Business and the Environment

Contemporary business-as-usual solutions are not sufficient for achieving meaningful change in a resourceconstrained and inequitable world. Students taking the Business and the Environment Option (B&E) will develop a
critical understanding of how businesses currently tackle the challenges of sustainability in the broadest of senses.
They will use creative thinking to develop proactive businesses models that go beyond contemporary levels of
sustainability performance.
The B&E Option provides students with an understanding of opportunities and risks that businesses face in the light
of growing environmental constraints and social inequality and gives them the skills develop entrepreneurial
solutions that maximise those opportunities. Students will be equipped with the knowledge to deal with the
complex choices that business must face in order to function as responsible members of society.
The Option benefits from the input of leading companies and strategists in the fields of environment, finance, retail
and emerging markets, and students are exposed to a wide variety of industry and academic perspectives. Recent
contributors have included speakers from Adnams, BG Group, Caf Direct, Rio Tinto, InterfaceFlor, Unilever and John
Lewis. There is a strong emphasis on learning-by-doing, going beyond the norm and developing solutions to difficult
problems using systemic, disruptive innovative thinking coupled with sound business and organisational
management strategies.
During the Option term, teaching is supported with practical work that serves to both reinforce learning and to give
students exposure to real-world problems. A group-based 'live' consultancy project is carried out in conjunction with
leading UK-based companies, whilst a business planning exercise gives students the opportunity to develop their
own ideas of what a responsible company should look like by planning a business that has positive environmental
and social impacts.
Key elements of the Option include:
understanding sustainability challenges across a companys complete supply chain
innovation and sustainability
problem-solving using life cycle and systems thinking
effective stakeholder engagement, corporate reporting and marketing
business ethics and responsibility
basic accounting for business
The Marketing Environment consists of the factors and forces outside marketing that affect marketing management's ability to build
and maintain successful customer relationships with target customers. Within this environment we have the Macro-environment
and the Micro-environment. Let's start with the Micro-environment.
Micro Environment of Business: 6 Factors of Micro Environment of Business

Most important factors of micro environment of business are as follows: 1. competitors, 2. customers, 3. suppliers, 4.
public, 5. marketing intermediaries, 6. workers and their union!
The micro environment of the organisation consists of those elements which are controllable by the management.
Normally the micro environment does not affect all the companies in an industry in the same way, because the size, capacity,
capability and strategies are different. For example, the raw material suppliers are giving more concessions to large sized
companies. However, they may not give the same concessions to small companies.
Like the same, the competitors do not mind about the rival company if it is compared to the small, but he will be very much
conscious if the rival him is large. Sometimes micro environment of the various firms in an industry is almost the same. In such a
case, response of these firms to their micro environment may differ as each firm will attempt to achieve a higher success level. The
general micro environment factors are discussed below.
1. Competitors:
The competitive environment consists of certain basic things which every firm has to take note of. No company, howsoever large it
may be, enjoys monopoly. In the original business world a company encounters various forms of competition. The most common
competition which a companys product now faces is from differentiated products of other companies.
For example, in the Colour Television Market, Philips TV faces competition from other companies like Videocon, Onida, BPL and
others. This type of competition is called brand competition. It is found in all durable product markets.
The consumer wants to purchase a two-wheeler, the next question in his mind is with gear or without gear, 100 cc or more than that,
self starter or kick starter, etc. This type is otherwise known as Product form competition.
Philip Kotler is of the opinion that the best way for a company to grasp the full range of its competition is to take the viewpoint of a
buyer. What does a buyer thinks about that which eventually leads to purchasing something? So, tracing of the consumer mind set
will help to retain the market share for all the firms.
2. Customers:

