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INDEX Q 1. Define Marketing. Q 2. Explain various Company Orientations. Q 3. Define Marketing Mix Q 4. Define Marketing Concept Q 5.

Explain Segmentation Q 6. Explain Targeting. Q 7. Define Data Warehousing and Data Mining Q 8. Rationalise need for new product for a company. Q 9. Sequence the steps involved for ensuring success of the new product launch. Q 10.Comment on Product Life Cycle. Q 11.Explain various Strategies, Objectives and Methods of Pricing. Q 12.Differentiate Between Penetration Pricing. Market Skimming and Market

Q 13.Differentiate between Marketing and Selling. Q 14.Comment on conversion from Sellers Market to Buyers Market due to liberalisation. Q 15.Short Notes on Distribution Channels. Q 16.Comment on Product Mix Strategy Q 17.Write a short note on Sales Promotion. Q 18.Comment on Push Vs Pull Strategy. Q 19.How would you justify the role of middlemen in the distribution chain? Q 20.Differentiate between Intensive Growth and Diversification Growth. Q 21.Write a short note on B.C.G. analysis
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Q 22.Differentiate between Consumer Product Marketing Vs Industrial Product Marketing. Q 23.Differentiate between Advertising, Selling and Publicity. Promotion, Personal

Q 24.Explain the process of developing an advertising campaign.

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Q 1. Define marketing. Ans. Marketing is a highly dynamic, innovative and wide encompassing activity. Therefore, definitions of marketing are plenty. One of the most accepted definitions of the marketing is Marketing is a process of identifying human and social needs, overt, covert, apparent or even dormant, and meeting them profitably. In addition there are several more definition of marketing as follows: (a) Typically marketing is the art of creating and promoting demand for your goods and service to customers in a profitable manner. A marketer tries to influence level of demand, timing and composition of demand to meet the organizations goals Market is an arena for potential exchanges Deals with identifying and meeting human and social needs Meeting needs profitably Deliver a higher standard of living Social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products & services of value with others The art of selling products The process of planning & executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and orgn goals

(b) (c) (d) (e) (f)

(g) (h)

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(i) (j)

Find wants and fill them To sell more shift to more people more often for more money in order to make more profit Sergio Zyman, Ex VP, Coke Have it your way Burger King You are the boss United Airlines

(k) (l)

However, there is a school of thought which believes that marketing goes beyond identifying and meeting demands. It believes that demands are even created by market men. But the fact of the matter is that need already exists; market men only bring them to the fore and profit by satisfying them.

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Q 2. Explain various Company Orientations. Ans. Every companys management has a philosophy and value system. The company orientations evolve from those philosophies and value systems. 1. Production Orientation - Consumers will prefer products that are widely available and inexpensive. Business Model - High production efficiency, low cost, mass distribution 2. Product Orientation - Consumers will favour those products that offer the most quality, performance, innovative features Business Model Offer high quality goods even at a higher cost. 3. Selling Orientation - Consumers and businesses, if left alone, will ordinarily not buy enough unless supported by an aggressive selling and promotion Business Model - Inside out perspective. High pitched selling. 4. Marketing Orientation (a) Key to achieving its org goals consists of the company being more effective and efficient than competitors in creating, delivering and communicating superior customer value to its chosen target markets. (b) Four pillars viz target market, customer needs integrated marketing and profitability Business Model - Outside in perspective - level in customer segment

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5. Customer Orientation A happy customer is road to profit. Treat the Customer like the king. Profits will automatically flow. Business Model Customise the product and business as per requirement of customers. Separate offers, services and messages to individual customers 6. Social Marketing Orientation We are responsible to overall welfare of our society from where we draw our profits. Business Model - Act in best long term interest of consumers and society. Invest in socially beneficial projects. Tata group is the most vivid example of this concept.

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Q 3. Define Marketing Mix Ans. Marketing Mix is defined by Four Ps (Mc Carthy) (a)P roduct (b) P rice (c)P lace (d) P romotion Product Features Variety Quality Design Feature Brand name Packaging Sizes Services Warranties Returns Price Features List price Discounts Allowances Payment period Credit terms Promotion Sales promotion Advertising Sales force
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Public relation Direct marketing Place Channels Coverage Assortments Locations Inventory Transport In addition to 4 Ps of Marketing, there are 4 Cs of Customer also Robert Lauterborn Four Ps Vs Four Cs Product Customer Solution Price Customer Cost Place Convenience Promotion Communication For service marketing in addition to these 4 Ps , there are 3 more Ps : 1. People recruiting the right staff at the right place for right role. 2. Process The systems used to assist organization in delivering services. i.e infrastructure , technology. 3. Physical evidence tangible components that are visible for a service to form a opinion. Q 4. Define Marketing Concept Ans. Marketing Concept is based on three fundamentals

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(a)Customer Orientation (b) Marketing Organisation (c)A profitable volume criterion (a) Customer Orientation

Name triggered a change in the whole world. Customer orientation simply means taking care of the customer needs and happiness and earning their loyalty in the process. In order to be truly customer oriented, a company must introduce customer consideration at the beginning rather than at the end of the production cycle. Some of my associates laughed a few years ago when our electrical fan and blanket dept changed its name to the home care and comfort dept. Now whole attitude of the mgmt of that dept has changed from a factory or hardware orientation to a customer orientation. The astute business managers saw that they were not in the business of producing and getting rid of fans and blankets. Rather they are in the business of anticipating what public would be interested in buying, that which will make the home more comfortable and easier to take care of and having the last laugh because the change meant that they are not only selling more fans and blankets than ever but an expanded line of product as well G. L. Phillips Chairman of the Board General Electric Co (b) Marketing Organisation In the words of Mr Larry Rosenberg, New York University,

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I have come to the conclusion that even the most imaginative marketing plans and efforts will not bear fruits unless they are backed by a matching marketing organisation to effectively execute them. In large measure, a successful marketing organisation demands that: (i) The chief marketing executive should have influence at the top mgmt level and participation in the decision making process, and more so when top mgmt personnel do not have marketing background. All functions concerned with developing and moving goods and services are coordinated under the chief marketing executive.

