Unit structure: 1. Introduction 2. Learning Objectives 3. Sales promotions 3.1. Obejctives of sales promotions 3.2. Importance of sales promotions 3.3. Strengths and weaknesses of sales promotions 3.4. Comparison between sales promotions and advertising 3.5. Sales promotion methods 3.6. Developing sales promotion methods 3.7. Evaluation of sales promotions 3.8. Sales promotion campaigns in India 4. Have you understood type questions 5. Summary 6. Exercises 7. References 1. Introduction:

Every marketer has to think about sales promotion at one stage or the other of the product life cycle. In modern business world, sales promotion is considered as an important instrument to lubricate the marketing efforts. The marketers have realised that it is not expenditure but it is an investment because it will pay rich dividends. This does not compete with advertising or personal selling. Sales promotion activities are complementary to them. Advertising is frequently used to make sales promotion activities, such as sweepstakes, coupons, premiums etc., known to consumers. Sales people often use sales promotion to help sell their product lines to intermediaries.
2. Learning Objectives: When you finish this unit, you should be able to:

• • • •

Understand the objectives and importance of sales promotions Understand the various methods of sales promotions Understand the implementation aspect of sales promotions Understand some of the sales promotion campaigns

3. Sales Promotions:

According to the American Marketing Association, sales promotion includes all marketing activities, other than personal selling, advertising and publicity, that stimulate consumer purchasing and dealer effectiveness such as displays shown and expositions, demonstrations and various non-recurrent selling efforts not I the ordinary routine. Sales promotional activities are impersonal and usually non-recurring and are directed to ultimate consumer, industrial consumer and middlemen. These activities tend to supplement the advertising and personal selling efforts. Examples of sales promotion are free product samples, premiums and trade shows. For many organisations, including the marketers of foods, toys and clothing, store displays are important sales tolls. All prospective buyers must be attracted and even persuaded to buy the product. Sales promotion is a vital link between advertising and field selling. It aims at stimulating consumer purchasing at the point of sale and dealers effectiveness at the retail channel of distribution especially because of the competitiveness of retailing.
3.1. Objectives of sales promotion: The goals of sales promotion must confirm to the overall objectives of promotion efforts. There are five broad sales promotional objectives. They are: Exposure: The important objective is simply to expose an adequate number of target consumers to the message. Managers must choose promotional media that will reach adequate numbers of target consumers. In planning for exposure, marketers should take the following steps: 1. Define target consumers

2. Determine their number 3. Chose the promotion media 4. Determine the promotion budget needed to acquire the number of exposures Attention: The term attention refers to the state of focusing one’s mind upon something. Marketers are faced with the need to take steps to make their promotion stand out and say or do something to attract consumer attention. Comprehension: To comprehend is to understand, or to receive communicated knowledge. The objective is achieved when consumers interpret the message in the manner intended by the marketer. Consumers often fail to comprehend promotional message when the messages are poorly designed or simply not interested. Attitude change: Attitude change involves readiness to respond in a particular way. When the message promises a reward that is strong cleaning power in a detergent, that may target consumers’ value. Behaviour/Action: Inducing behaviour or action is especially important in personal selling and sales promotion. Many managers encourage consumers to: Buy the brand for the first time Continue to buy the brand Buy more of the brand Urge friends to buy the brand Visit a retail store See a demonstration of the brand or Try out the brand Confirming to the above, in a broad way, sales promotion is said to have three objectives. They are: To communicate marketing information to the potential buyers or actual users or retailers To persuade and convince them by exercising persuasive measures and To act as a powerful tool of competition. 3.2. Importance of sales promotion:

In recent years, expenditure on sales promotion has been increasing more rapidly than the outlays for advertising. Changes in the marketing environment are exerting upward pressure on the demand for sales promotion. As the number of brands increases, for example, the competitive pressure for display space in retailer store or Stock keeping unit

(SKU) intensifies. These forces increase retailer’s demand for more sales promotional efforts from their suppliers.
A good sales promotional programme could alleviate consumer dissatisfaction with respect to retail selling. The trend is away from the use of retail sales people and towards self service also points up the need for sales promotion. Sales promotional devices are often the only promotional materials available in the point of purchase. Advertising media reach potential consumers at their homes and at their places of business. When the time for buying arises, the impact of the advertisements may have worn off (or the prospect may not even have seen the advertisement). However, the sales promotional devices at the point of purchase inform, remind and persuade the buyer. People who comprehend the promotional devices are excellent prospects. They are usually in the buying frame of mind, or they would not be there at the purchase point. The importance of sales promotion to manufacturers, middlemen and consumers are explained below: Sales promotion to consumers:

/ / / / /

With the help of promotional efforts, the consumers get latest information regarding the new goods or services to be initiated or sold in the market. Consumers get effective incentives in the shape of off-season discount , gifts, samples etc., Consumers get the opportunity to participate in contests Upgrade the standard of living of the consumers Reduction in prices make certain products affordable

Sales promotions to manufacturers: / Creates new markets for the product / Helps in contacting and maintaining the actual consumers / Economies of scale comes into picture due to higher productivity and lower prices / Allows them to overcome the competition / Helps in having goodwill from the middlemen Sales promotion to the middlemen:

/ / /

Easy to persuade the buyer with minimum effort Allows them to make profits with minimal costs Helps to provide incentives to the buyers, resellers etc.,

3.3. Strengths and Weaknesses of Sales promotion:

Sales promotion is mentioned as a push strategy as compared to advertising which is considered as pull strategy also has its own share of advantages and disadvantages as is seen from the following table: Strengths Weaknesses

Clutter Adds tangible value to product Can set false retail price offering Can undercut brand name Gives sense of immediacy to Cost can be prohibitive purchase continued Adds excitement, spectacle Stimulates trials Stimulates continuity of purchase or support, repeat purchases Increases purchase frequency and/or quantity Balances inventory, helps clear overstocks Motivates trade support Builds database Adds involvement/participation


3.4. Differences between sales promotion and advertising:

A push promotion offers consumers an extra incentive to choose the brand. For new products, a pull promotion is designed to create a demand. One advantage of a pull promotion is that once a brand has developed consumer demand, that demand will last as long as the brand remains competitive. Further more once a brand has created a strong brand franchise, it can spend little on trade promotion. A disadvantage of using push promotion is that most discounts apply to everyone who buys – regular brand users who would have bought the brand with out the discount benefit as well as new buyers.
Advertising differs with sales promotion on the following points: Sales promotion adds tangible value whereas advertising does not. Advertising does not reduce the risk whereas sales promotion is able to reduce. Immediate response is possible from sales promotion and advertising effect is considered long term, Sales promotion is able to add the accountability whereas advertising is not able to. The continuity of purchases can be seen in sales promotion than advertising.

The purchase frequency is increased in sales promotions due to impulse buying, which is not possible through advertising. The database of the customers can be built through sales promotion. The involvement of the trade, sales people is more in sales promotion than that of advertising.

3.5. Sales promotion methods: Consumer promotional tools: Price reductions: The most common type of consumer sales promotion is a price reduction – a sale. Although sale prices can generate tremendous response, they can also have negative effect on a brand’s overall pricing strategy. This was understood by Bombay Dyeing as they decided to keep their flagship brand –Vivaldi away from the normal 15% price reduction they undertake. An indirect price reduction is the price pack, which provides the consumer with multiple units priced less per unit than they would be if they were individually priced. The Gillette Company in offering shaving kit adopted this. Coupons: A certificate offered by either manufacturers or retailers that grants specified savings on specific brands when presented for redemption at the point of purchase. Manufactured sponsored coupons can be redeemed at any outlet distributing the manufacturer brands. Retailer sponsored coupons must be redeemed at the sponsoring retail store or chain. Sampling: This allows the consumer to experience the product or service either free or at a reduced price. The primary tool for new-product introductions because it stimulates trial, sampling is also effective for introducing modified products, for dislodging an entrenched market leader, and for demonstrating the brand superiority. Ariel and Pantene are examples. Refunds and rebates: A sales promotion that reduces price after the purchase is made is known as a refund or rebate. The marketer promises to return a certain amount of cash or high-value coupons to the consumer who purchases the product. Most refunds and rebates encourage product purchase by a given time, thereby creating a sense of immediacy and limiting the manufacturer’s period of liability. Contests, Sweepstakes and Games: The growth of contests and sweepstakes during the 90’s attests to the power of tools that generate excitement by promising ‘something for nothing”. Although contests and sweepstakes are considered low-level motivators because people know that the odds are against them, many companies favour them because

they are highly visible inducements to participation and don’t cost as much as coupons. Premiums and Specialities: An offer of merchandise, either frees or at a reduced price, for responding in same way is called a premium. Many companies also use premiums to encourage consumers to switch brands or to reward customer loyalty. Premiums can be classified as: In-pack premiums which are inserted into the package by the manufacturers On-pack premiums which are placed on the outside of the package at the factory Container premiums which are special packages, such as decorative coffee canisters, that have extended use after the product contents are gone. Specialities are free gifts or rewards ranging from pencils to cellular telephones. The difference is that the customer doesn’t have to purchase anything to get them. Merchandising materials: Every promotion needs communication support if customers are to know it. Such merchandising materials include: ♠ banners ♠ signs ♠ window posters ♠ shelf strips and tags ♠ racks ♠ stack cards ♠ end aisle displays and ♠ shelf extenders Tie-ins: Two products are promoted together. Cross –promotions: Sometimes one brand is used as a carrier to promote another, non-competitive brand. Trade promotions: The following trade related the manufacturers could follow promotions: Trade allowances: To achieve the authorisation objective explained above often requires slotting allowances. These are fees paid to a retail chain to stock in its warehouses and make it available in its stores. Originally, slotting allowances

were modest sums meant to cover the costs of physically placing the product on the shelves and entering it into the store’s computer ordering system? Off-invoice allowances are similar to consumer price reductions. They are used periodically by most brands takes the form of free goods –“buy six cases and get one free”. Performance allowances are given when a wholesaler or retailer promises to do or perform some additional activity to help sell or move the brand. Dealer Loaders: To help encourage the retailer to put up a special display or POP display for a promotion, the marketer will sometimes design a display to include an attractive item of value to the retailer. Trade shows: Manufacturers, suppliers and vendors in a particular industry gather to display and review new product developments at trade shows. Manufacturers have exhibits or booths where they can demonstrate the product, provide informations, answer questions and write orders. 3.6.Developing the sales promotion schemes: After deciding the objectives and tools of sales promotion, the marketer has to make a few more decisions to ensure effective results. The following are a few such aspects: 1.Size of incentive: The marketer has to determine how much incentive should be offered. A certain minimum incentive is necessary if the promotion is to succeed. A higher incentive level will produce more sales response but at a diminishing rate. The marketers may usually decide the quantum of incentives on the basis of effectiveness of part promotion plans. 2.Conditions for participation: Incentive should not be disturbed to all the prospective buyers’ indiscrimenably. It should be offered only who have the innate desire and attitude to purchase products offered by the company. 3.Distribution Pattern: The marketer must also decide the mode and media of distribution of incentives. The cost of distribution should not be more than the results that are expected from the promotional efforts. 4.Duration of the promotion:

If the sales promotion period is too short, many prospects will not be able to take advantage, since they may not be repurchasing at that time. With the promotion trends too long, a scheme will lose some of its effects. 5.Timing of the promotion: The promotion managers have to develop a time schedule for the promotions. The dates must be useful to production, sales and distribution managers. Some unplanned promotions may become necessary. At that time, co-operation of people concerned must be enlisted. 6.Sales promotion budget: The marketer can choose the promotional tools, the method of implementation in advance. On the basis of such a plan, he can estimate the cost of sales promotion activities. The more popular way is to take a conventional percent age of the total budget to use for sales promotion. 7.Pretesting: Sales promotion scheme should be pre-tested if possible. The purpose is to determine whether the scheme is appropriate or not. It is also helpful to test the suitability of the size of the incentive in the context of a particular target group. 8.Implementing the promotional schemes: Companies should establish implementation plans for each promotion covering lead-time and sell off time. ♠ Lead-time is the time required to prepare the programme before launching it. ♠ Sell off time begins with the launch and ends when the deal closes. 3.7. Evaluation of the sales promotion schemes:

Manufacturers can use various methods to measure the effectiveness of sales promotion schemes. Some of them are: ♠ The most common method is to compare sales before, during and after a promotion. Suppose a company has 6% market share, in the pre-promotion period, which jumps to 10% during the promotion, falls to 5% immediately after and rises to 7% after some time. The promotion evidently attracted new buyers as well as more purchasing by existing customers. After the promotion, the sales fell as consumers worked down their inventories. The long run rise to 7% indicates that the company gained some new users. ♠ Consumer panel data would reveal the kind of people who responded with the promotion and what they did after the promotion. If more information is needed, the consumer surveys can be conducted to learn how many recall the promotions, what they think about it, how many took advantage of it, how it affected their subsequent branded choice behaviour.

♠ Sales promotion can also be evaluated through experiments that differ such attributes as incentive value, duration and distribution media.
3.8. Sales promotions in India: 1. Baron International, the marketers of AIWA TV promised the money back if India succeeds in the World Cricket Cup 1999. If the team wins, one gets some Rs.6, 000 back on a TV priced at around Rs.12, 500. Apart from this, the company has promised each team player a Mercedes if India wins the cup. This is by far the best sales promotion and had given the company the dividends. 2. Britannia invested Rs.10 Crore on its ‘Britannia khao, World Cup jao’ promotion and it created waves in the market. Every product comes with a number of runs (printed on the pack). By collecting 100 runs, one gets a booklet from the retailer. This represents a potential trove for the buyer – ranging from complementary packs to match tickers. The company kicks off this sales promotion scheme in February that year well ahead of the programme. 3. Samsung and Sansui gave away Cup related freebies with every product. 4. Asian Paints asked the customers to walk into any of their showrooms and pick out the shade of blue that the Indian team wears in the World cup. Winners flew to England to watch the Indian games. 5. Re.1 off on a Surf carry bag 6. 50 gm. Cake of Ponds soap was at one time given free with every purchase of HLL shampoos. 7. Britannia Quiz Contest 8. Coke offered a cap on the purchase of 5 Coke bottles 9. Vicks, Ariel using sampling technique 10. Tamil magazines providing in pack premiums like Amrutanjan cream, Shampoos, Saffrons and soaps 11. For every three Peter England shirts bought, one white Peter England was given free 12. Pepsi by keeping three digit numbers in the crown offered the following prizes based on weekly draws: 13. Rupees One lakh if all the three numbers match 14. Rupees Ten thousand if two numbers match 15. One Pepsi free if one number matches 16. TVS-Suzuki offering to provide the vehicle at Rs.3000 and later on in instalment schemes 17. LML allowing trade ins of any make 18. Akai spearheading the exchange market where the old TV was valued at Rs.10,000 for a new Akai TV 19. Nike tying up with Advertising and Marketing for the subscription drive 20. Castrol and Servo giving away caps, T-shirts etc as freebies 21. Parle cashing on the Sakthimann serial success with Sakthimann sub-brand products with sales promotional efforts

22. Kurl-on mattress offered pillows free in the 5” category 23. Maruti lowering the prices of its 800, Zen Estilo by Rs.25, 000. 4. Have you understood type questions

1. To convince supermarkets to stock a large display of HUL products (containing eight cases of the company's bar soap and body wash products), the company's sales force had to engage in ________, especially when dealing with chain stores. A. Advertising B. Personal selling C. Sales promotion D. Publicity 2. Do you agree that sales promotion is a below the line promotion? Yes/ No 3. State whether True or False. “Sales promotion aimed at the sales promotion normally do not provide the results intended and discourages the entire field force” 4. Which sales promotion is quite often used by the retailers? A. Premiums B. Couponing C. Tie-ins D. Discounts 5. State whether True or false. “Sales intended across the traders necessarily need to be discounts either as cash or in quantity”.
5. Summary Marketers who employ sales promotion as a key component in their promotional strategy should be aware of how the climate for these types of promotions is changing. The onslaught of sales promotion activity over the last several decades has eroded the value of the short-term requirement to act on sales promotions. Many customers are conditioned to expect a promotion at the time of purchase otherwise they may withhold or even alter their purchase if a promotion is not present. For instance, food shoppers are inundated on a weekly basis with such a wide variety of sales promotions that their loyalty to certain products has been replaced by their loyalty to current value items (i.e., products with a sales promotion). For marketers the challenge is to balance the advantages short-term promotions offer versus the potential to erode loyalty to the product. Sales promotions are delivered to customers in many ways such as by mail, in-person or within print media. However, the Internet and mobile technologies, such as cell-phones, present marketers with a number of new delivery options. For example, the combination of mobile devices and geographic positioning technology will soon permit marketers to target promotions to a customer’s physical location. This will allow retailers and other businesses to issue sales promotions, such as electronic coupons, to a

customer’s mobile device when they are near the location where the coupon can be used. Tracking customer’s response to marketers’ promotional activity is critical for measuring success of an advertisement. In sales promotion, tracking is also used. For instance, grocery retailers, whose customers are in possession of loyalty cards, have the ability to match customer sales data to coupon use. This information can then be sold to coupon marketers who may use the information to get a better picture of the buying patterns of those responding to the coupon. For many years consumers typically became aware of sales promotions in passive ways. That is, most customers obtained promotions not through an active search but by being a recipient of a marketer’s promotion activity (e.g., received coupons in the mail). The Internet is changing how customers obtain promotions. In addition to websites that offer access to coupons, there are a large number of community forum sites where members share details about how to obtain good deals which often include information on how or where to find a sales promotion. Monitoring these sites may offer marketers insight into how customers feel about certain promotions and may even suggest ideas for future sales promotions. Sales promotions do the same way, an advertisement competes with other advertisements for customers’ attention. This is particularly an issue with inserted coupon promotions that may be included in mailing or printed media along with numerous other offerings. The challenge faced by marketers is to find creative ways to separate their promotions from those offered by their competitors. 6. Exercises