(ii)

Observations regarding Marketing Concepts Consumer goods companies have tended to adopt and implement the marketing concept to a greater degree than industrial. Goods companies. Large cos. have tended to adopt and implement the concept to a greater degree than small and medium sized cos. MNCs have generally been on the forefront of adopting the marketing concepts. The implementation of the marketing concept is determined to a large extent by the attitude of the companys Chief Executive.

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Q 5. Explain Segmentation Ans. Definition Segmentation is the process of identifying groups within population having similar preferences, buying desires or requirements. Segmentation is resorted to with two basic purposes: (a) (b) Selection of target market Effective marketing programs

Importance and Utility of Market Segmentation (a) (b) (c) (d) For guiding Market Strategy Better position to spot & compare market opportunities Finer adjustments of products & marketing appeals possible Marketing programs & budgets based on clearer ideas of the response characteristics of specific Market segments

Segmentation Variables (a) (b) (c) (d) Geographic Segmentation based on geographical location of consumers Demographic segmentation Based on Age, sex and other demographical attributes Psychographic segmentation Based on life style, and personality traits of consumers Behavioural segmentation Based on behavioural pattern of the consumers
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(a)Geographical Variables (i) Nations (ii) States (iii) Cities (iv) Neighbourhoods (v) Density (vi) Climate (vii) Regions (viii) Zones (ix) Metro (x) Town class (xi) Village (b) Demographical Segmentation (i) (ii) (iii) (iv) (v) Age Sex Financial status Physical Attributes like height, weight etc. Urbane/village

(c)Psychographic Segmentation (i) (ii) Life style- swinger, status seeker, good citizen, car freak, characterization Personality- compulsive, gregarious, authoritarian, ambitious, confident, adventurous, cool

(iii) Marketing factors- quality, price, service, advtg, sales promotion (d) Behavioural Segmentation

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(i) (ii)

Benefits sought by Economy/convenience/prestige.

consumer-

User status- Non user, ex-user, potential user, first time user, regular user

(iii) Usage rate- Light, medium, strong, absolute (iv) Stage of readiness- Unaware, aware, informed, interested, desirous (v) Occasion (vi) Loyalty status- None, medium, strong, absolute (vii) Attitude towards product

Q 6. Explain Targeting. Ans. Definition Targeting is identification as to which market segment to serve Targeting Options (a) Undifferentiated marketing Company having only one product in a particular product line which has universal appeal, like Nirma Washing Powder. Concentrated marketing Company serving only particular market segments while totally ignoring other segments. Like Taj Group of Hotels are serving to niche customers. They do not have any budget hotels. Similarly Rolls Royce car. Differentiated marketing Company offering diff products to suit different market segments. Like Maruti Car. They have a large variety of cars in their product

(b)

(c)

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range as well as line, in price ranges to suit different financial segments of the market. Undifferentiated Marketing (a) (b) (c) Focus: What is commonly sought by general consumer (not what is different) Appeal: Buyers base is very broad and wide. Rely on: Mass Channel/Advts/ Universal Themes (Coke philosophy - endow product with superior image in prospects mind {cost economics, mass production} Late Effect : Less profitable segment! Differentiated marketing (a) (b) (c) Focus: Two or more segments with separate products for each. Appeal: Meeting customers specific desires Rely on: Creating more sales, concern about increasing cost, optimality of strategy Late Effect: Over-differentiation Concentrated Marketing (a) (b) (c) Focus: Large share in one or a few sub-markets Appeal: Customers delight (good market position) Rely on: Greater knowledge, special reputation, enjoys operating economics (due) specialisation, earns high rates of ROI

Late Effect: Higher than normal risk due to small customer base.
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Q 7. Define Data Warehousing and Data Mining Ans. Savvy companies are capturing information every time a customer comes into contact with any of its departments. The touch points include a customer purchase, a customer requested service call, an online query, or a mail-in rebate card. These data are collected by the companys contact centre and organised into a Data Warehouse. Company personnel can capture, query and analyse the data. Inferences can be drawn about an individual customers needs and responses. Telemarketers can respondent to customer inquiries based on a total picture of the customer relationship. Through Data Mining, marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. Data mining involves use of sophisticated statistical and mathematical techniques such as cluster analysis, automatic interaction detection, predictive modelling, and neural networking. A company that wants to learn the most from its data base needs to engage the services of a person or company skilled in data mining.

Q 8. Rationalise need for new product for a company. Ans. Customers needs and tastes as well as technology are ever changing and therefore most of the products have a limited life cycle. New and better products are constantly innovated and offered in the market by the entrepreneurs. Take the case of cyclostyling machine. With the advent of photocopying technology, cyclostyling machines have completely disappeared from the market.
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Fortunately, Indian market is highly heterogeneous and therefore the product life cycle is much longer. However, in developed economies, products have very small life cycle and therefore, a company which does not offer new products regularly in line with the changing customers preferences, is putting its future at risk. Further, often new products have higher profit margins which shrink drastically in later stages of its life cycle. New products also create new demand in the market. Take the case of computer processors. Intel Corporation has been launching a new chip, with increased prices, almost every 6 months and consumers have been buying them, many only for novelty sake without any functional need. Similarly, car companies keep offering new models of existing car as a method to improve sales.

Q 9. Sequence the steps involved for ensuring success of the new product launch. Ans. For any product to be successful in the market place, it should be able to meet the needs of a sufficiently large body of consumers at their acceptable price. Most often products fail because there is inadequate demand for the product. Still others fail despite adequate demand in the market because they fail in non core attributes like size, shape, weight, taste, smell, etc. Therefore, in order to ensure that a new product succeeds in the market, a meticulous approach needs to be followed. 1. Idea Generation Lots of new ideas should be collected from various sources and the best should be chosen after careful analysis and scrutiny of all the ideas. The selection rate of new ideas is often 1/100 and less. Various methods that can be employed to gather new ideas are: -

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(a)

Customers Most important source. 3M Corporation, holding over 6 lakh patents, claims that almost 70 % of new ideas have been contributed by the customers themselves. Scientists Competitors Salesman and dealers Top management

(b) (c) (d) (e)

2. Screening Careful screening of new ideas is very important because in the process of screening of new ideas, it is possible that a good idea is dropped or a bad idea is given a go ahead. Such errors are called Go Errors and Drop Errors. A Go error is one when a bad idea gets the nod for implementation and Drop error is one when a perfectly nice idea is dropped. Iridium Project of M/s Motorola, which cost the company $5 billion, was a classical case of Go Error. Whereas, many companies who refused to buy Photocopy technology or Quart watch technology from the inventors were guilty of Drop Error. 3. Concept Development & Testing- Basic idea only outlines the core function. Thereafter, to give it a physical shape, all its attributes, ie surround values need to be developed in consonance with the contemporary environment. Quite often, even core concept goes for a complete transformation during development. 4. Business Analysis. Estimation of future sales, first time sales, costs and profits is necessary to check the viability of the idea. It is also needed to fix product development budget.

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5. Product Development Once the Business analysis indicates viability, the actual product development begins. It involves prototype development, consumer testing (Test Marketing), Brand Naming and packaging. 6. Test Marketing Before full scale launch of the product, the products acceptance, price and value for the customers, sale potential, etc, are estimated through Test Marketing. Various factors to be kept in mind while conducting test marketing are as follows: (a) (b) (c) Exacts purpose of the test marketing. Procedure to be followed for TM In how many cities is the product to be tested?

(d) Which are the representative cities for test marketing. In India, barring some special products, Banglore, Pune and Hyderabad are considered to be ideal test cities for any new testing. (e) (f) How long should the test run last? What info to collect during the test?

7. Commercial Launch Often the commercial launch is in select cities and the spread is increased gradually. 8. Consumer Adoption Process- Increasing the awareness, developing the interest, offering for trial and finally hoping that the consumer adopts the product.

Q 10.

Comment on Product Life Cycle.

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Ans. Very few products have unending appeal. Most products have limited life span after which they are discarded by the consumers in favour of other products. Like a human being, a product also passes through 4 distinct stages in its life cycle, Introduction, Growth, Maturity and Decline. The challenges faced by the company in terms of finances, marketing, manufacturing etc in each of the above stages are different from others. Similarly, profits are also different. .
Sales & Profits

Sales

Profits

Intro Growth Time

Maturity

Decline

Introduction A period of slow sales growth as the product is introduced in the market. Profits are non existent because of the heavy expenses incurred on product launch and promotion. Growth A period of rapid market acceptance and substantial profit improvement. Maturity A period of slowdown in sales growth rate because the product has already penetrated most of the potential market. Profits stabilize or decline because of fall in sales prices due to increased competition. Decline The period when the sales slow down and profits also erode.
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In addition to the basic cycle, there are also supplementary cycles which are followed by certain category of products

Primary cycle Growth Slump Maturity Pattern

Recycle

Cycle Recycle Pattern

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Q 11. Explain various Strategies, Objectives and Methods of Pricing.


09 PRICE- QUALITY STRATEGIES
PRICE H I G HM E D I U L M O W MEDIU M LO W

Q U A L I T Y

PREMIUM HIGH SUPER . VALUE VALUE OVERMEDIUM GOOD CHARGIN VALUE VALUE G RIPFALSE ECONOMY OFF ECONOMY .

HIGH

Pricing Policy A firm has to consider many factors while setting its price of its products. Selecting Pricing Objectives The company has to first decide where it wants to position its market offering. A company can pursue any of the following objectives: Survival Survival is a short term objective and normally resorted to when co is plagued with over capacity, intense competition or changing customer wants. Maximum Current Profit This again works in short term only and is at the cost of long term growth of the company. Maximum Market Share Also called Market penetration pricing. This is a long term objective as the companies believe that higher market share will lead to

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higher sales and lower per unit costs. It works very well in a market that is highly price sensitive. Maximum Market Skimming Extracting maximum price for the product. This method is practiced by high technology product companies. They enjoy a monopoly due to technological superiority of the product for certain period and price the product very high only to reduce it gradually to penetrate the markets deeper. Sony often practices this. Product Quality Leadership Certain companies maintain very high quality standard and charge a premium for it. Determining Demand Prices have inverse relationship with demand for the product. The production volume has a bearing on production costs. A company has to determine the price elasticity of demand for its product and set the price where it gains maximum profit. However, in case of certain snob value products the price demand relation is not inverse but direct. Therefore, the price is to be set by determining the demand viz a viz price. Estimating Costs If the demands set the ceiling on the price, then the costs set the floor. Often some companies use target costing. They estimate the selling price of the product depending upon SP of similar products in the market, deduct the profit and arrive at the target cost to be achieved for the production. If they can not achieve the target price, they may abandon the product. Analysing Competitors Cost, Prices And Offers Competitors pricing has a undeniable effect on any
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companys price line. Some companies like Mercedes always keep the prices of its cars 25-30% higher than immediate rivals. Some other company might like to keep the prices a shade lower than its competitors price to take advantage of the price sensitive segment. Selecting A Pricing Method Companies follow any of the following pricing methods: Mark-Up Pricing This is the most elementary method. The company calculates it costs and then sets up a percentage to charge as profits over the cost. Target Return Pricing In target return pricing the firm determines the price that would yield its target rate of return on its investment (ROI). Perceived Value Pricing Many companies price their product on the customers perceived value. There are three kinds of buyers Price Buyers, Value buyers and Loyal Buyers. Companies need different price strategies for each. Companies offer stripped down version for price buyers. For value buyers, they must keep innovating new value and keep reaffirming the value. For loyal buyers, companies must invest in relationship building and customer intimacy. Dupont is a major practitioner of Perceived value pricing. Most of the car manufactures in the country are also following the Perceived Value Pricing by offering different variants in the same model with added features. Value Pricing Value pricing is charging a fairly low price for a high quality product. Wal-Mart, Ikea and