1. There are number of products designed for consumption by children but the purchases are made by mothers. Such products must appeal to children and have the mother's approval too. In what way sales promotion by these companies be effective? Give examples. 2. Manufacturers, suppliers and vendors in a particular industry gather to display and review new product developments at trade shows. Manufacturers have exhibits or booths where they can demonstrate the product, provide informations, answer questions and write orders. Explain how you will conduct these exhibitions as an event manager. 3. An offer of merchandise, either frees or at a reduced price, for responding in same way is called a premium. Many companies also use premiums to encourage consumers to switch brands or to reward customer loyalty. Conduct a study to find the latest measures in the Indian market. 4. “Advertising is a must to show cause the sales promotion efforts” –Discuss with recent examples.
7. References 1. Julian Cummins, Sales Promotion, Universal Book Stall, New Delhi

PERSONAL SELLING Unit structure: 1. Introduction 2. Learning Objectives 3. Personal Selling 3.1. Relevance of selling to modern marketers 3.2. Selling steps 3.3. Sales force objectives 3.4 Sales force structure 3.5. Purpose of sales territories 3.6. Sales force management 4. Have you understood type questions 5. Summary 6. Exercises 7. References

1. Introduction:

Sales management is considered crucial in those industries where personal selling is given the most important part in the promotional mix. Sales management needs to be carried out with conviction otherwise there will be lot of manpower turnover from companies. There are a lot of differences sales management has as compared to other promotional mix elements. Personal selling is a two-way flow of communication between a potential buyer and a sales person that is designed to identify the customer’s needs, match those needs to one of the company’s products and convince the customer to buy the product. Hence it is very comprehensive in nature.
2. Learning Objectives: When you finish this unit, you should be able to:

• • • •

Understand why sales management is important to marketers Understand what are the strengths and weaknesses of sales management Understand the relevance of sales management to the modern marketer Understand the structure of sales force management

3. Personal selling:

Personal selling’s greatest strength is its personal touch. Of all the marketing communication functions, personal selling involves the most human contact and interaction, qualities that are indispensable to building lasting relationship between buyers and sellers. A related strength is the flexibility of personal sales thereby making necessary changes in the specific needs of each potential customer, highlighting the

characteristics of a product that are most likely to meet those needs. Personal selling is most likely to persuade some one to buy a product than other promotional tools. The oneto-one situation facilitates instant feedback with the result that the sales person can address customer’s objections. Salespeople are part of the corporate team, and their relationships with other areas and functions within their own company are important factors affecting the company’s image and ultimately the sales. A weakness of personal selling is that one person can sometimes spoil a relationship between a company and one or more of its customers. Because the salesperson is the company’s main representative to customers, anything this person does that is out of line will reflect negatively on the entire company. Another weakness is that if a salesperson leaves the company to work for a competitor, he or she takes along all the company’s selling strategies, important accounts and also other inside information. Personal selling is very costly due to the labour intensiveness. A highly qualified professional sales person calling on corporate headquarters and selling high-tech products or large volume products can make only a few calls a day because customers are rarely geographically close. Consumers often complain about high pressure and dishonesty among sales people, an image that competent sales people are continually trying to dispel.
3.1. Relevance of selling to the modern marketer:

In today’s highly competitive market place, customers expect more from companies. That can be offered only directly through the use of sales management. Since the customers expect more information and expertise, there needs to be a one-to-one interaction. Through selling, all the questions and other problems which the customer have can be answered with full satisfaction. This makes selling an unique tool as compared to advertising, sales promotion etc. Another aspect is that the customers require a honest and just answer. The value for money (VFM) can be provided only through the use of personal selling with effectiveness. The broad strategy for the marketer is organising the firm to meet consumer needs. The sales force is one of the practical weapons that the chief marketing executive, who can be the managing director can use to achieve the objectives. In most firms the bulk of the presentation effort is carried out by the sales force, and thus it is often by far the most important tactical weapon. In a situation where products and prices are becoming sincreasingly similar and the sales force is the weapon, its efficiency is absolutely critical to the success of the whole enterprise. In fact, in many markets it can be said that the differenece between competitors lies in relative quality of their sales forces. The company with the best planned, selected, trained, motivated and controlled sales force will inevitably gain dominance in the market. To a large extent, once the sales person has been recruited and given basic training his success will depend on the field sales manager who controls that sales person.
3.2. Selling steps: Prospecting

Prospecting refers to identifying and developing a list of potential clients. Salespeople can seek the names of prospects from a variety of sources including trade shows, commercially-available databases or mail lists, company sales records and in-house databases, public records, referrals, directories, and a wide variety of other sources. Prospecting activities should be clearly structured so that they identify only potential clients who fit the profile and are able, willing, and authorized to buy the product or service. Once prospecting is underway, it then is up to the sales professional to qualify those prospects to further identify likely customers and screen out poor leads.

Before engaging in the actual personal selling process, sales professionals first analyze all the information they have available to them about a prospect to understand as much about the prospect as possible. During the Pre-approach phase of the personal selling process, sales professionals try to understand the prospect's current needs, current use of brands and feelings about all available brands, as well as identify key decision makers, review account histories (if any), assess product needs, plan/create a sales presentation to address the identified and likely concerns of the prospect, and set call objectives. The sales professional also develops a preliminary overall strategy for the sales process during this phase, keeping in mind that the strategy may have to be refined as he or she learns more about the prospect.

The approach is the actual contact the sales professional has with the prospect. This is the point of the selling process where the sales professional meets and greets the prospect, provides an introduction, establishes rapport that sets the foundation of the relationship, and asks open-ended questions to learn more about the prospect and his or her needs.
Making the Presentation

During the presentation portion of the selling process, the sales professional tells that product "story" in a way that speaks directly to the identified needs and wants of the prospect. A highly customized presentation is the key component of this step. At this point in the process, prospects are often allowed to hold and/or inspect the product and the sales professional may also actually demonstrate the product. Audio visual presentations may be incorporated such as slide presentations or product videos and this is usually when sales brochures or booklets are presented to the prospect. Sales professionals should strive to let the prospect do most of the talking during the presentation and address the needs of the prospect as fully as possible by showing that he or she truly understands and cares about the needs of the prospect.
Overcoming Objections

Professional salespeople seek out prospect objections in order to try to address and overcome them. When prospects offers objections, it often signals that they need and

want to hear more in order to make a fully-informed decision. If objections are not uncovered and identified, then sales professionals cannot effectively manage them. Uncovering objections, asking clarifying questions, and overcoming objections is a critical part of training for professional sellers and is a skill area that must be continually developed because there will always be objections. Trust me when I tell you that as soon as a sales professional finds a way to successfully handle "all" his or her prospects' objections, some prospect will find a new, unanticipated objection-- if for no other reason than to test the mettle of the salesperson.
Closing the Sale

Although technically "closing" a sale happens when products or services are delivered to the customer's satisfaction and payment is received, for the purposes of our discussion I will define closing as asking for the order and adequately addressing any final objections or obstacles. There are many closing techniques as well as many ways to ask trial closing questions. A trail question might take the form of, "Now that I've addressed your concerns, what other questions do you have that might impact your decision to purchase?" Closing does not always mean that the sales professional literally asks for the order, it could be asking the prospect how many they would like, what color they would prefer, when they would like to take delivery, etc. Too many sales professions are either weak or too aggressive when it comes to closing. If you are closing a sale, be sure to ask for the order. If the prospect gives an answer other than "yes", it may be a good opportunity to identify new objections and continue selling.

Follow-up is an often overlooked but important part of the selling process. After an order is received, it is in the best interest of everyone involved for the salesperson to follow-up with the prospect to make sure the product was received in the proper condition, at the right time, installed properly, proper training delivered, and that the entire process was acceptable to the customer. This is a critical step in creating customer satisfaction and building long-term relationships with customers. If the customer experienced any problems whatsoever, the sales professional can intervene and become a customer advocate to ensure 100% satisfaction. Diligent follow-up can also lead to uncovering new needs, additional purchases, and also referrals and testimonials which can be used as sales tools.
3.3. Sales force objectives:

Sales objectives must be based on the character of the company’s target markets and the company’s desired position in these markets. Companies typically set objectives for their sales force. For example, a computer sales person is responsible for selling, installing and upgrading customer computer equipments. Sales representatives perform one or more of the following tasks for their companies: Prospecting Targeting

Communication Selling Administration Information gathering and Allocating Considering these, sales representatives work with customers in several ways: Sales representatives to buyer: A sales representative discusses issues with a prospect or customer in person or over the phone. Conference selling: Sales representative brings company resource people to discuss a major problem. Seminar selling: A company team conducts an educational seminar for the customer company. Once the company decides on a desirable selling approach, it can use either a direct or contractual sales force. Direct: It consists of full-time or part-time paid employees who work exclusively for the company. This includes inside sales personnel who conduct business from their office using the telephone and receiving visits from prospects and field sales personnel, who travel and visit customers. Contractual: This consists of manufacturer’s sales agents or brokers, who are paid a commission based on their sales.
3.4. Sales force structures:

The sales force strategy will have implications for structuring the sales force. If the company sells many products to many types of customers, it might need a product or market sales force structure. If the company sells one product line to one end- using industry with customers in many locations, the company would use a territorial sales force structure. Territorial structure: In this case each representative is allotted a specific territory. The advantages of this structure are: 1.It results in a clear definition of the sales representatives responsbilities. 2.Territorial responsibility increases the sales representatives selling effectiveness, incentives and personal life. 3.Travel expenses are relatively small as the representative travels within a small geographical area. Product structure: This is needed where the products are technically complex, highly unrelated or very numerous. Kodak uses different sales force for its film products and industrial products. Cipla uses different executives stationed at one area to cater to different products.

Market structure: Here a company’s sales force can often specialise in industry or customer lines. Separate sales force can be set up for different industries and even different companies or customers. Say a book publisher can set up sales force for retail trade and as well have another one for institutional sales. Complex salesforce: When a company sells a wide range of products to many types of customers over a broad geographical area, it can often combine several principles of sales structures. Sales force can be speicalised by territory-product, territory-market, product-market etc. A sales representative then report to one or more line managers and staff managers.
Number and size of sales force:

Once the company decided about its sales force strategy and structure, it is ready to consider sales force size. Increasing the number of sales representatives will increase both the sales and cost. Some of the methods of sales force size are: Work load method: Here the company establishes the number of customers it wants to reach, then it can use a work load method to establish sales force size. This method consists of the following steps: Customers are grouped into size classes according to their sales volume. The desirable call frequencies are established for each class. The total work load is achieved by multiplying the number of accounts in each class by the call frequency. The average number of calls a sales representative can make per year is determined. The number of sales representatives needed is determined by dividing the total annual calls required by the average annual calls made by a sales representative. Incremental method: In this method, a company will start generating a cost-volume(revenue) equation for hiring the sales force. The number will be added, say at 15th sales representative, if the equation is positive, it is better to add him to the line. However at one point, the equation will become negative which shows clearly that adding any more representative is a loss for the company. Budgetary method:

The company’s financial resources will often circumscribe the number of sales people that are required. The steps involved in the process are: 1. Determine the personal selling budget 2. Determine the full costs of maintaining one sales person in the field 3. Calculate the number of sales personnel permitted by dividing item 1 by item 2. Breakdown method: This technique uses the following steps: 1. Determine the company’s potential sales volume for its entire market area. 2. Determine the minimum sales volume to support one sales person. 3. Calculate the number of sales personnel by dividing item 1 by item 2. Thus the number of sales personnel a company employs in the field derives from the fundamental considerations as: The number of prospective customers for the company’s products The sales potential of each of these prospective customers The geographical concentration or dispersion of these customers and The financial resources available to the company.
3.5. Purpose of sales territories: 1.Shared territories:

Every business defines sales territories in some fashion. Usually several sales persons of the same company work in a given geographic area. Some firms use this shared territory strategy to deliberately cause competition among their own sales representative.
2.Exclusive territories: The rationale for exclusive territories is that all prospects can be covered in an orderly and efficient manner. The risk of duplication of effort is virtually eliminated. The customer may be better served because each sales person will be responsible and reap the rewards of happy customers and all that means in terms of repeat business. This type generally thought to encourage more loyalty from the sales person toward the company. 3.Territory planning: Everyone involved must understand the plan and thus aid in its implementation. By the same token the plan should provide direction and reduce the tendency to drift without working toward a desirable objective. To be useful, it must be written in simple plain language. Such issues as market penetration, geographic concentration, sales blitzes, new account emphasis, and product strategy, among other factors, will affect how the territory is divided.

4.Return on Assets Managed: Some companies study the sales function and set performance criteria in terms of ROAM. It refers to two types of items, first it can mean the actual assets needed to support the sales effort, particularly inventories and accounts receivable. Second, it can refer to the customers within the territory, who are after all the most valuable resource for which the sales person is responsible. Determining these criteria before hiring or reassigning salespeople will aid in the deployment process itself. Specifically defining the area served is a start. Focusing on the geographic limits, the sales manager should write down the area for which he is responsible. In some case it the top management who defines the target area for the company. Even if it has not this is a necessary and obvious starting point.

5.Sales forecast:

Once the area to be served is defined the next step is relatively easy. From the sales forecast for the following year and the estimates projected for future years, the sales manager should be able to determine how many sales people will be required to attain the projections. This involves analysing the sales forecast in terms of the number of sales persons needed to make the predicted sales. One of the considerations is the commission level expected for each sales person. The sales manager should also decide how many territories will be required. Again it is a function of the forecast. In fact, a complete and scientific forecast, in-depth and well documented, will be the best spring board from which the sales manger can build the territory design for profitable sales.
3.6. Sales force management:

3.6.1. Recruitment: The major sources of recruiting sales representative are: 1. Internal applications 2. Advertising National newspapers Local newspapers Trade journals Commercial television
Radio 3. Manpower Consultants 4. Employment agencies 5. Educational establishments Universities

Engineering/ Technical institutions 6. Professional bodies etc. Following are the developments in the advertising circuit over the years which help the advertiser:

1. The emergence of specialised trade journals and magazines like Express Pharma pulse, IT magazine, PC quest, Hotelier& Caterer, Auto India, Retailing magazine etc., has helped the recruiter to zoom down to the right candidates. 2. Many business magazines are offering recruitment services for the benefit of the advertisers. 3. The evolution of Inter net has opened the opportunities section with confidentiality being maintained. Portals like Naukri.com, JobsDB.com, indiainfo.com, rediff.com, mafoi.com etc are offering placement services 4. The outdoor media has also become useful to conduct walk in interviews by advertising for a single day. 5. Telephonic interchange, teleconferencing, videoconferencing have become another source for attracting overseas talent at a low cost. 6. The developments of e-mail has helped the companies to write separately to the prospective candidates. By sourcing the information bank of say Rediff.com, companies can sent in mail to whom they think will fit into their position. Based on the recruitment drive, a selection process is undertaken where by various methods like Aptitute tests, attitude tests etc., are conducted. Primarily interview is the most sought after selection method. 3.6.2. Types of Interviews:
1. Unstructured Interview Involves a procedure where different questions may be asked of different applicants. 2. Situational Interview Candidates are interviewed about what actions they would take in various job-related situations. The job-related situations are usually identified using the job analysis technique. The interviews are then scored using a scoring guide constructed by job experts. 3. Behavior Description Interviews Candidates are asked what actions they have taken in prior job situations that are similar to situations they may encounter on the job. The interviews are then scored using a scoring guide constructed by job experts. 4. Comprehensive Structured Interviews Candidates are asked questions pertaining to how they would handle job-related situations, job knowledge, worker requirements, and how the candidate would perform various job

simulations. Interviews tapping job knowledge offer a way to assess a candidate's current level of knowledge related to relevant implicit dimensions of job performance (i.e., "tacit knowledge" or "practical intelligence" related to a specific job position) 5. Structured Behavioral Interview This technique involves asking all interviewees standardized questions about how they handled past situations that were similar to situations they may encounter on the job. The interviewer may also ask discretionary probing questions for details of the situations, the interviewee's behavior in the situation and the outcome. The interviewee's responses are then scored with behaviorally anchored rating scales. 6. Oral Interview Boards This technique entails the job candidate giving oral responses tojob-related questions asked by a panel of interviewers. Each member of the panel then rates each interviewee on such dimensions as work history, motivation, creative thinking, and presentation. The scoring procedure for oral interview boards has typically been subjective; thus, it would be subject to personal biases of those individuals sitting on the board. This technique may not be feasible for jobs in which there are a large number of applicants that must be interviewed.

3.6.3. Training the sales force:
On-the-job-training (OJT): Formal training for learning the skills and knowledge to perform a job that takes place in the actual work environment. Case study: A printed description of a problem situation that contains enough detail to enable the learners to recommend a solution. The learners encounter a real-life situation under the guidance of an instructor or computer in order to achieve an instructional objective. Control of the discussion comes through by the amount of the detail provided. Computer-based training (CBT): Interactive instructional experience between a computer and a learner in which the computer provides the majority of the stimulus and the learner responds, resulting in progress toward increased skills or knowledge. Has a more complicated branching program of mediation and answering than CAI. Now an all-encompassing term used to describe any computer-delivered training including CD-ROM and the World Wide Web. Some people still use the term CBT to refer only to old-time text-only training. Multimedia training: An instructional system that incorporates all or various instructional methods and media. It describes any application that uses multiple media (graphics, text, animation, audio, video), but multimedia is primarily thought of as any application that uses highbandwidth media (audio and video) and is most often delivered on CD-ROM. Performance-oriented training :

Training in which learning is accomplished through performance of the tasks or supporting learning objectives under specific conditions until an established standard is met.
Simulation : Any representation or imitation of reality. An instructional strategy used to teach problem solving, procedures, or operations by immersing learners in situations resembling reality. The learners actions can be analyzed, feedback about specific errors provided, and performance can be scored. They provide safe environments for users to practice realworld skills. They can be especially important in situations where real errors would be too dangerous or too expensive. Web based instruction (WBI) : Web-based Instruction is delivered over public or private computer networks and displayed by a Web browser. WBI is available in many formats and several terms are linked to it; on-line courseware, distance education on-line, etc. WBI is not downloaded CBT, but rather on-demand training stored in a server and accessed across a network. WBI can be updated very rapidly, and access to the training controlled by the training provider.

3.6.4.Methods of compensation:
Straight salary: This method is used by many start-up companies and those companies in the fledgling or new industries. This method makes the staff confident about his earnings and also provides a sense of security to him. This method works on the basis of the following: The components of salary are: Basic salary Dearness allowance as decided by the company House Rent Allowance Medical allowance and Provident fund , gratuity and employee insurance schemes where the employee needs to contribute. Straight commission: The commission schemes are followed only in those industries which are very old. There are lot of individuals who are experienced who can understand the riguors of the industry and would be able to provide the company what they expect. The following are the methods followed in this straight commission: Simple Percentage Company pays its salespeople 10 per cent of whatever they sell. The details of this method are provided in the next lesson. Salary and Commission:

This method allows for the improved performance by the sales people. In an effort to achieve above their targets, this method helps the companies. The sales people will work more than what they do when they are earning only a simple salary. If the organisation is old and the industry is growing, this method is found to be useful.

Incentives: Incentives are motivators. Over and above the salary, these incentives play a vital role in the overall growth of the company as well the sales personnel. Incentives provide the extra money for the employee and motivates him to perform better. A study by Ralph & Affliates among the companies and sales people revealed that, incentives are used to
Increase or maintain sales (84%) Build morale (65%) Build customer loyalty / trust (51%) Increase market share (51%) Build employee loyalty / trust (49%) Improve customer service (49%) Create new markets (44%) Foster teamwork (42%) Develop contracts (40%)

ESOP: Employee Stock Ownership Plan (ESOP): An ESOP is a defined contribution employee benefit plan that allows employees to become owners of stock in the company they work for. ESOP works as under: 1. The ESOP operates through a trust, setup by the company, that accepts tax deductible contributions from the company to purchase company stock. 2. The contributions made by the company are distributed to individual employee accounts within the trust. 3. The amount of stock each individual receives may vary according to preestablished formulas based on salary, service, or position. 4. The employees may ‘cash out’ after vesting in the program or when they leave the company. The amount they may cash out may depend on the vesting requirements. 4. Have you understood type questions:

1. Personal selling plays a vital role in industrial markets. True/ False 2. The stage in the personal selling steps where the sales force actually meets the prospect is at: A. Prospecting B. Pre approach C. Approach D. Demonstration 3. The emergence of specialised trade journals and magazines like Express Pharma pulse, IT magazine, PC quest, Hotelier& Caterer, Auto India, Retailing magazine etc., has helped the recruiter to zoom down to the right candidates. State True /False. 4. Simulation is a method of sales force…………….: A. Recruitment B. Selection C. Training D. Performance appraisal 5. ……………………..is the best method in industries which are old. A. Salary only B. Commission only C. ESOP D. None of these
5. Summary

Personal selling is different for different industries. The sales people require to have certain unique skills and traits that force them to face the harsh realities of the market. The most important personality traits for sales people are empathy and focus,

ego-drive, optimism and attitude toward responsibility. There is a need to have personal introspection before venturing into selling. An introvert can hardly be able to sell anything. It is hence important that the individual is outgoing, gregarious and also an extrovert, talkative person. Apart from selling, the sales person has to perform many other tasks, such that the percentage of calling time is only about 33 per cent. The potential customers have to be first identified from databases/company sources/primary information available. The sales person has to plan on which prospect needs to be called with what priority. Then, the sales person has to decide how to approach a customer. Thus the selling techniques have to be constantly followed up. In addition, the sales person’s company will request administrative work such as providing all kinds of data on customers, reporting activities, participating in sales meetings and conferences and visiting trade shows as seen earlier. In order to constantly improve the competence, the sales person has to take part in product as well as sales training.
6. Exercises 1. What kinds of activities are required in determining the types of sales personnel required by a company? 2. Describe the role of sales force in the wake of technological sophistication. 3. Explain how recognition and praise can be used successfully to motivate sales people? Cite examples. 4. What are commission schemes? How they can be used for the purpose of sales people? Identify the industries where it can be implemented. 5. “ The management development programmes are mostly confined to IIM” – Discuss. 6. Mention the characteristics required for an industrial sales manager. 7. References 1. 2. 3. 4. 5. 6. 7. 8. Alam Williams, “All about selling”, McGraw Hill. Bellenger and Ingram, “Professional selling”, MacMillan. Bert Schlain, “ Big league salesmanship”, Prentice Hall. Carlton Pederson et al, “ Selling: principles and methods”, Richard Irwin. Charles Futrell, “Fundamentals of Selling”, Richard Irwin. David Hiller, “Leading the sales team”, Gower. Ibid.,“ Training the sales team”, Gower. David Georgoff and Robert Murdick, “Manager’s guide to forecasting”, Harvard Business Review, Janurary- February 1986, pp.110-119. 9. David Mercer, “The sales professional: strategies and techniques for managing the High level sale”, Kogan Page. 10. Eric Berne, “ Games people play”, Grove. 11. Robert Patty, “Manaing sales people”, Reston. 12. Robert Sobek, “A manager’s primer on forecasting”, Harvard Business Review, May- June 1973, pp.6-15. 13. Susan Marks, Workforce, June 2001, p. 111. 14. Strafford et al., “Effective sales management”, Butterworth Heinemenn.

Case studies: 1. NANZ When Nanz hit the market in 1993, it was considered a bold step into what was then a sunrise industry. In 1997, the chain had projected a turnover Rs100 crore by 1999. But by the appointed date, turnover was less than a fifth of that level, and profits were nowhere visible on the horizon. Nanz appears to have got it just right. It had the right stores in the right places - places where well-heeled customers would come to buy things at a premium; places like South Extension and Greater Kailash, representing some of New Delhi uppercrust areas. But Nanz is out for the count today, after struggling for nearly a decade with low business volumes and turnover. Why did a chain with three high-profile backers fail in an industry that has seen a boom in the last decade? The answer, in one sentence, is simple: getting a couple of rules of the game right is not enough if you get the rest of them horribly wrong. With 20/20 hindsight one can say that the Nanz management failed on almost every count. It failed to do its homework, a fact that affected both its cost structures and its target market. It also failed in building effective partnerships with its vendors to ensure an efficient supply chain. The problem began right from the groundwork. Nanz chose to start its chain in Delhi, where its Indian promoters, the Nandas, are based. But this proved to be a bad decision because of crippling real estate prices. In contrast, RPG group’s Foodworld opened in Bangalore, Hyderabad, Chennai and Pune, where real estate prices are almost a quarter of those in Delhi. For one of its first outlets in Delhi’s Greater Kailash locality, Nanz was paying as much as Rs 5 lakh for its 10,000 square feet space in 1993. Thus at Nanz, rent accounted for as much as 4 to 5 per cent of gross margins. But real estate proved to be a bigger killer than Nanz had bargained for. The first Nanz outlet was opened in May 1993 in South Extension in Delhi. Within a year, it was attracting 2,000 customers per day. But the dream run came to a sudden halt when the Municipal Corporation of Delhi razed the building. Apparently, Nanz had violated building by-laws by taking a lease on residential property. Kapoor claims that the Nanz management was unaware of these irregularities; it had merely leased the property from parties who owned the real estate. Then in 1998, a part of another Nanz outlet on Pusa Road was demolished because the builder had taken up more are than what was permitted. Meanwhile, Nanz had another, bigger problem on its hands - the lack of a market. When Nanz Food Products was formed in 1993, the supermarket concept was in its infancy. Though retail activity started in the mid-eighties, players like Nilgiri and Foodworld were restricted to the south and west. The first Shoppers’ Stop outlet opened in Mumbai in 1991. Nanz was the first major food and grocery retail store chain in northern India. It was, therefore, in direct competition with the kirana shops, which have three distinctive advantages - proximity, service (they offer such convenience as home delivery) and high margins due to low infrastructure

costs. Nanz’s ambiance may have been in keeping with the promoters’ aim of providing an international shopping experience, but it failed to lure middle class and lower middle class consumers who would help generate volumes to partially neutralise the high overheads. Nanz made sure it targets the low turnover customers by setting up ‘LoBill” stores - no-frills stores of 1,000 to 2,000 square feet to increase its consumer base. These stores were opened in such middle class “catchment areas” like Noida and Shahdara in 1994. This format was extended in December 1996 when Nanz established six sub-1,000 square food stores called “Kiryana from Nanz”. However, by 1997, two of these had shut shop. The reason: Nanz Kiryana stores did not offer sufficient price differentials from the neighborhood shops. Moreover, Nanz did little to strengthen customer relationships in a durable manner. Where, for instance, Shoppers Stop has an energetic loyalty program, Nanz launched special promos and went in for some aggressive advertising. But the problem was that these efforts were rarely consistent. Nanz would step up its media presence during the fag end of one month and the beginning of another (from the 25th of one month to the 10th of the next). Such measures only brought temporary relief. Typically, retailers source directly from manufacturers instead of distributors. By cutting one link in the chain, they are able to negotiate better bulk discounts.In the case of Nanz, they could not leverage the same. The lax standards at the store level were a direct reflection of the management, which was constantly in flux. In eight years, Nanz Food Products has had six CEOs. (source: Ronita Chattopadhyay) Questions: 1. What were the problems as seen by the company and perceived by the customers? 2. Nanz was also trying to fight the general perception that a supermarket or branded store need not necessarily charge higher prices. Do you think this is the right strategy? Explain.


Marketing of services
Unit structure: 1. Introduction 2. Learning Objectives 3. Services marketing 3.1. Characteristics of services 3.2. Segmentation, positioning and differentiation 3.3. Service quality 3.4. Marketing mix for services 4. Have you understood type questions? 5. Summary 6. Exercises 7. References 1. Introduction: Services permeate every aspect of our lives; consequently the need for services marketing knowledge is greater than ever before. The distinction between goods and services is often unclear. In general goods are defined as objects, devices or things, where as services are defined as deeds, efforts, or performances. Very few products can be classified as pure products or pure services. When a customer purchases a service, he or she purchases an experience. The four components of the servicing system create the experience for the customer-the inanimate environment, service providers/contact personnel, other customers, and the invisible organization and systems. In turn, the service experience that is created delivers a bundle of benefits to the consumer. This service sector which is now a major component of the Indian economy will thrive for years to come and the marketers should know how to make the most of this sector.

2. Learning Objectives: When you finish this unit, you should be able to:

• • • •

Understand the emergence of service sector in India Understand the characteristics of services Understand the marketing issues in services Understand the marketing mix strategies of services

3. Services in Indian context

Services in India were noticed only after the advent of liberalization, privatization and globalization aspect. The technological advancements of the last century have been bestowed an unheard of premium on the human resource which came as a windfall for the Indian economy, especially for its service industry. India has a definite resource advantage to meet the growing global opportunities in the services sector. With the rise of new economy, outsourcing has flooded the employment channels. India's comparatively young population is well educated in diverse fields and that specific class of professionals is also well versed in the language which the world speaks. Being a developing nation rearing to make a mark globally our services have the leverage of wage differential. This phenomenon makes Indian professionals much sought after in the world market. For domestic economy too, opening of the services sector is advantageous as it absorbs the teaming millions reducing the possibility of educated unemployed stuck with limited options in agriculture and manufacturing sectors of the economy. Sixteen service sectors in the country achieved growth of more than 20 per cent in 2004-05 compared to 2003-04, according to an analysis of 42 service sectors carried out by the FICCI. Another 18 sectors clocked 10-20 per cent growth during the same period. Based on the feedback received from representatives of various service-related industry associations and private and public sector companies, the analysis found that the sectors that recorded more than 20 per cent growth in 2004-05 included organised retail trade (30 per cent), road transport service (20 per cent), domestic air passenger traffic (24 per cent), total air cargo handled (20 per cent), mobile subscriber (55 per cent), Internet subscriber (22 per cent), and live entertainment (40 per cent). The sectors that have achieved 10-20 per cent growth included international air passenger traffic (17.1 per cent), international air cargo (19 per cent), courier services (15 per cent), car finance (16 per cent), and film industry (17 per cent). 3.1. Characteristics of Services:

Service is an intangible product; any product offering that is essentially intangible. The features of services that distinguish them from tangible products; these are intangibility, variability, inseparability and perishability.

Intangibility the service cannot be touched or viewed, so it is difficult for customers to tell in advance what they will be getting; Inseparability of production and consumption the service is being produced at the same time that the customer is receiving it (e.g. during hair dressing, during an online search, or a legal consultation); Perishability unused capacity cannot be stored for future use. For example, spare seats on one aeroplane cannot be transferred to the next flight, and query-free times at the reference desk cannot be saved up until there is a busy period.

Heterogeneity (or variability): services involve people, and people are all different. There is a strong possibility that the same enquiry would be answered slightly differently by different people (or even by the same person at different times). It is important to minimise the differences in performance (through training, standard-setting and quality assurance).