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southwest airlines are the companies practicing this method. Going Rate Pricing Company fixes the prices based on the general market price of the competition in the market. It may charge the same, little more or little less. Smaller firms normally follow this method. Auction Type Pricing This method is gaining popularity with advent of internet. The price is decided by the way of auctioning, either English way or the Dutch way. Selecting The Final Price In addition to the methods available for pricing, there are some more factors to be taken into account while deciding the price: Psychological Pricing Many consumers associate price with the quality. High price also has snob value. Therefore, some of the life style product companies take advantage of this psychological trait and price their product much higher. Another classical variety of psychological pricing is the BATA pricing. A shoe priced Rs 999.95 is perceived to be costing in hundreds rather than thousands that it actually is. Gain and Risk Sharing Pricing Many times buyers resist accepting the price as the value offered by the seller may not be certain. Say software for companys operations that would raise savings in operations. Company may not be so sure of gains beings promised. The seller can in this case offer to compensate the savings if they are not realised. Similarly, the seller could also add a clause that if the savings exceed the promised
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amount, they would be entitled to a percentage share in the additional profits.

Q 12. Differentiate Between Market Skimming and Market Penetration Pricing. Ans. Market penetration pricing means to keep the prices very low in order to capture large market share. It is done in the belief that the profits eventually lie in volume as the unit cost of production falls with rise in volume (Economies of scale principle). Another intention some times is to cripple the competition through low prices and later gain monopoly and high prices. Reliance tried this strategy when they launched their telephone services. They offered to charge the telehone call @ 5 paise per 15 sec pulse which was just half of the MTNL price with very 1/12 pulse rate. However, they did not get approval from the TRAI as the pricing was considered to be predatory, which was probably the case as the events later proved it. Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price gradually over the time. Market Skimming Pricing is a much complex method. This method is more applicable for innovative premium products. When a premium innovative product is launched in the market, there is often a segment in the market who would be willing to pay high premium (called consumer surplus) on such product either simply because they can afford it (price is not a criteria in that price range ever with them) or for the snob value associated with such products. And therefore, the prices are initially kept artificially very high. But as this segment begins to dry up, the prices are lowered to take advantage of the next lower segment. This gradual lowering of prices is continued till the product becomes a
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mass product at normal prices. Case in the point is Sony High Definition TV (HDTV). The product was priced at USD 43,000/- in 1990 when it was launched. By 1993 prices were reduced to USD 6000/- and now a much larger TV is being sold for less than USD 2000/-. So in this case penetration is achieved gradually by reducing the prices in steps. It is a temporal version of price discrimination/yield management. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price.

Q 13.

Differentiate between Marketing and Selling.

Ans. Marketing is often confused with selling and both terms are considered synonymous. However, this is not always the case. Selling is a narrow objective and often has short term perspective Where as, marketing operates on a much larger canvas and selling is just one of the elements of that huge canvas of Marketing. But marketing is not necessarily selling. In simple words, marketing is promotion of an idea in a manner that target group accepts it. It could be a physical product, service or even a belief. Say, the case of marketing the idea of quitting Cigarette Smoking. Here nothing is being sold. Rather, it is anti-selling. Marketing could be for an election candidate seeking votes. It is promoting a belief that people would benefit by voting for the candidate. But in market sense, it can not be called selling. Similarly, campaigns for raising donations. Noting is being sold in this case, some times not even a promise of goodwill. It is just appeal to the inner conscience of the people to share their prosperity with less fortunate in the society. Marketing often has a long term perspective since it attempts to change peoples belief. It is mind oriented where as selling is feet or action oriented.
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Q 14. Comment on conversion from Sellers Market to Buyers Market due to liberalisation. Ans. The transformation of the Indian market in the last decade and half has been gigantic. The Indian economy has transformed from a largely socialistic model to the near capitalistic one. Till 1990, industry was under what is derisively called Licence & Quota Raj Licence was required for every business activity and most of the producers had near monopoly in their area of operations. Take the case of automobile market. Ambassador had a near monopoly in car segment and Bajaj was ruling the two wheeler segment. There were waiting queues running into 5 years and more for a Bajaj scooter. Despite inherent problems in the scooter design, no efforts were made to improve the design. This was a completely sellers market where almost complete monopoly existed. Come 1991 and Mr Manmohan Singh. 14 years later, Indian market has turned into a Buyers market. Instead of customers standing in queue in front of Bajaj, it is now Bajajs turn to wait in queue at customers door to offer not only the scooter but also money on loan to buy its products. Market has been deregulated and almost any number of players can enter and exit the market at any time. Competition to capture the market share is intense resulting in innovative strategies to catch customers attention and imagination.

Q 15.

Short Notes on Distribution Channels.

Ans. Distribution Channels are part of the wider network called Marketing Channels. Marketing channels are path to reach the target market. Three kinds of channels are used for the purpose: -

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(a) (b) (c)

Communication Channel Distribution Channels Service Channels

Distribution Channels Distribution Channels are used to display, sell or deliver goods to the buyer or user. These could be distributors, whole sellers, retailers or agents. An effective distribution strategy is a sure success story because it influences the customer in 3 different ways simultaneously. (a) Time Saving In todays fast paced world, time is a precious commodity for most of the people. Even if time is available, patience is almost never there. Therefore, people are generally impatient and are often willing to substitute one brand with other even at the cost of compromise on quality and price. Advertising Strong distribution channels often give free advertising advantages. Like the car dealers often place advertisement in the local dailies or other media to boost their sales. Parent company gets the advantage out of such advertisements. Local dealers also some times distribute promotional material like caps, keychains, and bags, Stepney covers bearing their names as well as the product name and logo. Better Visibility of Product A strong distribution network often leads to improved visibility of the products which in turn improves the recall value of the product and even impulse purchase of the product. Constant visibility also improves customers confidence and goodwill for the product.