People often try to overcome some of these difficulties by ensuring that the physical manifestations of the service (the people running it, the library building, printed search results, airline tags, hotel material, web pages etc) indicate the quality of the service. The people running the service are more likely to inspire confidence in the service if they are responsive, reliable, courteous, and competent. If the hotel lobby looks shabby and disorganised, or if the website is difficult to navigate with broken links, then users may assume that the services provided by the respective hotel or provider is bad. 3.2. Segmentation, Positioning and Differentiation:

Market segmentation is used as a strategic marketing tool for defining markets and thereby allocating resources. Market segmentation is the act of dividing a market into distinct groups who might be attracted to different products or services. This technique is widely accepted as one of the requirements for successful marketing. By dividing the market into relatively homogenous subgroups or target markets, both strategy formulation and tactical decision making can be more effective. Market segmentation is concerned with individual or group differences in response to specific market variables (e.g. preferences, lifestyles, media habits, etc.). The strategic presumption is that if these response differences exist, can be identified, and are reasonably stable over time, and if the segments can be efficiently reached, the company may increase its market share beyond that obtained by assuming market homogeneity. Apart from the normal market segmentation possibilities that are mentioned earlier in this study material, one major segmentation that is needed in services is customer segmentation. Customer segmentation is a good thing. It helps to recognize how customers are different and it should draw the attention to needs of different segments, prompting you to better meet those needs. Segment by need rather than profit or revenue. A low-profit customer today could be high-profit tomorrow if you offer products and services that fill her/his needs. Look for ways some customer segments can effectively be more "self- service," which cuts costs for the company while meeting customer service needs. Build in ways to create exceptions in automated customer service processes, so as not to alienate those with special situations. If offering promotions, rewards, or other incentives to some segments but not others, "spell it out" for customer service representatives and structure your Web site and promotional mailings accordingly. By taking steps to assure customers receive consistent information across all channels of communication, you avoid customers being exposed to offers for which they do not qualify. There are ways to segment customers without lowering customer service. Positioning applies to all products and services. Positioning is about making products available at the right time, to the right people, and at the right place. Thus, it is in the

hands of marketers how well they play with positioning by adopting innovative methods. It is imperative for an organization to clearly differentiate its product or service from that of its competitors. This enables the firm to gain sustainable competitive advantage in the market. Positioning is the strategy by which the firm does the aforesaid endeavor. Some of the methods include getting into the mind of consumers, avoiding overload of information to customers, and sustaining the leadership position. There are perceptual mapping that can be done so that the desired service can be offered to the customers. It has been used as a strategic management tool for about thirty years now. Perceptual mapping helps to communicate the relationship between competitors and the criteria used by your consumers while making purchase decisions. Perceptual maps, being simple graphic figures, can pave the path for all types of organizations.to think in strategic terms.
A study conducted by Nargundkar brings out the perceptual map of the Indian airline sector where the respondents were A)Jet airways, B)Indian Airlines, C)Air Deccan and D) Kingfisher in this order. The study was based on perceived service quality. This study shows that customers of Jet Airways rate it as an airline that provides very good service quality across the fourteen service variables. Kingfisher ranks second and its customers have reported that usually the airline provides good service quality. Indian Airlines was rated as providing good in-flight food, waiting time for baggage, good ground service, accommodation on delay and a few other elements such as price, online booking and benefits for frequent fliers. Indian Airlines was rated as average or below average on the rest of the service variables. Baggage loss has been reported as a problem faced by some of the Indian Airlines customers. Air Deccan has been rated by its customers as providing good service quality in informing customer about delay. Air Deccan customers are happy with its provision for online booking, discounted fare and real benefits for frequent fliers. The travelers of Air Deccan seem to rate it to be a bad service provider even though they were flying on low fares. Differentiation can occur only by adding new service elements along with providing better quality in delivering quality service which now Kingfisher and Jet airways have started to do so.

3.3. Service Quality:

An attitude formed by a long-term, overall evaluation of a firm’s performance. To deliver a consistent set of satisfying experiences that can build in to an evaluation of high quality requires the entire organization to be focused on the task. The needs of the consumer must be understood in detail, as much the operational constraints under which the firm operates. Service providers must be focused on quality, and the system must be designed to support that mission by being controlled correctly and delivering as it was designed to do. 3. Customer Expectations:
Following are the types of customer expectations: Predicted Service: The level of service quality a consumer believes is likely to occur, which is a probability expectation, i.e. the customer expectation based on the customer opinion of what will be most likely when dealing with service person. Desired Service: The level of service quality a customer actually wants from a service encounter, which is an ideal expectation, i.e. a customer expectation of what a perfect service encounter would be. Adequate Service: Level of service quality a customer is willing to accept. It is a minimum tolerance expectation. i.e. a customer expectation based on the absolute minimum acceptable outcome. Zone of Tolerance: Level of quality ranging from high to low and reflecting the difference between desired service and adequate service; expands and contracts across customers and within the same customer, depending on the service and conditions under which it is provided.

Perceived service quality can be defined according to Parasuraman, Zeithaml & Berry as "a global judgment or attitude relating to the superiority of a service." Over the past three decades, researchers have attempted to discover the global or standard attributes of a service that are important to the customer and that contribute significantly to customers' quality assessment. Sasser, Olsen, and Wyckoff reported seven major attributes in the context of the service industry: security, consistency, attitude, completeness, conditions, availability, and training. Later, ten dimensions were revealed in an exploratory study conducted by Parasuraman, Zeithaml & Berry : tangibles, reliability, responsiveness, communication, credibility, security, competence, courtesy, understanding the customer, and access. Based on these ten dimensions, Parasuraman et al. further purified and distilled these ten dimensions of service quality to five: tangibles, reliability, responsibility, assurance, and empathy. These five service quality attributes constitute the basis for global measurement of service quality, namely, SERVQUAL. The various gaps that can arise out of service continuum between customer and the employee are: 1. Service gap: The distance between a customer’s expectation of a service and perception of the service quality delivered. Ultimately the service gap is a

function of the knowledge gap, the standards gap, the delivery gap, and the communications gap. 2. Knowledge gap: The difference between what consumers expect of a service and what management perceives the consumers to expect. 3. Standards gap: The difference between what the management perceives consumers to expect and the quality specifications set for service delivery. 4. Delivery gap: The difference between the quality standards set for service delivery and the actual quality of service delivery. 5. Communications gap: the difference between the actual quality of the service delivered and the quality of service described in the firm’s external communications. SERVQUAL at SBT A study was conducted at nine branches of State Bank of Travancore in Thiruvananthapuram. The outcome of the study reveals the current perception about the bank, rooted in the mindset of the customers, which could be useful in formulating the strategies in future-operations of the organization, for the attainment of its goals in this competitive scenario. The basic objectives of the study were to diagnosis the gap in service (the difference in the expected and perceived service by the customer) provided in Thiruvananthapuram district and to suggest appropriate strategies for improving service quality and thereby increase the satisfaction level enjoyed by the customers at State Bank Of Travancore. In order to elicit the responses, a questionnaire was framed. This was used to collect the Personal data like age, occupation, income level, residential area etc. were collected along with data like years of business with SBT, features of SBT and whether the customers have accounts with other banks etc. The set of branches in Thiruvananthapuram were classified into three groups in terms of performance with respect to position and growth with reference to total personal deposits. o A – High performance o B – Medium Performance o C – Low performance A set of three branches was selected at random from each groups and a sample size of nine branches were obtained, three each from the above categories. A set of thirty customers was interviewed at each branch by performing a systematic random sampling from these branches. After knowing the average total number of customers per day from the branch manager. Analysis was done by comparing the data obtained from different branches based on the preference and opinion of the customers. A Chi–Square test for independence of attributes was done in order to test whether the customers’ opinion on the rating given to the banks is dependent on the basis of performance by the branches. The SERVQUAL scores were determined from the responses of the customers on their perceived value against their expectations on the various dimensions of service quality.

The findings of the study revealed three factors that make the customer continue with the bank. They are: o Service dependent o Bank dependent & o Customer dependent More than 38% of the respondents do business with SBT due to its service quality. Here it is found that the scores for service dependent factors are more for higher performance branches in comparison with others. Factors that make the customers start account with other bank includes reasons like dissatisfaction with the current services provided by SBT, and some of the mostly told causes for this are: o Waiting time for counter service delivery o Confusions at the counter o Lack of coordination between employees o Technical difficulties in availing funds through ATMs o Unavailability of right information due to employee’s lack of knowledge The best SERVQUAL scores are attained for the dimensions of quality by branches like Kowdiar, Medical College and Nanthencode while others are far back in the race. Performance of the branch is dependant on its attitude towards the performance in various dimensions of service quality. The banks have got good feedback on higher reliability while on responsiveness, assurance, empathy as well as tangibles are not convincing to customers. At Kowdiar, Medical College and Nanthencode the expected and personal service quality are almost comparable while in other branches it has got much difference. The introduction of Grahak Mitra has proved to be the right move to help the customers who are unaware about the information regarding their transaction with the bank. In the outskirts of the district the customers face difficulties due to the lack of knowledge and understanding of the bank’s operations; Dissatisfaction level in service is higher in case of private sector employees when compared to that of the public sectors. Public sector employees have rated the service of SBT to be excellent and good while most of the private sector marked it to be average and suggested for betterment. Dissatisfaction level is higher in case of youth and middle-aged while the senior people are very well satisfied with the present service.

SERVQUAL in KTDC: Understanding the changes in customer preferences and expectations of services, to deliver service according to that is important in hotel service industry. This will help to anticipate the competition and stay ahead in the competition. Keeping in mind these aspects, the following objectives were set: • To understand the customer perception and expectation of service quality in hotels of KTDC

• •

To find out the present service quality prevailing in hotels of KTDC To find out customer satisfaction in service rendered by the hotels of KTDC

This study is based on primary and secondary data. The primary data is collected from 100 members of the management staff of the KTDC Ltd and secondary data is collected from the published annual reports and from other documents and from the website of the company. The study is mainly carried out in Trivandrum (dist) and KTDC hotels at Trivandrum, Hotel Mascot, Hotel Samudra, and Hotel Chaitram. For the study mainly primary and secondary data were used. The Primary data was collected through questionnaire and interview method and secondary data was collected from annual reports, brochures, and websites. In the findings it was found that majority of respondents were professionals and businessmen. The purpose of visit by most of the respondents in the hotel was for leisure. A good majority of the respondents visit not only Trivandrum but other places in Kerala as well. Most of the respondents plan to visit Kerala yearly. Majority of the respondents prefer premium hotel for their stay. A high level of satisfaction exists among the respondents regarding the level of services offered. The respondent rated the information availability and thanking provided as excellent at the reception. The respondents rated the welcome, verbal introduction, non-verbal introduction and other conversations at the reception as very good. The respondents have rated room service as excellent, food and beverages, cleanliness, overall atmosphere as very good and room facilities as good. The respondents rated the transportation and guiding as excellent, ticket booking, foreign exchange as very good. The majority of the respondents are not aware whether their suggestions have been implemented or not. More than 90% of the respondents are loyal as they would use the same hotel on their next visit and would also recommend it to others. Some of the suggestions put forward include provision for few separate rooms with all the facilities, which the businessmen/professional might need to stay connected with his business. Examples may the personal computer with broadband connection, printer, tax etc. this is because there is a growing number of businessmen and professionals who visit Kerala. Setup help desk at each hotel, which would provide assistance and guidance to the tourists in planning their trip in Kerala. This could be done in co-ordination with the events organized and places highlighted by Kerala tourism department. The main aim would be to promote the packages of hotels of KTDC. Set up a data bank consisting of information regarding preferences of regular customers. This would help them in providing better service to the customers and building brand loyalty. This would translate in repeat usage of the hotel and it getting recommended by way of word of mouth communication. The hotels should keep up regular communication with the clients and keep them up to date with the new packages being offered to sending greetings on the special occasions in the clients country, so that KTDC

remains in their minds long after their visit, with the minimum effort on the part of KTDC in terms of cost. The front desk and the hotel staff should be provided with training regarding customer relationship and they should be kept up to date wit the changing global preferences trends in service since most of the clients are foreigners. Implement the changes and show it in the service provided to the customer so that the customer feels that his suggestions have been implemented. Provide compliments to the customers who had taken interest in providing those suggestions. A roof top hotel could be constructed at hotel Chaitram as was mentioned by many of the customers. 3.4. Marketing mix strategies for services: The service marketing mix has 7Ps consists of Product, Price, Promotion, Place, People, Physical evidence and Process. There are 3P’s in addition to the 4P’s of product keeping in mind the characteristics of services. Let us now look at the three additional P’s: Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. They are: • Building • Catalougues • Brochures • Furnishings • Signages • Pacakging • Internet web presentation • Uniforms Process is another element of the extended marketing mix, or 7P's.There are a number of perceptions of the concept of process within the business and marketing literature. Some see processes as a means to achieve an outcome, for example - to achieve a 30% market share a company implements a marketing planning process. Another view is that marketing has a number of processes that integrate together to create an overall marketing process, for example telemarketing and Internet marketing can be integrated. A further view is that marketing processes are used to control the marketing mix, i.e. processes that measure the achievement marketing objectives. All views are understandable, but not particularly customer focused. process is an element of service that sees the customer experiencing an organisation's offering. It's best viewed as something that your customer participates in at different points in time. Here are some examples to help your build a picture of marketing process, from the customer's point of view. Going on a flight trip - from the moment that you arrive at the airport, you are greeted; your baggage is taken to the screening. Accessibility given to the person from restaurants and inflight shopping. Finally, at the end of the journey the baggage is delivered to you. Here many airlines want to differentiate their offerings to make the process successful.

People are the most important element of any service or experience. Services tend to be produced and consumed at the same moment, and aspects of the customer experience are altered to meet the 'individual needs' of the person consuming it. Remember, people buy from people that they like, so the attitude, skills and appearance of all staff need to be first class. Here are some ways in which people add value to an experience, as part of the marketing mix - training, personal selling and customer service. All customer facing personnel need to be trained and developed to maintain a high quality of personal service. Training should begin as soon as the individual starts working for an organization during an induction. The induction will involve the person in the organization's culture for the first time, as well as briefing him or her on day-to-day policies and procedures. At this very early stage the training needs of the individual are identified. A training and development plan is constructed for the individual which sets out personal goals that can be linked into future appraisals. In practice most training is either 'on-the-job' or 'off-the-job.' On-the-job training involves training whilst the job is being performed e.g. training of bar staff. Off-the-job training sees learning taking place at a college, training centre or conference facility. There are different kinds of salesperson. There is the product delivery salesperson. His or her main task is to deliver the product, and selling is of less importance e.g. fast food, or mail. The second type is the order taker, and these may be either 'internal' or 'external.' The internal sales person would take an order by telephone, e-mail or over a counter. The external sales person would be working in the field. In both cases little selling is done. The next sort of sales person is the missionary. Here, as with those missionaries that promote faith, the salesperson builds goodwill with customers with the longer-term aim of generating orders. Again, actually closing the sale is not of great importance at this early stage. The forth type is the technical salesperson, e.g. a technical sales engineer. Their in-depth knowledge supports them as they advise customers on the best purchase for their needs. Finally, there are creative sellers. Creative sellers work to persuade buyers to give them an order. This is tough selling, and tends to o ffer the biggest incentives. The skill is identifying the needs of a customer and persuading them that they need to satisfy their previously unidentified need by giving an order. Many products, services and experiences are supported by customer services teams. Customer services provided expertise (e.g. on the selection of financial services), technical support(e.g. offering advice on IT and software) and coordinate the customer interface (e.g. controlling service engineers, or communicating with a salesman). The disposition and attitude of such people is vitally important to a company. The way in which a complaint is handled can mean the difference between retaining or losing a customer, or improving or ruining a company's reputation. Today, customer service can be face-to-face, over the telephone or using the Internet. People tend to buy from people that they like, and so effective customer service is vital. Customer services can add value by offering customers technical support and expertise and advice.

4. Have you understood type questions? 1. Classification of products into goods, services, and ideas is determined by the: A. B. C. D. degree of labour intensiveness. type of markets. skill of the service provider. degree of consumer contact.

2. Of the following alternatives which service is the most people-based? A. Carpet cleaning B. Swimming instruction C. Airline flight D. Hotel accommodations 3. The appearance of the production facilities and the interpersonal skills of actual service providers are critical in __________ services. A. low-contact B. equipment-based C. industrial D. high-contact 4. Marketers for the airline industry sometimes find it difficult to promote their product because unused aeroplane seats cannot be stored. This problem illustrates which one of the following unique features of services? A. Intangibility B. Inseparability C. Perishability D. Heterogeneity 5. Summary

In the present CRM era where the customer is the decision maker, the increase in competition has made the differentiation in product range and services of an organization more important in any industry. Considering the fact that services are growing and are expected to be 75% of the Indian GDP, the importance can be seen. The growth in IT and software are one of the primary indicators. Hence organisations entering the service sector need to be competitive and updated. 6. Exercises

1. Prepare a perceptual map with the following details: Brand A Brand B Brand C Shares a few Shares a few Shares no attributes attributes with attributes with with competitors Brand A Brand B

Brand D Shares many attributes with Brand F

More Classy Less Sporty Brand E Shares no attributes with Brand G More Practical Less Classy

More Sporty Less Classy Brand F

Is conservative Is Sporty Brand G

More Practical Less Conservative Your Brand Shares absolutely no attributes with any Brand Exclusive Unique

Shares no Shares many attributes with Brand attributes with Brand E E More Conservative Less Practical More Classy Less Practical

2. Explain the service quality that is needed from a retail store. Visit the nearest retailer and explain the same. 3. Describe the need for people in services with examples from Hotel and Hospital sector. 4. Explain the relevance of marketing mix in the following aspects: a. Courier services b. Software services c. Consultancy services
7. References 1. Palmer, Adrian (2000) The principles of services marketing. 3rd ed. McGraw-Hill. 2. Christopher lovelock & Jochen Wirtz, Services marketing, Pearson 5th Ed. 3. Foster, S. Thomas, Managing Quality: An Integrative Approach. Prentice Hall, 2001. 4. Hiller, Steve, ARL SERVQUAL Survey Pilot. University of Washington Libraries. 5. Nitecki, Danuta A., SERVQUAL: Measuring Service Quality In Academic Libraries, http://arl.cni.org/newsltr/191/servqual.html. 6. Valarie A. Zeithaml , Bitner Mary Jo, “Integrated Customer Focus Across The Firm” Tata Mc Graw Hill, 3rd Edition 7. Valarie A. Zeithaml, Parasuraman, A.and Berry,L., “Problems and Strategies in Services Marketing”, Journal of marketing, 1985. 8. Valarie A. Zeithaml , “How Consumer Evaluation Processes Differ between Goods and Services” THE MARKETING OF SERVICES (1981) 9. A Parasuraman, Valarie A. Zeithaml, Leonard L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research”, Journal of Marketing (fall) 1985. 10. Parasuraman, Valerie A. Zeithaml, Leonard L. Berry, "SERVQUAL: A Multiple Item Measure For Measuring Consumer Perceptions of Service Quality", Journal of Retailing ,1988. 11. Cunningham, L. F., Young C. E., & Lee, M (2004)., Perceptions of airline service quality Pre and Post 9/11. Public works Management & Policy, 9(1), 10-25

12. Cunningham, L. F., Young C. E., & Lee, M. (2002). Cross-cultural perspectives of service quality and risk in air transportation. Journal of AirTransportation, 7(1), 3-26. 13. Bhagyalakshmi Venkatesh & R. Nargundkar , Service Quality Perceptions of Domestic Airline Consumers in India: An Empirical Study, VilakshanXIMB journal, 2006.