(b)

(c)

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Q 16.

Comment on Product Mix Strategy

Ans. A product mix is the set of all products and items that a particular seller offers for sale. A companys product mix has certain width, length, depth and consistency. (a) Width The width of a product mix refers to the number of different product lines that a company carries. Like HLL and P&G have tens of different types of products in their basket of offering. Like soaps, shampoos, toothpaste, washing soaps, detergents, disinfectants, oil and so on. Each of the above mentioned products form one product line. Length Length of the product mix refers to the total number of brands names that a company carries. Each product line will carry various brands. Like HLL may be marketing 8 different brands of bathing soaps, 3 brands of detergents, 4 types of hair oils and so on. Each of these have a different brand name. Depth - of the product mix means how many variants are offered in each product in the product line. Like Maggi noodles comes in 5 different flavours. So the depth of Maggi noodles product is 5. Moti soap is available in 3 different fragrances. So the depth of Moti soap product is 3. Consistency Consistency of the product mix refers to how closely related are the products in product line in end use. Like a company may be dealing only in personal care product or another company dealing in home appliances. They have a reasonably consistent product line. But take the case of Tata. They have a highly
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(b)

(c)

(d)

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inconsistent/diversified product line starting from personal care, to food product to air conditioners and even beyond. Strategy Every companys product portfolio consists of products with different margins. Supermarkets make almost no profit on bread and milk, reasonable margins on canned and frozen food, and very good margins on flowers, and other life style products. A company can classify its products into four types that yield different gross margins depending on sales volume and promotion. (a) Core Products These are the products that produce high sales volume and are heavily promoted but have very thin margin due to undifferentiated nature of the product. Say soaps and oils in a supermarket. Staples Items with lower sales volume and no promotion. They have some what higher margins. Specialties Items with lower sales volume but which might be highly promoted, such as electronic products. They have high profit margins. Convenience Items Peripheral items that sell in high volume but receive less promotion. They are purchased along with some other items from the same store where main product is purchased out of sheer convenience. These items carry higher profit margins.

(b) (c)

(d)

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Thus, a manager has to understand that various items differ in their potential for extracting margins out of them or advertisement requirement to induce sales and accordingly push their sales.

Q 17.

Write a short note on Sales Promotion.

Ans. Sales Promotion is a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumer or the trade. Whereas Advertising offers a reason to buy, sales promotion provides an incentive to buy. Sales promotion includes tools for : (a) Consumer Promotion - Samples, coupons, cash refund offers, price off, premiums, prizes, patronage rewards, free trials, warranties, tie-in promotions, cross promotions, point of purchase displays and demonstrations Trade Promotions - Prices off, advertising and display allowances and free goods. Business and Sales Force Promotions - Trade shows and conventions, contests for sales rep and specialty advertising.

(b) (c)

Sales promotion has slowly overtaken advertising and today the budget for sales promotion often exceeds that for the advertising in the ration of 3:2. Objectives of Sales Promotion

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(a) Quick Sales Return (b) To expand market/market penetration (c) Retain existing market share under thread from competitors (d) Liquidate finished goods inventory (e) Increase share of shelf space of retailers (f) Acquire New customers (g) Induce forced purchases (h) General trials among new buyers Disadvantages (a) (b) (c) (d) (e) (f) (g) Only brings sales forward. It does not actually increase sales. Post promotion, there is a sharp drop in general sales. Dumping happens. Post promotion lots of goods landed with dealers come back. Consumers postpone their purchases and wait for sales promotion. Profit margins are squeezed. Image of the company may suffer if sales promotions are too frequent. Can affect production plans due to sudden rise in demand during the promotion period and drop in post promotion period. Working capital gets blocked.

Trade promotion has grown to be a nuisance now. Today it consumes almost 45% of the total marketing budget and is difficult to police that the retailer is actually abiding by the terms of contract.

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Q 18.

Comment on Push Vs Pull Strategy.

Ans. A Push Strategy is aimed at sales force and retailers while a Pull Strategy is aimed at consumers. A push strategy involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end users. Push strategy is appropriate where there is low brand loyalty in a category, brand choices are made in the store, the product is an impulse item and product benefits are well understood. A pull strategy involves the manufacturer using advertising and promotion to induce consumers to ask intermediaries for the product, thus inducing the intermediaries to order it. Pull strategy is appropriate when there is high brand loyalty and high involvement in the category, when people perceive differences between brands and when people choose the brand before they go to the store. Companies in the same industry may differ in their emphasis on push or pull.

Q 19. How would you justify the role of middlemen in the distribution chain? Ans. Producers gain several advantages by using the intermediaries or middlemen: (a) Many producers lack the financial resources to carry out direct marketing. For example, general motors sells its cars through more than 8000 dealer outlets in North America alone. Even General Motors would be

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hard pressed to establish such mega sized company owned sales showroom network. (b) In most cases direct marketing is simply not feasible. Take the case of any mass consumed low value item like pencils and erasers. Companies have to retail their product through network of small stationery shop/grocery shop owners near schools and colleges because they simply can not open outlets all around the country side just to sell a few pencils worth a few hundred rupees per store every day. Often, the return on production is higher than in retailing. Therefore, it makes more economic sense to invest the money required for raising retailing outlets in core business.

(c)

Intermediaries often achieve superior selling efficiency due to their intimate knowledge of local area, populace, contacts and commitment to the business being their own. Q 20. Differentiate between Intensive Growth and Diversification Growth. Ans. Diversification Growth Diversification growth is resorted to by any company when (a) (b) Core marketing system (present business) doesnt show potential for growth. Potential outside core marketing system, i.e. in the new business, are superior.

(d)

There are three types of diversifications: -

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(a)

Concentric Diversification New products that have technological and/or marketing synergies with existing ones for new class customers. Like a plastic kitchen ware company deciding to diversify into plastic chairs and tables or industrial storage bins/crates business. It already has know-how and equipment for manufacturing plastic articles. Horizontal Diversification New products appealing its present customers though technologically unrelated. Like a CD manufacturing company coming out with CD Storage Racks. The technology required by the two products is entirely different, but the customers are same. Conglomerate Diversification New products for new classes. This is diversification into area which has no relation with companys present business or customers in any way. Take the case of Raymond. A cloth manufacturing company ventured into cement production at one time. There is no synergy between cement and cloth business either in terms of the product or the customers.

(b)

(c)

Integrative Growth Integrative growth is operative when (a) (b) Basic industry has strong growth future Company can increase profitability, efficiency or control by moving backward, forward or horizontally in industry.

Thus integrative growth can be achieved by (a) Backward Integration Co seeks ownership or increased control of its raw material supply system. Like

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Reliance, which has refinery at Jamnagar, diversified into Oil exploration. (b) Forward Integration Co seeks ownership or increased control of its distribution system. Reliance company is also opening retail petroleum outlets. Thus, it has grown to marketing its own products. Horizontal Integration Co seeks ownership or increased control of some of its competitors. Like Birla Group (Grasim) which has strong presence in cement production, has acquired cement division of L&T and renamed Ultra Tech.

(c)

Q 21.

Write a short note on B.C.G. analysis

Ans B.C.G. analysis is a technique used in brand marketing and product management to help a company decide what products to add to its product portfolio. It involves rating products according to their market share and market growth rate. The products are then plotted on a two dimensional map. Products with high market share but low growth are referred to as "cash cows". Products with high market share and high growth are referred to as "stars". Products with low market share and low growth are referred to as "dogs" and should usually be discontinued. Products with low market share but high growth are referred to as "question marks".

???
Growth Rate

Star

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Cas Dogs Cow

30% Market Share

A "QUESTION MARK" has the potential to become a "STAR" in the future if it is developed. A company should have a balanced portfolio. This implies having at least one "cash cow" which can generate revenue that can be used to develop one or more "Question Mark". This process is called as "milking your cash cow". B.C.G. Analysis was originally developed by the Boston Consulting Group in the early 1970s.

Q 22. Differentiate between Consumer Product Marketing Vs Industrial Product Marketing. Ans. Consumer Products have wide customer spread while Industrial Products have limited customer base. Since most of the Industrial products are high value purchases, they are Involved Purchases. Also, the customers have complete knowledge of the product and the competition. Overall marketing of the Industrial products is much tougher proposition than the consumer product marketing.

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As already stated, these are informed customers and the purchases are involved purchases. Therefore, plain Jane advertising and marketing, popular with consumer products, is not much effective in such cases. Industrial Products advertisements are high in information content and less in emotional appeal. Also advertisements are not placed in the popular media, hoardings, etc but placed in trade magazines and publications. Sales team is a heterogeneous team consisting of people from Engineering, software, finance, marketing and some other relevant fields. The most successful method of marketing for Industrial Products is Personal Selling. The sale is clinched by one to one meetings with the potential clients and making presentations in the Board Rooms to the management and also performance demonstrations at company site. Ordinary methods of promotion like sale, gifts, coupon, etc are not much effective in this case. Industrial fairs and Exhibitions are main source of advertisement and promotion for industrial products. In contrast to the Industrial Products, Consumer Products are advertised in mass media and often have high emotional appeal. Advertising has large impact on the customers and in fact higher the emotional connection achieved with the consumer, more successful the marketing.

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Q 23. Differentiate between Personal Selling and Publicity.

Advertising,

Promotion,

Ans. While each of the above is a form of marketing, each has its own distinct flavour. Though every method aims to achieve sale of the product to the consumer, each one affects the consumer in a different way. Special characteristics of each are enumerated below: Advertisements Advertising is defined as any paid form of non personal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertising is most powerful form of persuasive communication. Ads are a cost effective way to disseminate message. Advertising is mind oriented. It influences attitude and behaviour of the person. Role of advertising is to create/increase positive attitude of the person towards the product. It has a long term objective. It does not achieve a direct sale but helps create awareness of the product and thereby helps in improving the sale in due course. Advertising is often created with the target audience in mind. Each market segment has its own peculiarities and advertising message and visuals have to be crafted in keeping with tastes, beliefs, needs, culture and language, etc of the target group. Advertising does not always try to achieve sale. In many cases they are meant to create goodwill and brand image. Like L&T being Engineering Company has nothing to gain in terms of sales through advertisement in mass media, yet it advertises to create a brand image in the public mind and earn goodwill for the company. Promotion Unlike Advertising, Promotion is Feet Oriented. It provides immediate incentive to buy. Promotions hardly ever, if they do, create a long term impact. They are vehicles for improving immediate sale or enticing new customers to try the companys
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product. They are like quick fix solution to sales. Most often, they are used to liquidate excess inventories, achieve quick sales to improve cash liquidity of the company. There are enough critics who do not support promotions. They believe that Promotions erode brand equity and value. There is another school of thought who believes that promotions only advance the sale and do not improve sale and erode companys bottom line. However, there have been some remarkable success stories achieved with well orchestrated Promotion Campaigns, like AKAI television. Personal Selling Personal selling is the most effective tool at later stages of the buying process, particularly in building up buyer preference, conviction and action. It is especially useful in high value involved products where customer is highly knowledgeable and looks for pure merits rather than any emotional appeal. Personal selling has three distinctive qualities: (a) Personal Confrontation Personal selling involves an immediate and interactive relationship between two or more persons. Each party is able to observe the others reactions. Cultivation Personal selling permits all kinds of relationships to spring up, ranging from a matter of fact selling relationship to a deep personal friendship. Response Personal selling makes the buyer feel under some obligation for having listened to the sales talk.