Rural marketing
Unit structure: 1. Introduction 2. Learning Objectives 3. Indian rural sector 3.1. Rural marketing profile 3.2. Rural consumer behaviour 3.3. Strategies for rural marketing 3.4. Rural retailing 3.5. Rural marketing initatives 4. Have you understood type questions? 5. Summary 6. Exercises 7. References

1. Introduction: Marketing of products has taken precedence over the process of production itself. This can be attributed to the fact that the new-age consumer equipped with the potent tool of information seeks more knowledge about the product, its features and its uses. Customer today indeed is the "King". He can make or break the company. And when this information is presented in a creative and effective manner, it creates an everlasting impression on the consumer's mind and may even alter his perception of what he needs. The urban consumer has always been pampered with the most dazzling array of goods and services from every industry. But the urban market is fast shrinking due to saturation caused by the competition, and the growth rate over the past few years has consistently shown a declining trend. Hence the only option before the marketer is to tap the rural sector which can provide a large volume for economies of scale. 2. Learning Objectives: When you finish this unit, you should be able to:

• • • •

Understand the reasons why organisations resort to rural markets Understand the profile of the rural markets Understand the intricacies of marketing in rural India Understand the challenges and solutions to rural marketing

3. Rural marketing: The rural market comprises of 74 per cent of the country's population, 41 per cent of its middle class, 58 per cent of its disposable income and a large consuming class. Today, real growth is taking place in the rural-urban markets or in the 13,113 villages with a population of more than 5,000. Of these, 9,988 villages are in seven states -- Uttar Pradesh, Bihar, West Bengal, Maharashtra, Andhra Pradesh, Kerala and Tamil Nadu. According to the National Council for Applied Economic Research, the millennium belongs to the Class III and IV ruralurban towns. In order to efficiently and cost-effectively target the rural markets, the companies will have to cover many independent retailers since in these areas, the retailer influences purchase decisions and stock a single brand in a product category. Most of the companies have started tinkering with pack sizes and creating new price points in order to reach out to rural consumers since a significant portion of the rural population are daily wage workers. Hence it becomes important to have a deeper insight into this emerging market. 3.1. Rural marketing profile: There are about 285 million live in urban India whereas 742 million reside in rural areas, constituting 72% of India's population resides in its 6, 00,000 villages. The number of middle income and high income households in rural India is expected to grow from 80 million to 111 million by 2007 while urban India is expected to grow from 46 million to 59 million. In fact according to a recent survey, there are more crorepatis in rural Punjab than in a few big urban cities. Size of rural market is estimated to be 42 million households and rural market has been growing at five times the pace of the urban market. There is increasing agricultural productivity leading to growth of rural disposable income. There is also lowering of difference between taste of urban and rural customers. There has been good monsoons during the years 2005-06. Many companies like Colgate-Palmolive, HLL, Godrej, etc., have already made forays into rural households but still capturing the markets is a distant dream. Most marketers still lack in-depth knowledge to analyze the complex rural market. Rural market has an annual size of Rs.65,000 Crore for FMCG, Rs.5000 Crores for Durables, Rs.45,000 Crores for Agri-inputs and Rs.8000 Crore for two and four wheelers according to NCAER study. Of two million BSNL mobile connections, 50% are in small towns / villages. Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT). 41 million Kisan Credit Cards have been issued (against 22 million credit-plus-debit cards in urban), with cumulative credit

of Rs. 977 billion resulting in tremendous liquidity. Of the 20 million Rediffmail sign-ups, 60% are from small towns. 50% of transactions from these towns are on Rediff online shopping site. 42 million rural households (HHs) are availing banking services in comparison to 27 million urban HHs. Investment in formal savings instruments is 6.6 million HHs in rural and 6.7 million HHs in urban. The rural market is expected to poise towards a greater jump as the infrastructure is improving rapidly. In 50 years only, 40% villages have been connected by road, in next 10 years another 30% would be connected. More than 90% villages are electrified, though only 44% rural homes have electric connections. Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD. Social indicators have improved a lot between 1981 and 2001. Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41% to 23%). Percentage of BPL families declined from 46% to 27%. Rural literacy level improved from 36% to 59%. Marketers can make effective use of the large available infrastructure like 1,38,000 post offices, 42,000 of haats, 25,000 melas, 7,000 mandis, 3,80,000 public distribution shops and 32,000 bank branches. Some of the companies that have used the rural distribution have started their own centres like DSCL Haryali Stores, M & M Shubh Labh Stores, TATA / Rallis Kisan Kendras, Escorts Rural Stores and Warnabazaar, Maharashtra (Annual Sale Rs. 40 crore). In the Indian context, rural marketing is a complex subject. For a business organization, rural marketing is beset with a number of problems. The prices of rural marketing pose many problems due to the vastness of the country and a high potentiality for providing an effective marketing system. Besides, a few other problems stem from the under-developed markets, and illiterate and gullible people constitute the major segment of the markets. More purchasing power is not enough. It is not enough to have some consumption pioneers. The activation of buying on a wide scale is an essential pre-condition for the exploitation of the rural market. It is now unanimously accepted that the rural salesmanship in India has been insufficient and inadequate and out of proportion to the agriculture revolution. This calls for strong bias in favour of raising the rural demand as against the urban demand. The hurdles in the rural marketing are: 1. 2. 3. 4. 5. 6. 7. 8. 9. High distribution costs High initial market development expenditure Inability of the small retailer to carry stock without adequate credit facility Generating effective demand for manufactured foods Wholesale and dealer network problems Mass communication and promotion problems Banking and credit problems Management and sales managing problems Market research problems

10. Inadequate infrastructure facilities (lack of physical distribution, roads warehouses and media availability) 11. Highly dispersed and thinly populated markets 12. Low per capita and poor standards of living, social, economic and cultural backwardness of the rural masses 13. Low level of exposure to different product categories and product brands 14. Cultural gap between urban-based marketers and rural consumers

In a nutshell the rural market profile is large and scattered in the sense that it consists of over 63 Crore consumers from 5, 70,000 villages spread throughout the country. Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity. Consumer in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc. The rural consumer values old customs and tradition. They do not prefer changes. Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country. The Infrastructure Facilities like roads, warehouses, communication system, and financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure facilities.

3.2. Rural consumer behavoiour: Rural consumer buys products more often (mostly weekly). He buys small packs, low unit price more important than economy. In rural India, brands rarely fight with each other; they just have to be present at the right place. Many brands are building strong rural base without much advertising support. Chik shampoo, second largest shampoo brand. Ghadi detergent, third largest brand. Both of them have had concerted effort in the north Indian rural market and have benefited. The gap between the urban and rural spend is huge. Though there is no authenticated figure, it is found that rural marketing currently must be accounting for only Rs. 5 billion out of a total estimated advertising budget of over Rs. 100 billion a year. There is a vast difference in the lifestyles of the people. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural customer. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart. With low disposable incomes,

products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh - the so-called `Bimaru' States. Hindustan Lever, among the first MNCs to realise the potential of India's rural market, has launched a variant of its largest selling soap brand, Lifebuoy at Rs 2 for 50 gm. The move is mainly targeted at the rural market. Coca-Cola has addressed the affordability issue by introducing the returnable 200-ml glass bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets. CocaCola has also introduced Sunfill, a powdered soft-drink concentrate. The instant and ready-to-mix Sunfill is available in a single-serve sachet of 25 gm priced at Rs 2 and multiserve sachet of 200 gm priced at Rs 15. The rural consumer is more of price oriented and also has high level of patronage motive. 3.3. Strategies for Rural Marketing Traditional methods of rural marketing make an interesting study and they ought to be analyzed carefully to draw relevant conclusions. Conventionally, marketers have used the following tools to make rural inroads: • • • • • • •

Use of few select rural distributors and retailers to stock their goods but no direct interaction with prospective consumer. Use of print media or radio but no alternate form of advertising for promoting their brands. More focus on price of product but less attention devoted to quality or durability. Same product features for urban and rural setting with no customization for rural areas despite differences in the market environment. Low frequency of marketing campaigns. Little uses of village congregations like haats and melas to sell the products. More focus on men as decision makers and buyers.

The past practices of treating rural markets as appendages of the urban market is not correct, since rural markets have their own independent existence, and if cultivated well could turn into a generator of profit for the marketers. But the rural markets can be exploited by realizing them, rather than treating them as convenient extensions of the urban market. Considering the magnitude of the task at hand with the companies, it makes sense for non-competitive companies like HLL and LG to make a joint effort to penetrate the market. They can use each other's distribution channels to leverage their brands. Also considering the poor awareness levels of the people, competitors like HLL and P&G should join hands to avoid the product proliferation, which results in confusing the consumer.

Rural consumers have a very high level of ethos so all the care should be taken not to hurt them in any form of advertising. Moreover, every effort should be made by the companies to promote the "my brand" feel in the minds of consumers. This can be achieved by connecting the local industries of that place and, if possible, use it in packaging or graphics of the product. Marketers need to understand the psyche of the rural consumers and then act accordingly. Rural marketing involves more intensive personal selling efforts compared to urban marketing. Firms should refrain from designing goods for the urban markets and subsequently pushing them in the rural areas. To effectively tap the rural market, a brand must associate it with the same things the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, "melas", and other activities where they assemble. One of the ways could be using company delivery van which can serve two purposes - it can take the products to the customers in every nook and corner of the market, and it also enables the firm to establish direct contact with them, and thereby facilitate sales promotion. However, only the bigwigs can adopt this channel. The companies with relatively fewer resources can go in for syndicated distribution where a tie-up between non-competitive marketers can be established to facilitate distribution. Annual "melas" organized are quite popular and provide a very good platform for distribution because people visit them to make several purchases. According to the Indian Market Research Bureau, around 8000 such melas are held in rural India every year. Rural markets have the practice of fixing specific days in a week as Market Days (often called "Haats') when exchange of goods and services are carried out. This is another potential low cost distribution channel available to the marketers. Also, every region consisting of several villages is generally served by one satellite town (termed as "Mandis" or Agri-markets) where people prefer to go to buy their durable commodities. If marketing managers use these feeder towns, they will easily be able to cover a large section of the rural population. Firms must be very careful in choosing the vehicle to be used for communication. Only 16% of the rural population has access to a vernacular newspaper. So, the audio visuals must be planned to convey a right message to the rural folk. The rich, traditional media forms like folk dances, puppet shows, etc., with which the rural consumers are familiar and comfortable, can be used for high impact product campaigns. 3.4. Rural retailing:

The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban. The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart. This is where rural retailing really takes off. Study on buying behaviour of rural consumer indicates that the rural retailers influences 35% of purchase decisions.

Therefore sheer product availability can affect decision of brand choice, volumes and market share. India offers a huge, sustainable and growing rural market which can be tapped effectively through innovative distribution channels with retailing being the most critical element of this strategy as it is the final touch point and the actual touch point with the customer which can be the most critical influence in the buying process. From the time HLL's new distribution model, named Project Shakti, was piloted in Nalgonda district in 2001, it has been scaled up and extended to over 5,000 villages in 52 districts in AP, Karnataka, Gujarat and Madhya Pradesh with around 1,000 women entrepreneurs in its fold. The vision is ambitious: to create by 2010 about 11,000 Shakti entrepreneurs covering one lakh villages and touching the lives of 100 million rural consumers. HLL has operated Project Shakti through these self-help groups; AP was chosen for the pilot project as its has the most number and better established SHGs - there are about 4.36 lakh SHGs in AP covering nearly 58.29 lakh rural women. The Shakti model trains women from SHGs to distribute HLL products of daily consumption such as detergents, toilet soaps and shampoos - the latter's penetration being only 30 per cent in rural areas. The women avail of micro-credit through banks. Mr Sehgal explained that some of the established Shakti dealers are now selling Rs 10,000-Rs15,000 worth of products a month and making a gross profit of Rs 700-Rs1,000 a month. Each Shakti dealer covers 6-10 villages which have a population of less 2,000. The company is creating demand for its products by having its Shakti dealers educating consumers on aspects like health and hygiene. Similarly ITC has already set up over 700 choupals covering 3,800 villages in four States — which include Madhya Pradesh, Uttar Pradesh, Karnataka and Andhra Pradesh — dealing with products ranging from soya bean, coffee, aquaculture and wheat. Now there is re-emergence of mandis in the form of portals or virtual bazaars like that EID Parry, Amul and ITC e-choupals etc. After all, the concept of mandis cannot be written off that easily. They have evolved over a period of time and have lasted for several centuries. They lost their prominence temporarily due to the brand marketing strategies adopted by companies. The basic problem with brand marketing is its high cost. Mandis offer a cost-effective method of marketing. With the virtual mandis the cost saving is still better. Consider for example the case of marketing farm inputs like fertilisers, seeds and pesticides. In the brand marketing approach, the same information is provided by several marketers through different media and methods. In the virtual mandis, several people can join hands and provide best possible information in a most cost effective manner to the farmers.
3.5. Rural marketing initiatives: 1. Escorts did not rely on TV or press advertisements, but rather concentrated on focused approach depending on geographical and market parameters like fares, melas, etc. Looking at the 'kuchha' roads of village, they positioned their bike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punch line 'Jandar Sawari, Shandar Sawari'. Thus, they achieved whopping sales of 95000 vehicles annually.

2. HLL started 'Operation Bharat' to tap the rural markets. Under this operation, it passed out low-priced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households. 3. ITC is setting up e-Choupals, which offers the farmers all the information, products and services they need to enhance farm productivity, improve farmgate price realization and cut transaction costs. Farmers can access latest local and global information on weather, scientific farming practices as well as market prices at the village itself through this web portal - all in Hindi. It also facilitates supply of high quality farm inputs as well as purchase of commodities at their doorstep. 4. BPCL introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing. It moves from village to village and fills cylinders on the spot for the rural customers. BPCL considered low-income of rural population, and therefore introduced a smaller size cylinder to reduce both the initial deposit cost as well as the recurring refill cost. 4. Have you understood type questions?

1. What are the number of villages as mentioned in this unit? A. 4,00,000 B. 5,00,000 C. 6,00,000 D. 7,00,000 2. Which company follows “hub and spoke” model of distribution? A. HUL B. P&G C. Coca cola D. Pepsi 3. Operation Bharath by HUL uses: A. Cinema halls B. Mandis C. Vans D. Dealers 4. “Fortune at the bottom of the pyramid” was written by : A. Peter Drucker B. Raghavachari C. Prahlad and Hart D. Peerumohamed
5. Summary

According to the United Nations, the richest 20 percent in the world accounted for about 70 percent of total income in 1960. In 2000, that figure reached 85 percent.

Over the same period, the fraction of income accruing to the poorest 20 percent in the world fell from 2.3 percent to 1.1 percent. According to CK Prahlad, contrary to popular assumptions, the poor can be a very profitable market especially if MNCs change their business models. Specifically, Tier 4 is not a market that allows for the traditional pursuit of high margins; instead, profits are driven by volume and capital efficiency. Margins are likely to be low (by current norms), but unit sales can be extremely high. Managers who focus on gross margins will miss the opportunity at the bottom of the pyramid; managers who innovate and focus on economic profit will be rewarded. Considering the discussions mentioned above, it is imperative that marketers start realizing the need for giving attention to the rural markets. Thus, looking at the challenges and the opportunities, which rural markets offer to the marketers, it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India. 6. Exercises 1. Nirma has become one of the largest branded detergent makers in the world. Meanwhile, HLL, stimulated by its emergent rival and its changed business model, registered a 20 percent growth in revenues per year and a 25 percent growth in profits per year between 1995 and 2000. How was this possible? 2. With large parts of rural India inaccessible to conventional advertising media — only 41 per cent rural households have access to TV — building awareness is a challenge. Explain how a consumer durable company can do it? 3. Explain the relevance of hub and spoke model of Coca cola for rural markets. Visit the nearest Coca-cola dealer and find out. 4. Do you think this will work- “a mobile van with complete Thums Up branding tours villages and invites people to buy any Coca-Cola product and play a game free. The van comes complete with a magician, speakers/promoters, and invites all consumers to participate in various games in rural markets” 5. The agri-portal of EID Parry, www.indiagriline.com, has been designed to address the specific needs of the rural farming community and is an attempt to catalyse ecommerce in agricultural and non-farm products by offering a network of partnerships. Do you think this will address the rural reach problem? References 1. Rethinking marketing programs for emerging markets, Chattopadhyay, A., and Dawar. N., Insead R&D, 2000. 2. Growing brand awareness, Joseph, Sophie, The Hindu Survey of Indian Industry, 1999 3. Backcountry Business, Business Today, November 11, 2001. 4. The Consumer, Business Today, January 20, 2002


5. Alternative Nation, Baxi, Sachin, Brand Equity, The Economic Times, 15 May, 2002. 6. I’ll play the game my way, Vindi Banga’s interview with Rahul Joshi and alika Rodrigues, Brand Equity, The Economic Times, May 22, 2002. 7. Advertising in Rural India: Language, Marketing Communication, and Consumerism. Institute for the Study of Languages and Cultures of Asia and Africa, Tokyo University of Foreign Studies. Tokyo Press, Tokyo, Japan. 2000.

Marketing Research
Unit structure: 1. Introduction 2. Learning Objectives 3. Marketing research 3.1. Marketing research process 3.2. Marketing research analysis 3.3. Marketing research methods 3.4. Preparation of marketing research reports 4. Have you understood type questions? 5. Summary 6. Exercises 7. References

1. Introduction: Managers need to exceed the expectations of the various stake holders in business such as shareholders, suppliers, employees, customers, government, general public etc.. And it is very evident that these different groups of stake holders possess conflicting interests. So the ability to build and maintain mutually beneficial long term relationship with customers and suppliers, the skill to adhere to government rules and regulations, the capacity to the uphold the shareholders expectation, and the task of securing appreciation from the general public, all are the performance indicators of the present day business. The turbulent environment forces further makes it a tough sail. The ability to get adapted to the complex and every changing environment is crucial in this ‘Darwinian economy’, which ensure the survival of only the fittest. The much demanding system never allows a manager to consider information as a bureaucratic nuisance like in the yesteryears. Today, managers, irrespective of their position consider information as a strategic weapon. The major aim of applied research is to find out a solution for a practical problem where as basic research is aimed at contributing towards the organized body of scientific knowledge. Descriptive or Ex post facts research is characterised by the fact that the research can only report what has happened or what is happening. In analytical research, the researcher has to use facts or

information already available and analyse these to make logical conclusions. Quantitative research is concerned with the measurement of quantity or amount. It involves the generation of data in quantitative form and various analysis using mathematical tools. Qualitative research is important in behavioural sciences. Conceptual research is related to theory. It is used by thinkers to develop new concepts or reinterpret existing ones. Empirical research relies on experience or observation. It is also called experimental type of research. In marketing the following are normally taken up for research: a. Consumer behaviour, loyalty b. Product positioning, product development, product life cycle c. Branding, brand equity d. Market segmentation & targeting e. Advertising, sales promotion f. Sales and distribution etc. 2. Learning Objectives: When you finish this unit, you should be able to:

• • • •

Understand the importance and scope of marketing research Understand the process of marketing research Understand the various types of marketing research Understand the applications of marketing research in India.

3. Marketing research

The Oxford Encyclopedia English Dictionary gives the meaning of research as “the systematic investigation into the study of materials, sources etc., in order to establish facts and reach new conclusion. In other words, research is simply the process of finding solutions to a problem after a detailed study and analysis of the situational factors. So it is about finding the truth with the help of study, observation, comparison and experiment. 3.1. Marketing research process:

The research process consists of a series of activities. The activities in the research process are closely related and they overlap continuously rather than following the sequence presented. A problem well defined is half solved. Research also is not an exception to this dictum from the dateless past. Problem identification and formulation is a crucial part in the research process. A research problem is one which requires a researcher to find out the best possible solution from among to find out a best possible solution from among the alternatives available. In order to select the best alternative, researcher has to find out and evaluate the alternatives available. Also he as to identify the various

environmental factors which have a bearing on the problem at hand. For example, company ‘X’ is worried about the high sales force turn over they experience and you are assigned to undertake a research on that. Here you have to identify the reasons for the high attrition rate. Also you need to identify various alternative courses of action to deal with the problem at hand which may be like increasing the perks, ensuring better working environment, imparting proper Training and Development programmes etc. Then you have to evaluate these alternatives and suggest the appropriate one or may be a combination of these. Also inorder to reach a decision, the researcher has to consider the environment to which the problem pertains ie., the general industry environment, competitors strategy etc. The research problem for the study must be carefully selected and is not an easy task Defining a research problem properly and clearly is a herculean task. It is a task that must be accomplished intelligently, not hurriedly. Identification of the broad problem area through developing an intimacy with the general situation and the problem at hand is the starting point. Then the problem is stated in a general way. The best way to understand the problem is to discuss it with people having some expertise in the subject. A preliminary literature review concerned with the conceptual as well as empirical aspects of the issue is also useful. This helps the researcher to refine and rephrase the problem. So essentially there are the following steps involved in defining the research problem. At this stage, the researcher makes an attempt to state the problem in a loose, general way. In no way it may be holistic as the researcher address only some of the concerns at this stage. A relook at the aspects covered in the general statement of the problem is done after seeking the opinion of the experienced people. Also it is required to keep in view the environment within which the problem is to be studied. A preliminary literature review is recommended at this stage. This enable the researcher to get a better understanding of the conceptual and empirical aspect of the problem. This also sheds some light on the data and the materials available for the study as well as the techniques that might be used. Referring the studies done on the similar or related topics will also be useful. When doing primary research, there are three basic avenues you can apply. First is using direct mails. The tactics include brief and direct questions, direct addressee of the respondents, limited pages of questionnaires, attached professional cover letter explaining the survey, and enclosed reminder to respond. The drawback can be lower mail responses from the respondents. The second is using phone surveys. This is more cost-effective compared to direct mails in terms of response rates. Phone interviews also allow a wider geographical range. It is also relatively inexpensive by using the cheaper rates at specified hours. The tactics include direct respondents confirmation upon contacts, constant flow of conversation, follow-up calls, and direct relay of information. The third is personal interviews. It can either be a group survey or a depth interview. Group survey is mostly used by big businesses as a brainstorming tool to obtain information on new products and product modifications. Depth interviews are done with a ready made checklist. The secondary sources can be: Public sources such as public libraries, business departments, and governmental departments. This is the most cost-effective way

of finding information. It can be sometimes provided as free with lots of better information to offer. Commercial sources such as trade and research associations, financial institutions, corporations being traded publicly, and banks. This can be costly since association fees and subscription fees are involved. However, it will cost less if you hired a team to research and collect the information for you. Educational sources is sometimes overlooked. However, more research is conducted in polytechnic institutes, colleges, and universities compared to a business sector in the community. A hypothesis is a predictive statement capable of being tested by scientific methods. Development of working hypothesis plays an important role in research because it help the researcher to limit the area of research on the relevant variables. It sharpens the thinking of the researcher and help to focus attention on the important aspects of the problem. Also it sheds light on the type of the data required as well as the method of data analysis to be used. A detailed thinking about the subject, a fruitful literature review and consultation with experts, all result in the formulation of working hypothesis. The hypothesis must posses the following characteristics. i. ii. iii. iv. v. vi. vii. viii. It should be clear and precise. It should be capable of being tested. It should state the relationship between the variables. It should be limited in scope and must be specific. It should be stated in simple terms. It should be consisted with known facts. It should enable testing in a reasonable time. It should have empirical references ie, it must explain what it claims to explain.

Eg: Sales force who have training show greater productivity than the employees who do not receive training. A null hypothesis (H0) is the hypothesis we are trying to reject. Alternative hypothesis (Ha) represents all other possibilities. For example, if we are comparing two employees A and B about their productivity and if we make the assumption that both are equally good, it is called as null hypothesis. All the other possibilities ie, A is better them B or B is better than A, are termed as alternatives hypothesis. A decision rules is made for the acceptance or rejection a hypothesis. For example, if you have to take a decision on the acceptance or rejection of a lot of goods. The null hypothesis (H0) is that the lot is good and the alternative hypothesis is that it is not good. Here the decision rule is that we might test 10 items from the lot and if there are none or only one defective item, we will accept H0, otherwise we will reject H0 ie, accept Ha.

A research design is the structures with which the research is conducted. It deals with the collection, measurement and analysis of the data. It is the decision regarding what, where, when and how much concerning the research. A research design consists of the following parts (a) (b) (c) (d) The sampling design which deals with the method of selecting items. The observation design which deals with the conditions under which observations are made. The statistical design concerned with the methods of data analysis, and The operational design which deals with the techniques by the procedures specified for the above can be carried out.

So a research design contains (a) Statement of the research problem; (b) Procedure and techniques to be used for data collection. (c) The population to be studied and (d) Methods to be used for processing and analyzing data. The entire group of study is called the population. These may be people, organisations, geographical areas, products etc. If the entire population is investigated, it is a census. Normally, it is not possible to study the entire population. So the researcher, quite often, select only a few items from the universe for the study. The items so selected are called a sample. The problem of sampling is to ensure that the sample is fair representation of the underlying population. So the researcher has to select an appropriate sampling method which answers two questions:
(a) (b) How many sample units to be studied? (sample size) What is the way of selecting the sample? (sample design)

So we can say that a sample design is a definite plan determined before the data are actually collected. Sampling can be either probability sampling or non-probability sampling. With probability sampling, each element of the population has a known probability of being included in the sample whereas the non-probability samples, do not provide equal probability for all the elements to be studied. For example, researcher undertake a study to evaluate the effectiveness of the sales training programme undertaken by a company. If the number of participants of the programme are 500 that constitute the population. For practical reasons, the researcher decides to study only 50 participants and then to generalise the results. So in this study 50 is the sample size. If all the 500 participants have equal chance of being studied, it is probability sampling and if it is otherwise, it is a non-probability sampling method. Raw data does not make any sense and only when it is analysed, we get information, which is meaningful. Before anlaysis, the raw data is processed to ensure that we have all the relevant data. Processing implies four activities: Editing Coding

Classification and Tabulation The process of examining the raw data to detect errors and omissions and to correct these when possible is called Editing. Coding is the process of assigning numerals or other symbols to the data in order to put them in limited number of categories. Putting larger volume of data into homogenous groups is termed as classification. The tabulation deals with the process of summarising raw data and displaying the same in correct form for further analysis. Analysis work after tabulation is based on the computation of various percentages, coefficiencies, etc. by applying appropriate statistical tools and techniques. The data analysis provides the researcher some logical insights into the problem at hand and enable him arrive at generalisation, i.e., to built a theory. The effort undertaken by the researcher to explain his findings is known as interpretation. The process of interpretation quite often trigger off new questions and thus saw the seeds for further researches. It is important that the results of the study are properly presented and communicated. Otherwise, all the efforts hitherto undertaken by the researcher would be in vain. So writing a report and making an oral presentation on the same is of extreme importance. 3.2. Marketing research Analysis: There are many analytical tools used in marketing research. SPSS is the software which is used effectively for analysing the tabulated data. Apart from SPSS, there are few other packages like SSP are used for the analysis. Multivariate techniques are those that involve more than variables at the same time. They can be categorised into essentially three broad areas which depend on the nature of the variables examined and their relationship with each other. The categories are based on certain questions being posed when designing surveys for primary data and analysing primary and secondary data. In Marketing Analysis multivariate techniques are employed for a variety of reasons i.e. establishing relationships between variables in order to explain and/or predict examination and analyses of differences in groups or populations. The various approaches are: Multiple Regression Analysis which examines the relationship between at least two interval scaled independent variables and one interval scaled dependent variable. It differs from regression analysis, which is bivariate (involving one dependent and one independent variable). Multivariate Correlation which is an extension of simple correlation analysis, to the situations involving two or more independent variables and their degrees of assocation with the independent variable. There are two coefficients used: The coefficient of multiple correlation, R which indicates the strength of relationship between two or more independent variables and the dependent variable. Also the coefficient of multiple determination, R2. This is similar to the coefficient of determination, it indicates the proportion of variance in the dependent variable which is statistically

accounted for by knowledge of the two (or more) independent variables. Conjoint analysis is a commonly used tool in market research. It enables manufacturers, for example, to find which features of a product will have most appeal to potential customers, or conversely, which features are regarded as least important. One consequence of this is that it is possible to trade-off factors against each other, to keep costs within acceptable limits, and also to position a product within the market place. Cluster Analysis can help us to identify groups of people. The idea is quite simple, and is based upon the idea of drawing a graph of particular peoples scores, known as factor scores, looking at them, and noticing where there are clusters of people, that is, a lot of people with similar scores on the factors. Computer packages allow us a variety of options in this procedure, in a later case example we will concentrate on trying to find easily identifiable groups. We can actually record peoples’ group membership allocation in the data file, too, so you can observe this, and see how useful it becomes. The key piece of output, however, is the dendogram, which helps us to identify the number of groups that may be useful to us. Perceptual mapping is concerned with describing the consumers perceptions of objects on one or a series of spatial maps, in order that the relationship(s) between objects can be easily seen. These methods can: • identify the number of dimensions that consumers use to distinguish objects; • determine a preferred location of an object on each of the dimensions; • provide information on the nature and characteristics of these dimensions. These approaches require respondents or observers to evaluate a set of objects on a large number of attributes. This usually requires ranking the objects on scales such as Likert or semantic differential. The following describes three of these approaches: There may be few or many linked variables in a data set as a result of these marketing analysts try to group responses from tests into basic clusters. This technique is known as factor analysis and can be used in conjunction with other techniques, such as cluster analysis. The analysis is usually undertaken on responses to a questionnaire. It is used to reduce the questionnaire to those questions that are really measuring different attitudes or traits of the respondent. The starting point of the analysis is to obtain a matrix of the correlations between variables, gained from answers to questions. The analysis identifies patterns from correlations. It does not indicate variable dependence directly but offer guidance for the analyst in what patterns predominate. Discriminant analysis seeks to generate dimensions that will separate objects as much as possible. The procedure for this is analogous to factor analysis. Like multiple regression analysis, this technique has one dependent variable and a set of independent variables. Based on measurements for the independent variables, discriminant analysis can be used to classify people or objects into one of two or more groups. Both factor and discriminant analysis require that attribute evaluations be interval data. Correspondence analysis allows the creation of

visual perceptual maps using categorical data as well as mixed data sets (nominal, ordinal, and/or interval). 3.3. Marketing research methods: 3.3.1. Demand measurement research:

The major concepts in demand measurement are: Market demand Company demand
Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined period of time in a defined marketing environment under a defined marketing programme. Company demand is the company’s estimated share of market demand at alternative levels of company marketing effort. One major reason for undertaking marketing research is to identify market opportunities. Once the research is complete, the company must measure and forecast the size, growth, and profit potential of each market opportunity. Sales forecasts are used by finance to raise the needed cash for investment and operations; by the manufacturing department to establish capacity and output levels; by purchasing to acquire the right amount of supplies; and by human resources to hire the needed number of workers. Marketing is responsible for preparing the sales forecasts. If its forecast is far off the mark, the company will be saddled with excess inventory or have inadequate inventory. Sales forecasts are based on estimates of demand. Managers need to define what they mean by market demand. Companies can prepare as many as 90 different types of demand estimates. Demand can be measured for six different product levels, five different space levels, and three different time levels. Each demand measure serves a specific purpose. A company might forecast short run demand for a particular product for the purpose of ordering raw materials, planning production, and borrowing cash. It might forecast regional demand for its major product line to decide whether to set up regional distribution. The growth of the market for consumer electronics might be more predictable. Consider colour TVs (CTVs). These sold 4.4 million units in 19992000. The market should sell some 10.5 million CTV sets in 2004-05 (with a 500,000 units margin of error). Prices have been descending in the past five years, even as the entertainment arena bustles with the launch of more and more satellite-TV channels. Now, with import barriers set to fall further, the action could get even more breathtaking. Unlike PCs, however, the market is closer to maturity amongst the ‘middle class’. The competition in this market is likely to be immense, and it’s still not obvious whether today’s market leaders will remain so five years ahead (the 1980s, remember, had a completely different set of leaders than the 1990s). As commodification grows, price will become a major selling

point. Meanwhile, the replacement market is likely to grow further - even as the low-end booms. In fact, some analysts feel that top-end and low-end brands will coexist. The drop in excise duty on picture tubes has helped the lower-end perk up.