(b)

(c)

Publicity Publicity is a variety of programs designed to promote or protect a companys image or its individual products. A company is required not only to relate to customers, suppliers and
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dealers but it must also relate to a large number to interested public. A public is any group that has an actual or potential interest in or impact on a company ability to achieve its objectives. Here, it can also be defined as the task of securing editorial space as opposed to paid space- in print and broadcast media to promote or hype a product, service, idea, place person or organisation. It is the opinion of the experts that editorial copy, due to high credibility, has five times better impact on consumers that advertisements. Publicity can play a very important role in:(a)Launch of new product (b) Repositioning a mature product (c)Building interest in product category (d) Influencing specific target groups (e)Defending products that have encountered public problems, like worms in Cadbury chocolates.

Q 24. Explain the process of developing an advertising campaign. Ans. An advertising campaign to be successful should necessarily be: (a)Simple S (b) Memorable M (c)Interesting I (d) Linked to the brand L (e)Emotionally involving E An advertising campaign is developed through the five Ms of Advertising: -

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(a)Mission (i) (ii) (b) Objective of advertising Sales Goals

Message (i) (ii) What message Message Coding

(c)Money Advertising Budget (i) (ii) (iii) (iv) (v) (vi) (d) Product type Stage in life cycle Market share and consumer base Competition and clutter Advertising frequency Product substitutability

Media Selection

(e)Measurement of effectiveness (Review) Setting the Objective Setting the objectives is important because every thing else begins and shapes on the basis of objectives. The objective must be S M A R T S Simple Objectives should be simple and easy to understand M Measurable objectives should be measurable A Agreed upon All involved people should agree with the objective Client, Agency agreement in writing R Realistic - Objectives should be realistic achievable T Time Bound - Objectives should be time bound - to be achieved in a definite time frame.
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Message Coding Every message must offer clear cut proposition to the customer. Message evolves from Positioning of the product. Message should be in consonance with companys objectives and prospective customer profile. Before coding a message, it is necessary that consumer insight be developed. Every segment of population has certain peculiarities, tastes, dislikes, beliefs, sensitivities, needs, etc. These are to be taken care of and exploited in advertisement. For e.g. Asian countries have strong family values and therefore advertising based on family values generally finds better acceptability. It has been found that messages having the right mix of facts and emotional appeal have high success rate. Factual content of the message provides the logical connection where as emotional appeal secures the heart connection. Factual/emotional mix will depend upon the type of the product. While emotive appeal is a sure success if it strikes the right cord, it is believed that highly involved products are less influenced by the emotive appeal while lifestyle, impulse and sensual products are greatly affected by it. Media Planning A host of media are available for advertising. Main media used for advertising are : (a) (b) (c) (d) (e) Electronic Broadcast Media (i) Television (ii) Radio Press Newspapers, Magzines Hoardings Cinema Direct Mail

In addition, host of other forms are available. Each of the media has its own advantages and disadvantages. However, the right choice depends upon the target group as well as product type. Consumer products have wide spread consumer base and high volume. Therefore, mass media like TV, National Newspapers are the right
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choice. But industrial products have highly selective customer base and low volume. Therefore, mass media would be waste of money. A product having only regional reach and distribution should select a regional media like language channels and vernacular dailies. Availability of advertising budget also dictates the selection of media. TV is a costly media requiring many repetitions to be effective. A mix of media is generally preferred option. Like the primary ads may be initially placed on TV, but reinforcements are done through much inexpensive media like radio. Also the timing of the ads is also important. The recency has to be taken into account. Consumer goods have high sales during the early part of the month. Also sales peak during festive and marriage season. Therefore, intensity of ad campaign needs to be high during those time to remind customer of the brand.

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MATERIAL FOR FURTHER STUDY Marketing System

CORE
SUPPLIER S

MARKETING
COMPANY COMPETITOR S

SYSTEM
MARKET

MARKETI NG ** INTERME -DIARIES

Growth Strategies Intensive growth In current product market Integrative growth In other part of core marketing system Diversification Outside the core marketing system INTENSIVE GROWTH

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P R O D U C T S M A R K E T S
P R E S E N T N E W PRESENT MARKET PENETRATIO N NEW PRODUCT DEVELOPMEN T

MARKET DEVELOPMEN T

DIVERSIFICATION

Market Penetration Stimulate mkt to increase present rate of usage Increase unit of purchase Increase rate of product development or obsolescence Suggest new uses for the product Offer price incentives for increased use Attract competitors customers Improving brand differentiation Stepping up promotion Attract non users Market Development Open addl geographical mkts Regional National International expansion
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Attract other mkt segments Developing product (suitable) versions Entering other channel of distribution Advertise in other media Product Development New product features Create different quality versions Develop additional models and sizes DIVERSIFICATION GROWTH Applicable, if Core marketing system doesnt show addl potential Potential outside core marketing system are superior Concentric diversification new products that have tech and/or marketing synergies with existing for new class customers Horizontal diversification new products appealing its present customers though tech unrelated Conglomerate diversification new products for new classes Promises to offset some deficiencies Represents great environmental opportunity

INTEGRATIVE GROWTH Operative, if Basic industry has strong growth future


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Company can increase profitability, efficiency or control by moving backward, forward or horizontal in industry Backward Integration Co seeks ownership or increased control of its supply system Forward Integration Co seeks ownership or increased control of its distribution system Horizontal Integration Co seeks ownership or increased ctrl of some of its competitors STRATEGIC MARKETING

P R I C I N G
HIGH MEDIUM LOW

Q U A L I T Y

PREMIUM STRATEGY OVER PRICING STRATEGY HIT AND RUN STRATEGY

PENETRATIO N STRATEGY AVG QUALITY STRATEGY SHODDY GOODS STRATEGY

SUPERBARGAI N STRATEGY BARGAIN STRATEGY PREMIUM STRATEGY

VPFC - Views Principles Factors Considerations (M.S.) Geographical End uses Buyer description variable Types of buyers
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Customer size Customer class Specific product A few characteristics (Market Segmentation) Sufficient current size Potential for further growth Now not owned by existing competition {saturation} Relative unsatisfied needs that co. Can serve well! Co. (or acquiring co) has little (?) Knowledge of industry Strong advantage in entering ASAP! Several barriers to entry (!) (on account of ., ., ., ., ., .,) Marketing Strategy Marketing strategy Co-objective

Mkt segmentation Quantitative Mkt positioning Realistic Mkt entry strategy Consistent Marketing mix strategy Timing strategy

MARKETING RESEARCH Steps Problem definition Research design Field work Data analysis Report preparation
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Make the decision Research Design Objectives in writing Data collection methods Research instrument Sampling plan

Data Collection Methods Secondary data Primary data Observations. Tape, camera Experimentation. subject task Survey. Questionnaires Research instruments Types of questions Form & wording of question (open, close) Choice of words Sequencing of questions (lead, probe..)

Sampling plan Who .sampling unit How many .sampling size How to select .procedure How to reach ..media (tel,

mail, person)

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Field Work Not at home/place Refusal to co-operate Respondent bias Interviewer bias

Data Analysis Average measure of dispersion Cross tabulation Co-efficient of co-relation, goodness of fit Multivariate analysis. Multi regr. Discriminant, factor and cluster analysis

Report Preparation (facilitates understanding + interest) Scientific method Research creativity Interdependence of models and data Value & cost of information Types of questions Closed end questions Dichotomous 2 answers - yes/no Multiple choice 3 or more answers

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Likert scale Agree/disagree Semantic differential Bipolar [modern, old fashion] Important scale Attribute rating [most . Not at all] Rating scale [excellent .poor] Purchase intent [dwb .dwnb] Open-end Questions Unstructured express opinion please Word association 1st word in mind (airline.product) Sentence completion (OB tool) Story completion Picture - responses Thematic Apperception Test (TAT) Predict happenings! Value And Satisfaction 1. Value is combination of Quality, Service & Price 2. Customer Value Triad = Q S P 3. Value = Benefits Costs = Functional b + Emotional b Monetary+Time+Energy+Psychic Advertising
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Definitions Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. Kotler Contribution to brand image David Ogilvy Intervener in all aspects of economic and cultural life Pope VI Paid, non-personal communication through various media by business firms, non-profit organisations and individuals who are in some way identified in the advertising message and who hope to inform or persuade members of a particular audience Nourishes consuming power Sir Winston Churchill Advertising Eras Product era 50s in USA and 70s in India Attention on product features Attention on customer benefits Unique selling proposition (USP) Decline due technology + me too products new and improved joke Image era Architect David Ogilvy Every advertisement is a long term investment in the image of a brand E.g. Rolls Royce, Marlboro Me too companies kill image era

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Xerox Corporation was an exception due to technical achievement Positioning era IBM invent computer? 1st company to build a computer position sperry-rand Amerigo Vespucci who discovered USA? {15th century} separate continent not Asia Wrote!! Christopher Columbus Positioning Battle for your mind Al Ries and Jack Trout New approach to communication positioning to overcome universal reason given for problems that develops failure to communicate Positioning starts with a product, a piece of merchandise, a service, a company, an institution or even a person. perhaps yourself. Positioning is what you do to the mind of the prospect i.e. position your product in mind of the prospect Reality that really counts is whats already in the prospects mind. Basic approach of Positioning is not to create but retie the connection that already exists. concentrate on narrow targets, practice segments. Average person can not tolerate being told he or she is wrong. But average person can tolerate something which he/she knows nothing about (which is why News is an effective advtg approach). In politics, perception is reality Lindsay
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More is less, first impression, superlative best approach. Inside out thinking. humour!! Marketing Tasks There are three stages of marketing practice: 1. 2. 3. Entrepreneurial Marketing Low cost self involved way of marketing adopted by small entrepreneurs. Formulated Marketing Sales force, TV, media and outdoor and other advertising. Intrepreneurial Marketing brand and product managers spend time with customers to find new ways to add value for customers. creativity is key word.

Demand States 1. Negative Demand product is disliked to the extent that people would pay to avoid using the product. eg. non vegetarian food products in a Jain community/brahmin dominated locality. No Demand Consumers may be unaware of the product or may not have utility of this product. eg. room heaters in equatorial countries or foreign language courses in small town. Latent Demand There exists need for such a product but none of the present products are able to meet it. like harmless cigarettes. Declining Demand The demand pattern of the product is reducing. Irregular Demand The demand pattern is unpredictable. Seasonal Demand Demand keeps varying but on a predictable pattern. like demand for entertainment services like parks, movies, opera vary greatly between week days

2.

3. 4. 5. 6.

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7. 8. 9.

and weekends. demand is known to vary greatly even during various time of day. Full Demand when demand is full capacity demand. Overfull Demand demand exceeds supply. the demand needs to be spread over to slack period through differential pricing or reducing demand from less profitable market. Unwholesome Demand there are some products with harmful direct or side effects, like, alcohol, drugs, x rated material, even cigarettes. marketers task is to get people to give them up by use of tools such as fear messages, price hikes and reduced availability.

Variety of products in the market 1 2. 3. 4. 5. 6. 7. 8. 9. Goods Services Places (destinations) People (elections) Information (new channels, magazines, new papers) Idea (venture capital seekers, patent sellers) Events (Mumbai marathon) Properties Experience unique kind of sight sound or chunk of life or achievement which becomes a cherished memory. like bungee jumping, visit to royal palace, palace on wheels train, etc.

For exchange potential, five conditions must be satisfied There are at least 2 parties Each party has some thing that might be of value to the other party Each party is capable of communication and delivery

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Each party is to accept or reject the exchange offer Each party believes it is appropriate and desirable to deal with the other party

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