Using Delphi technique, some analysts expect the TV to become an Internetaccess device, thus setting the screen for convergence. But will the TV merge with the PC? Unlikely, given that most people remain in different mental frames while surfing the Web and watching the ‘idiot box’. Actually, this market, like with PCs, has too many imponderables. Lots might depend on what happens to software content (will it converge?). Meanwhile, the Indian market for washing machines is expected to grow at 15 per cent CAGR to reach 3.5 million units. Most of the growth is expected to come from the semi-automatic segment, though fully automatic machines could account for most of the value growth. The markets for microwave ovens and dishwashers might also start selling in reasonable volumes, given the requisite marketing efforts, of course. The market for refrigerators, is now expected to reach 7.5 million by 2004-05, at a CAGR of 12 per cent. Excise structures, if rationalized, could raise growth in the entry-level segment. Meanwhile, this category is ripe for a wave of replacement, for which marketers are already geared. Refrigerators with 300-litre capacity and above are likely to grow faster than the rest of the market. If Indian food habits start to change, demand for greater freezer capacity might also grow. The market for air-conditioners (ACs) is also prominent among those that have failed to reach the expected figure for 1999-2000. A likely reason could be excise duties. The fact is that this product is still treated as a luxury by the Government, and ACs are outrageously priced in India (because of high duties). Assembled ACs, put together by corner shops that pay no duties, are thriving - much to the dismay of the organized sector. Wristwatches are a market that is not growing quite as well as it should formally. The market was pegged at 38 million units in 1999-2000, less than half the expected figure. At a CAGR of just under 12 per cent, the market could touch the 50million-units mark by 2004-05. Of late, the market has seen a sudden rush of top-end activity. At the lower end, assembled and smuggled watches thrive. The prize for the most thrilling performance over the past five years goes to the market for personal computers (PCs), which has been booming all through this period (CAGR: 36 per cent), regardless of the ups and downs of other markets. This is heartening news, for this product is an input for future economic growth. The Indian PC market in 1999-2000 stood at just over 1.2 million units (missing expectations by nearly 200,000 units). At an expected CAGR of 25 per cent, the market should hit 4.0 million units in 2004-05. But then, the prices have been falling sharply over the years. If duties are reduced to nothing as an incentive - the current rate could hold up. Also, Internet penetration is projected to take a hockey-curve upwards - and PCs might just remain the primary access device (other gizmos are still to catch on). Yet, sustaining a 36-per cent rate might not be possible. Since the PC is part of the ‘convergence sector’, projections are hard to make. Demand for consumer electronic products is highly seasonal and cyclical. The demand for such products reaches a high during the festive season and when the national

economy is enjoying a boom. Thus, 2000 AD is expected to witness a boom in TV sales, as it is an Olympic year. Manufacture of CTVs registered a growth of 42% during the first quarter of FY2000 while audio products registered an increase of 26%. However, supply continues to outstrip demand as a result of which prices continue to fall. In terms of volume, buyers upgrading from B&W sets represent 65% of the TV market. The upcoming rural market represents 19% of CTV sales and 39% of B&W TV sales. Price range for consumer electronics products has increased many times over the years. This enables manufacturers to focus on niche markets or specific market segments. India imports a relatively higher proportion of video and audio equipment. The current market trends in consumer electronics industry include: • Fierce competition resulting in price wars; • An array of modern designs and updated technology; • Players focusing on product differentiation, value addition and exchange offers; and • Manufacturers emphasising on altering consumer psyche, sub-branding products. The main demand drivers for consumer electronics products in the future include the following: • Growth in per capita income, disposable income of households and growth in entertainment sector; • Increasing consumerism, changing aspirations and higher affordability will drive demand further; and • Product penetration currently low - immense potential exists in smaller towns and rural markets.
3.3.2. New product launch research:

New product launch is the most crucial aspect in the new product management. The new product launch can be on a national basis or a rolling launch as seen in the earlier chapter. The success and failure of a product heavily depends on the new product launch. It is a known fact that the launch strategy of Microsoft, in the case of Windows 95 using Michael Jackson contributed heavily to the success of the product. It is important to be innovative in the launch strategies. Core teams are critical for speeding up product development and creating exciting products. Rogers has suggested the use of diffusion of innovation method for launching a new product. Not all-potential users of a new product or a new generation of a technology adopt the new product at the same time. Consequently, on the basis of the stage at which they adopt the new product, adopters traditionally are classified into five categories: innovators, early adopters, early majority, late majority and laggards. Rogers has suggested that for every new product, 2.5% of the adopters are innovators, 13.5% are early adopters, 34% are early majority, 34% are late majority and 16% are laggards. However, a later study done by Mahajan et al reveals that the relative size of the various segments depends on the product type and ranges. Hence

the same categories will have .2% to .3% of innovators, 9% to 20% of early adopters, 29% o 32% of early majority, 29% to 32% of late majority and 21% to 23% for laggards.
A marketer to ensure product success may use the following guidelines: 1. Distinguish your product from the competition in a consumer relevant way. 2. Capitalise on key corporate competencies and brand strength. 3. Develop and market products to people’s needs and habits. 4. Market to long-term trends, not fads. 5. Don’t ignore research, but don’t be paralysed by it. 6. Make sure your timing is right. 7. Be a marketing leader, not a distant follower. 8. Offer a real value to customers. 9. Determine a products short-term and long-term sales potential. 10. Gain legitimacy and momentum for the brand. 11. Give the trade as good a deal as the customer. 12. Clearly define, understand, and talk to your target. 13. Develop and communicate a distinctive and appealing brand character… and stick to it. 14. Spend competitively and efficiently, behind a relevant proposition. 15. Make sure the consumer is satisfied… and stays that way.

In order to do the same, marketing research to assess the success or failure of new product launches. Studies have shown that in many industries 35-40% of new product efforts fail. 46% of new product funding is wasted on failed or canceled projects. Failures are different from FADS (which have a naturally short life cycle). Failures are not necessarily financial failures, although bankruptcy may be a subsequent event. Failure is through a flaw in the design/selection process, such as not enough or misdirected product research or market research. Failures include, but are not limited to, products and services which pose health and safety hazards. Failures are not necessarily 'bad' technical ideas. The study of failures is important in that it can help us prevent future failures. Looking at a variety of past product failures may generate some insight into what aspects of the design process might warrant special attention in failure prevention. What went wrong with product X? Was there something that the manufacturer/designer should have foreseen that would have avoided the failure? Should the manufacturer have discovered that failure was inevitable and abandoned the product, not spending any more money on it?
3.3.3. Advertising research: Every year companies spend huge sums of money creating advertisements and buying media time and space. They hope that these marketing communication efforts and expenditures would benefit their businesses by influencing consumer choices. Too much of money is at risk unless advertisers have very good information about who their customers are, what they want and where they spend their media time. Research is needed to

furnish the information that drives marketing and advertising decision making. Without reliable information, in today's highly competitive market conditions, use of guesswork or intuition alone may prove to be failure. Advertising research is a subset of marketing research. It systematically gathers and analyses information to help develop or evaluate advertising strategies, individual advertisements, or whole advertising campaigns. Advertiser needs to know how consumers perceive its products or services, what their views about the competition are and what image of the brand or the company would be most appropriate to build. Advertising research is required to serve a number of purposes, which can be grouped into four categories : - ‘Advertising strategy research’ is used to determine product positioning to assist in the selection of the target markets, advertising messages, or media vehicles. - ‘Creative concept research’ is used to assess the extent of target audience's acceptance of different creative ideas at the concept development stage - ‘Pre-testing of advertisement’ is done to diagnose any possible communication problems before beginning an advertising campaign. - ‘Post-testing’ of advertisements helps advertisers to evaluate the campaign results. Strategy Research

Advertising strategy is developed by carefully blending the elements of the creative mix. The mix elements are : - Product and its positioning - Target audience - Communications media - The message-element To develop an effective positioning strategy for the brand, the advertiser needs to know how consumers perceive his brand and those of the competitors. They also need information on what qualities, features, or benefits associated with the product or service lead to initial purchases and ultimately to brand loyalty. Advertising can shape and enhance a brand's position and image over time. This is one of the most important long-term benefits of advertising. Advertising strategy research is important to develop a blueprint for creative specialists to follow. The major purpose of conducting target audience research is to develop a precise profile of a brand's target markets and consumers. It is critically important to know which customers can be classified as primary users of the product category and carefully study the geographic, demographic, psychographic and behavioural characteristics. The research may reveal which are the most potential market segments and target those to achieve advertising objectives. This is particularly true while introducing a new product. Companies may have

budget constraints and may prefer to launch the product in a phased manner instead of attacking all geographic areas at the same time. Communications Media Research helps develop media strategies and select media vehicles from among different media class and type (TV, newspapers, magazines, radio outdoor, etc.). Advertising agencies subscribe to syndicated research services that monitor and publish information on the reach, audience profiles and effectiveness of different media vehicles. Advertisers undertake research to study and identify what consumers' likes and dislikes are with respect to brands and products and hope to find the big idea and develop promising advertising messages. Researchers use concept testing to determine which message-element options are most likely to prove successful. Creative Concept Research

Creative specialists prepare several tentative advertising concepts in the form of rough copy platform or the storyboard. Researchers conduct focus group discussions in the agency's developmental lab which combines intensive qualitative interviews with quantitative techniques. A discussion leader moderates the conversation and each group views the roughs (copy platform, Storyboard or animatic). The reactions of these groups are measured, videotaped and observed by researchers behind a one-way mirror. This helps in identifying the most promising creative concept among the ones that have been seen and discussed by the focus groups. Pre-testing and Post-testing

Advertisers use pre-tests and post-tests to ensure that the advertising money is used wisely to achieve predetermined objectives. Testing can help in judging the effectiveness of advertising strategy or medium. Pre-testing is used to increase the likelihood of creating the most effective advertising messages. This helps in spotting any communication gaps or flaws in the message content before the account executive recommends it to the client. Advertisers are often interested in concurrent testing to assess the audience response while the advertisement campaign is under way. Post-testing (also called advertisement tracking) is important to evaluate the success or otherwise of an individual advertisement or the whole campaign after it has run. 3.3.4. Customer satisfaction research: Market researchers, ad agencies and many others have been trying to figure out what consumers want since the opening of the first store. Valuable as traditional qualitative techniques such as focus groups and in-depth interviews are, there is another way to study consumer Behaviour that can get at otherwise unobtainable truths. On-site observation, or research by watching people, gives researchers the chance to observe and learn about consumer purchasing decisions as they are being made. This is most effective if done in a supermarket situation where consumers can walk around and decide on their purchases. The

best approach is for the researcher or manager or whoever, to be in, say, a supermarket at that moment and present himself or herself as a shopper who needs advice for making a decision. The consumer identifies the researcher as someone who deserves assistance, and no long introductions are required. If the trained researcher asks the right questions about the product, the answers will come naturally. Shoppers tell about prices, taste, quality, health, ingredients, packaging and so on – just what researchers want to know. Moreover, unlike focus groups, consumers will tell spontaneously without feeling that they must give an acceptable response because they are being paid or because they like to show off. Nor will there be any problems with their recall about a product or how often they have really used it. Finally, if an interview is unproductive, moving on is easy. Just take your shopping cart and approach someone else. A skilled researcher can do about 35 interviews a day in several supermarkets with minimal overhead costs, an excellent yield for qualitative work. Of course, when it comes to testing a new product, exploring certain concepts in depth and having members of a group bounce ideas off each other, there is no substitute for focus groups. But on-site observation has many benefits and should be used far more often. Doing so, however, is not that easy. This type of research requires intensive training in interviewing and observational techniques. The researcher only has about three seconds in which to make eye contact, introduce him and pop the question that will determine receptiveness. He must know, by sizing up the shopper according to dress, demeanor, contents of their cart, the neighborhood the store is in, age, gender etc. The marketing scenario has changed today with an increasing emphasis on customer delight rather than just customer satisfaction. Today, companies need to put in additional effort to learn the likes/dislikes of their customers. In an age where product differentiation is tending to zero and brand promiscuity is a marketer's recurring nightmare, it is the customer's relationship with the brand that is becoming increasingly important. Companies are looking at ways and means of entering into a regular dialogue with their customers, to build this ever-so-important relationship. An effective customer satisfaction survey program should focus on measuring customer perceptions of how well the company delivers on the critical success factors and dimensions of the business. These usually include factors like service promptness, staff responsiveness, and understanding of the customer's problem. The American Association for Advertising Agencies has suggested that the advertiser ask the following questions when considering a magazine buy: 1. 2. 3. 4. 5. 6. Does the magazine reach the type of reader to whom expected to reach? How does distribution of circulation compare with the product distribution? What is the cost of reaching the thousand prospects? How do readers regard the magazine? Will the advertisement be in acceptable association? How co-operative is the publisher in giving good position?

7. How important are merchandising aids, availability of aids? 8. How do other magazines compare with the said one on the above comparing points? Case study of CCOHS: There was a study conducted for the Canadian Centre for Occupational Health and Safety. CCOHS council fulfils the Centre’s mandate by operating as “a source for unbiased technical information and expertise to support the efforts of governments, labour organizations, employers, and individual Canadians to improve workplace safety and health”.[1] CCOHS fulfils this mandate through a portfolio of free and priced products and services that draw upon a core collection of occupational safety and health information and the application of information management technologies. The key products and services offered by the Centre are the free Inquiries Service and web site and information products and services for which it charges. CCOHS wished to conduct a customer satisfaction survey of users of its Inquiries service, and subscribers to and users of its other products and services. The survey was designed to: 1. 2. 3. 4. 5. Measure client satisfaction. Compare expectation or need versus to how they feel about the service received. Identify service gaps. Identify what users value in the service. Identify direction for improvements.

In addition, CCOHS also wished to conduct a survey of visitors to their extensive web site. The use of a web-based survey provided a self-completion mode with added flexibility of delivery: skip patterns are opaque to the respondent, as they are in a computerized telephone survey. In addition, a web survey is considered ideal for business users in that it provides for swift response and any-timeanywhere completion Two surveys were conducted as part of this assignment. Web-site visitor survey: A pop-up survey of 603 visitors to the CCOHS/CCHST web site. The survey was available from February 13 to March 9, 2004. It should be kept in mind that this is a self-selecting sample. Customer survey: An invitation to participate in an online survey was mailed to 3,736 customers from the CCOHS database. The invitation was mailed and not e-mailed due to the need to comply with federal privacy legislation, and because valid e-mail addresses were not available for some customers. The survey was

available online from February 19 to March 26, 2004. A reminder card was mailed on March 8. Cards were returned from only 42 addresses. CCOHS provided two Access data files for the survey. One file contained contact information for individuals who had used the Inquiries Service. The second file contained coded information of purchasers of products and other services (such as subscriptions). Records with incomplete mailing addresses were removed. The files were checked for duplicates, cleaned and a sample selected of Canadian and US clients. A language preference (English/French) was available in CCOHS’s sample file. The sample file identified four product/service types: 1. 2. 3. 4. Inquiries Web Services CD/DVD Publications

Clients who purchased more than one type of product had more than one entry in the sample file. Our sampling department randomly selected a product for individuals with more than one. The product names in the data file were used as provided, so there was a possibility that, in some instances, a French respondent could get an English product name, or vice versa. Product names were occasionally abbreviated and always capitalized in the original file, and thus appeared as such in the survey and the letter. Web-site visitor survey: 603 visitors to the CCOHS/CCHST web site completed the survey over the course of the field period. Customer survey: Completions were achieved with 549 respondents for a response rate pf 15%, which is quite typical for a customer survey in a selfcompletion mode but less than was anticipated given the level of involvement many customers have with CCOHS. Number of challenges arose during the design of the customer survey methodology. CCOHS did not have previous opt-in consent to e-mail their customers or Inquiries users for the purposes of conducting research. As well, a significant number of records did not have e-mail addresses. To comply with Privacy legislation and to attempt to reach customers without e-mail addresses, a personalized letter was sent to a selected sample of potential respondents to the customer survey. This mixed mode methodology resulted in a somewhat lower completion rate than might have been expected with an all-electronic delivery, partially due to the extra effort required to turn from the written word to the computer and manually enter the web address for the survey. As well, it required a longer field period. However, our firm notes that many surveys involving client-

supplied customer lists result in a response rate of between 10 and 15% regardless of mode. The CCOHS web site is unique in many ways, as it provides a great deal of technical information to a wide audience of varying levels of knowledge, much of it free or at low cost. Although predominantly designed for the needs of Canadian business and individuals, it is used by a worldwide audience to answer an astonishing variety of occupational health and safety queries. Visitors mainly learn about the site via a search engine and, for half of respondents, it was their first visit to the site. Two-thirds of these first-time visitors indicate they are satisfied with the site, and satisfaction increases with more frequent visits. The majority indicates that they found the information they came to the site to seek, even though the site is structurally quite complex. Visitors express a rather high level of satisfaction with how the site performed in all areas, however, areas where there is the most gap between satisfaction and importance are “ease of finding information” and “scope of information.” Visitors would also like to see more free information provided. Overall, more than threequarters of visitors express satisfaction with the site. Very few suggested improvements were offered. CCOHS customers represent a mix of organization types and sizes, but a typical customer would be someone in a safety role of a manufacturing company of medium to large size. Despite the sizes of the organizations, most indicate that from 1 to 10 people will use or benefit from a specific CCOHS product or service. Close of half (43%) of customers have used the free web services, such as OSH Answers and INCHEM, in the past year. There is room for expansion in awareness and use of the HS Canada internet mailing list and the Health and Safety Report newsletter. A quarter of customers indicate the product or service is used once a month, although pay for use services are used more frequently. There is a growing preference for electronic media for provision of products. In product attributes, reliability and clarity are the most valued qualities, and coverage/comprehensiveness and currency (being upto-date) are the qualities customers would most like to see improved. While the majority of customers are either satisfied or very satisfied with all rated attributes of the product or service they received, they are most satisfied with usefulness and relevance, and least with cost and assistance provided for solving a problem. Gaps between perceived importance and performance for CCOHS product and service attributes are small (0.5 or less) and show that CCOHS is very close to meeting customer expectations for most of its offerings, including the important measure of time required to receive products and services. CCOHS meets its customers’ expectations regarding the number of service staff and contacts required to obtain products and services. Gaps in service attribute importance and performance are also small and there is a high level of customer satisfaction with the service provided by CCOHS staff on all measures. Very few errors are being made in provision of products and/or services. Close to three-quarters of customer report that, in the end, they got what they needed, and over 80% indicate they would purchase the product or service again.

3.3.5. Retail stores image research:

Researchers have studied a multitude of retailer attributes that influence overall image, e.g., the variety and quality of products, services, and brands sold; the physical store appearance; the appearance, behavior and service quality of employees; the price levels, depth and frequency of promotions; and so on. According to Kevin Lane Keller, it can be further categorized into a smaller set of location, merchandise, service, and store atmosphere related dimensions. The five dimensions we use to review past research are: 1) access, 2) in-store atmosphere, and 3) price & promotion, 4) cross-category product/service assortment, and 5) within-category brand/item assortment. A detailed presentation on this is available in the unit – Retailing. 3.3.6. Distribution research:
The study has been now divided into supply chain research and also on logistics research. In the case of supply chain, following are included for research: 1 - Alignment of markets with supply 2 - Linking Demand Chain and Firm performance 3 - Outsourcing 4 - Reverse Logistics 5 - RFID 6 - Supply Chain Agility 7 - Supply Chain Collaboration 8 - Supply Chain Costing 9 - Supply Chain Information Systems 10 - Supply Chain Risk & Resilience 11 - Supply Chain Strategy 12 - Service Supply Chains 13 - Stock loss

Logistics plays a crucial role in business as it is involved in the entire supply chain starting from purchase of materials to supply of finished products. Logistics costs account for 15- 25% of the cost of the final product in India, which is much higher than 7-9% in developed countries. Logistics contributes 13-14% of GDP in India, when compared with 10% in US. The relative inefficiencies in logistics in India can be attributed to inadequate logistics infrastructure (both physical infrastructure and technological), laborious paper -based and manual processes and fragmented supply chains.. Currently logistics in India does not have an industry status. The absence of a uniform tax structure and procedures in all the states often leaves the transporters to face delays at check posts, creating bottlenecks in transportation. These frequent delays also result in enormous increase in transportation costs, which go up to 40 % of the total logistics costs. Hence it becomes important that logistics research is undertaken also.
Case study of Home Grown Cereals Authority:

This research is a collaboration between Cranfield School of Management and Cardiff Business School, supported by the Food Chain Centre and the Home Grown Cereals Authority (HGCA). The project started in February 2005 and has a duration of three years. During this period eight case studies will be conducted focusing on different sub-sectors within the cereals industry, including malting and brewing, bread making, animal feed and bio-fuels. Some of the main industrial partners include Coors Brewers, Bernard Matthews, Frontier and United Biscuits. The overall aim of the project is to transform the UK cereals supply chain by fulfilling two main objectives. • To conduct improvement programmes within the representative cereals supply chains and to give confidential recommendations to the companies involved in each chain • To disseminate general lessons from these programmes in order to give guidance and encouragement to the wider industry A multiple case study methodology is being used for the research, in which each of the studies has its own specific objectives: 1. To analyse collaboration across the Supply Chain • Producing a Supply Chain Collaboration Index (SCCI) • Conducting collaboration interviews for specific relationships 2. To analyse the current supply chain • Creating a process map of the supply chain 3. To improve the current situation • Identifying opportunities to eliminate waste • Creating a ‘Future State’ vision agreed by the companies • Producing recommendations as to achieve that vision • Defining an agreed action plan The project covers two essential aspects of supply chain management, one refers to the ‘hard’ elements of the process (i.e. activities, times and inventories), the other to the ‘soft’ elements, this is, the personal and organisational relationships in the chain. These two aspects were analysed using different tools: Process Mapping: It is a pencil and paper tool that helps to visualise and understand the flow of material and information as a product makes its way through the supply chain. Some of the main benefits of this tool are that it helps to identify waste in the process, supporting the analysis of the linkages between information and material flows and serving as a basis for the implementation plan. Supply Chain Collaboration Index: the purpose of this tool is to capture quantitative and qualitative data to reveal the dynamics of long-term collaborative business relationships. The method has been proven in a large number of multimillion pound, bilateral relationships in the public and private sectors, and

subjected to rigorous testing. Measurements from both sides of a collaborative relationship are taken in order to assess five key dimensions of the relationship (creativity, stability, communication, reliability and value) and seven additional characteristics (long term orientation, interdependence, C3 behaviour, trust, commitment, adaption and personal relationships). Three case studies have already been completed giving some indication of the overall results of the project. It has been found that the commodity nature of the products in question promotes relationships that are transactional, where parties are not interested on establishing a close, long-term supply chain relationship. However, the project has also shown that in parts of the industry, other factors such as quality, delivery and reliability have gained importance. Taking these factors into consideration requires more complex relationships which are not necessarily served by a transactional approach. As a result, some of the organisations that contributed to this study are already moving towards more collaborative, long-term approaches. The research has also revealed a number of opportunities for improvement in areas such as haulage, information flow, inventory management, vulnerability, communication, personal relationships and trust. This was the case during 2006.

3.3.7. Competitor analysis Research:
There are number of possibilities of conducting competitive analysis. Competitive Intelligence is the legal and ethical process of collecting and analysing information, converting it into intelligence and then using it to determine the capabilities, vulnerabilities, and intentions of the competition. There are three levels at which the research is undertaken: 1. Feature level - Find out how your product stacks up against the competition, feature-by-feature. Learn what features customers think are important, how much they are worth, and how to focus your efforts on getting the most from your product development efforts. Solution level - We can help you understand the overall solution characteristics that create competitive advantage. Go beyond features to leverage options including delivery, support, and complementary services that differentiate your offering from the competition. Hidden competition - Your customers' perceptions determine who your competitors are, and it might not be who you think. Sometimes the competition comes from the customers themselves: internal departments, legacy techniques, or lack of awareness. We can help you identify what your marketing efforts are really competing with.



Some of the Tools and Techniques for Competitive Intelligence Activities: • • • • Contacting Government Agencies Searching Online Databases From Companies and Investment Community Resources Surveys and Interviews

• • • •

Drive-by and On-site Observations Competitive Benchmarking Defensive Competitive Intelligence Reverse Engineering

A classic industry and competitor analysis methodology can be by: • • • • • Identifying the most attractive segments of the market Competitive Advantage – sustainable superiority Understanding the life-cycle dynamics of each market area Uncertainties and Risks Return on investment

The sources of information for competitor analysis are: • • • • • • • • • Literature search Company annual reports (see library) Business directories Observation - mystery shopper visits to competitors Media - advertising Trade fairs, exhibitions, etc Trade press Collateral material (corporate brochures, Internet sites) Exclusive reliance on online sources is to be discouraged

3.4. Preparation of marketing research report:

The results of marketing research must be effectively communicated to management. Presenting the results of a marketing research study to management generally involves a formal written report as well as an oral presentation. The report and presentation are extremely important. First, because the results of marketing research are often intangible (after the study has been completed and a decision is made there is very little physical evidence of the resources, such as time and effort, that went into the project), the written report is usually the only documentation of the project. Second, the written report and the oral presentation are typically the only aspect of the study that marketing executives are exposed to, and consequently the overall evaluation of the research project rests on how well this information is communicated. Third, since the written research report and oral presentation are typically the responsibility of the marketing research supplier, the communication effectiveness and usefulness of the information provided plays a crucial role in determining whether that particular supplier will be used in the future. Every person has a different style of writing. There is not really one right style for a report, but there are some basic principles for writing a research report clearly. Preparing a research report involves other activities besides writing; in fact, writing is actually the last step in the preparation process. Before writing can take place, the results of the research project must be fully understood and thought must be

given to what the report will say. Thus, preparing a research report involves three steps: understanding, organising and writing. The general guidelines that should be followed for any report or research paper are as follows:
Consider the audience: The information resulting from the study is ultimately of importance to marketing managers, who will use the results to make decisions. Thus, the report has to be understood by them; the report should not be too technical and not too much jargon should be used. This is a particular difficulty when reporting the results of statistical analysis where there is a high probability that few, if any, of the target audience have a grasp of statistical concepts. Hence, for example, there is a need to translate such terms as standard deviation, significance level, confidence interval etc. into everyday language. This is sometimes not an easy task but it may be the case that researchers who find it impossible do not themselves have a sufficiently good grasp of the statistical methods they have been using. Be concise, but precise: On the one hand, a written report should be complete in the sense that it stands by itself and that no additional clarification is needed. On the other hand, the report must be concise and must focus on the critical elements of the project and must exclude unimportant issues. There is a great temptation, on the part of inexperienced researchers, to seek to convey all that they did in order to obtain information and to complete the research. This is done almost as if the researcher is afraid that the audience will not other wise appreciate the time, effort and intellectual difficulties involved. What the researcher has to come to realise is that he/she will be judged by the contribution towards solving the marketing problem and not by the elegance or effort involved in the research methodology. Understand the results and drawing conclusions: The managers who read the report are expecting to see interpretive conclusions in the report. The researcher must therefore understand the results and be able to interpret these. Simply reiterating facts will not do, and the researcher must ask him/herself all the time "So what?"; what are the implications. If the researcher is comparing the client's product with that of a competitor, for example, and reports that 60 percent of respondents preferred brand A to brand B, then this is a description of the results and not an interpretation of them. Such a statement does not answer the 'So what?' question.

The following outline is the suggested format for writing the research report: · Title page · Summary of findings · Table of contents · List of tables · List of figures
Introduction · Background to the research problem · Objectives · Hypotheses

Methodology-Data collection · Sample and sampling method · Statistical or qualitative methods used for data analysis · Sample description Findings · Results, interpretation and conclusions. The summary of findings is perhaps the most important component of the written report, since many of the management team who are to receive a copy of the report will only read this section. The summary of findings is usually put right after the title page, or is bound separately and presented together with the report. The introduction should describe the background of the study and the details of the research problem. Following that, automatically the broad aim of the research can be specified, which is then translated into a number of specific objectives. Furthermore, the hypotheses that are to be tested in the research are stated in this section. In the methodology chapter the sampling methods and procedures are described, as well as the different statistical methods that are used for data analysis. Finally, the sample is described, giving the overall statistics, usually consisting of frequency counts for the various sample characteristics. Once the sample has been described, the main findings are to be presented in such a way that all objectives of the study are achieved and the hypotheses are tested. As mentioned before, it is essential that the main findings are well interpreted and conclusions are drawn wherever possible. Easy-to-understand tables and graphics will greatly enhance the readability of the written research report. As a general rule, all tables and figures should contain: 1. Identification number corresponding to the list of tables and the list of figures 2. A title that conveys the content of the table or figure, also corresponding to the list of tables and the list of figures, and 3. Appropriate column labels and row labels for tables, and figure legends defining specific elements in the figure. 4. Have you understood type questions?

1. An intuitive manager could best be described as one who: A. B. C. D. eliminates uncertainty in decision making searches out facts and data systematically uses an orderly approach to gathering information uses personal knowledge and experience to make decisions

2. Subhiksha wants to learn about consumer attitudes toward mail order purchases and conducts a study to acquire this information, this study would best be classified as collecting _________data. A. casual B. experimental

C. primary D. secondary 3. Marketing researchers at Rohan Lathes Ltd. repeated an experiment several times and discovered that the results produced each time were identical. This would suggest that the results were: A. reliable B. valid C. predictable D. compatible 4. The first step in planning a marketing research project is: A. conducting a cost/benefit analysis B. defining and locating problems C. assessing organisation resources D. defining goals and objectives 5. State whether true or false: The need for marketing research is basically from the lacuna in framing wrong marketing strategies. 5. Summary

Marketing is a restless, changing, and dynamic business activity. The role of marketing itself has changed dramatically due to various crises—material and energy shortages, inflation, economic recessions, high unemployment, dying industries, dying companies, terrorism and war, and effects due to rapid technological changes in certain industries. Such changes, including the Internet, have forced today’s marketing executive to becoming more market driven in their strategic decision-making, requiring a formalized means of acquiring accurate and timely information about customers, products and the marketplace and the overall environment. The means to help them do this is marketing research. Marketing research assists in the overall management of the marketing function. A marketing manager must prioritize the more important and pressing problems selected for solution, reach the best possible solution based on the information available, implement the solution, modify the solution when additional information so dictates, and establish policy to act as a ready-made solution for any recurrence of the problem. Marketing research often focuses on understanding the “Customer” (purchasers, consumers, influencers), the “Company” (product design, promotion, pricing, placement, service, sales), and can also be expanded toward the environment to include “Competitors” (and how their market offerings interact in the market environment). 6. Exercises

1. The shoe market in India can be divided into two major segments, namely the formal leather shoes and the casual wear shoes. There has been a rapid

change in the casual shoes market in the past few years in India. It is no more a distinctive possession of the elite only. It has now become a ubiquitous, all purpose shoe as the outlook of people towards casual shoes has also changed. The market is now set for a boom. This is also owing to the launch of many new range of casual shoes by Bata and Carona in technical collaboration with the world famous leading manufactures of shoes like Adidas and Puma respectively. In a study of casual shoes we found that top of the mind awareness for various brands were North Star (33%), Nike (38%), Puma (17%) and Adidas (15%). Although Bata and Carona have been existing in the market for a long time, there have been scores of new entrants such as Liberty, Dawood etc. and even some foreign brands. This has led to an increased competition. It would be worthwhile to do an exploratory study of the casual shoe market with the aim of understanding consumer behaviour, buying criterion, awareness and preference and brands, attitudes of consumers etc. Conduct a research study to see the demand for shoes in South India. 2. Assume a situation where there is a retail mart which want to understand the potential in a town, outline the advice you would give to your client on: a. How to plan the research b. Which literature to search first 3. “The problem definition stage is more critical in research process than the problem solution stage.” Discuss. 4. If Proctor and Gamble, the makers of Ariel, need to know what percentage of customers examine product labels before making a product selection in the supermarket, what is the best methodology to do so? 7. 1. 2. 3. 4. 5. 6. 7. 8. References Uma Sekaran, Research Methods for Business – A Skill Building Approach, Wiley, 2006 C.R. Kothari, Research Methodology Methods and Techniques, New Age International, 1998 Saunders, Lewis and Thornhill, Research Methods for Business students, Pearson, 2006 Krishnaswamy, Sivakumar, Mahajan, Management Research Methodology, Pearson, 2006. McClelland et al, (1997) Marketing, Blackwell, Ch 8 Anderson, D.R., Sweeney, D.J., Williams, T.A. (1990), Statistics for Business and Economics 4th Ed. West Publishing Company Kvanli, Guynes, Pavur (1995), Introduction to Business Statistics 4th Ed. West Publishing Company Weiers, R.M., (1984) Marketing Research, Prentice Hall, Englewood Cliffs, New Jersey.

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