According to Peter. F. Drucker, There is only one valid definition of business purpose, that is to create a customer. The business
enterprises aim to earn profit through serving the customer demand. It now thinks more in terms of profitable sale rather than more
sales volume for its sake. Today marketing of a firm begins and also ends with the customers.
Now a days, a business firm to be successful, must find customers for its products. This is the reason the customers thus constitute
the most important element in the micro environment of business. Products sales depend mainly on the degree of consumer
satisfaction.
In fact, this is a reason that gives more importance to customer satisfaction surveys. Now every business firm set-up systems to
regularly watch customer attitude and customer satisfaction, because today it is universally accepted that the satisfaction of
customers is the base for companys success. Normally the customers are not in a same group, they are individuals, business
enterprises, institutions and government.
From the companys point of view it is always better to have customer from various groups and legions for that easily sustains
demand for the companys product.
3. Suppliers:
Regarding the suppliers, the organisation can think of availing the required material or labour according to its manufacturing
programme. It can adopt such a purchase policy which gives bargaining power to the organisation.
According to Michael Porter, the relationship between suppliers and the firm epitomises a power equation between them. This
equation is based on the industry conditions and the extent to which each of them is dependent on the other.
Suppliers are either individuals or business houses. They combined together; provide resources that are needed by the company.
Now the company necessarily should go for developing specifications, searching for potential suppliers, identifying and analysing
the suppliers and thereafter choose those suppliers who offer best mix of quality, delivery reliability, credit, warranties and obviously
low cost.
The development in the suppliers environment has a substantial impact on the operations of the company. In recent trends
companies can lower their supply cost and increase their product quality.
4. Public:
Literally word public refers to people in general. According to Philip Kotler, A public is any group that has an actual or potential
interest in or impact on a companys ability to achieve its objectives. The environmentalists, consumer protection groups, media
persons and local people are some of the well-known examples of publics.
The company has a duty to satisfy the people at large along with competitors and the consumers. It is an exercise which has a
larger impact on the well-being of the company for tomorrow s stay and growth. Create goodwill among public, help to get a
favourable response for a company. Kotler in this regard has viewed that.
Companies must put their primary energy into effectively managing their relationships with their customers, distributors and
suppliers. Their overall success will be affected by how other publics in the society view their activity. Companies would be wise to
spend time monitoring all their public understanding their needs and opinions and dealing with then constructively.
In the modern business public have assumed important role and their presence in the micro environment of business.
5. Marketing Intermediaries:
Market intermediaries are either individuals or business houses who come to the aid of the company in promoting, selling and
distributing the goods to the ultimate consumers. They are Middlemen (wholesalers, retailers and agents), distributing agencies,
market service agencies and financial institutions. Most of the companies find, it is too difficult to reach the consumers. In such a
cases the agents and distribution firms help to reach the product to the consumer.
Any type of intermediary the company must take into active consideration, the following aspects:
(i) The company has also to constantly review the performance of both middlemen and others helping its efforts periodically. If
necessary, it may take recourse to replacement of those who no longer perform at the expected level.
(ii) Middlemen come into being to help overcome the discrepancies in quantities place, time, assortment and possession that would
otherwise exist in a given condition.
(iii) It is advantageous and also efficient to work through the established Marketing channels instead of creating one and thus going
for experiments.
(iv) The manufacturer has to decide the most cost-effective method of intermediaries to reach the product to consumer that will help
to increase the profit.
6. Workers and Their Union:
As per the production function theory, the labour gets more importance. He is also one of the pillars of the company. The organised
labours is highly secured their position compare to unorganised workers So, the workers now prefer to join labour unions which
invariably resort to collective bargaining and thereby makes them less vulnerable to employers exploitation.

On the other hand, Trade Unions are a major component of a modern business. Trade Union of workers is an organisation formed
by workers to protect their interests, improve their working conditions etc.
All Trade Unions have objectives or goals to achieve, which are contained in their constitution, and each has its own strategy to
reach those goals Trade Unions are now considered a sub-system, which seeks to serve the specific sub-group s interest (i.e.
workers) and also considers itself a part of the organisation.
From the point of view of the company, industrial relation is more important to improve the company, otherwise conflict between
labour and management leads to Sick Unit.
Companys internal environment
7 Factors Determining the Internal Environment of a Business
The following points highlight the seven factors that determine internal environment of a business firm.
The factors are: (1) Value System, (2) Mission and Objectives, (3) Organisation Structure, (4) Corporate Culture and Style of
Functioning of Top Management, (5) Quality of Human Resources, (6) Labour Unions, and (7) Physical Resources and
Technological Capabilities.
Internal Environment of a Business
Factor 1# Value System:
The value system of an organisation means the ethical beliefs that guide the organisation in achieving its mission and objective. The
value system of a business organisation also determines its behaviour towards its employees, customers and society at large. The
value system of the promoters of a business firm has an important bearing on the choice of business and the adoption of business
policies and practices. Due to its value system a business firm may refuse to produce or distribute liquor for it may think morally
wrong to promote the consumption of liquor.
The value system of a business organisation makes an important contribution to its success and its prestige in the world of business.
For instance, the value system of J.R.D. Tata, the founder of Tata group of industries, was its self-imposed moral obligation to adopt
morally just and fair business policies and practices which promote the interests of consumers, employees, shareholders and society
at large. This value system of J.R.D. Tata was voluntarily incorporated in the articles of association of TISCO, a premier Tata
company.
Factor 2# Mission and Objectives:
The objective of all firms is assumed to be maximization of long-run profits. But mission is different from this narrow objective of
profit maximization. Mission is defined as the overall purpose or reason for its existence which guides and influences its business
decision and economic activities.
The-choice of a business domain, direction of its development, choice of a business strategy and policies are all guided by the overall
mission of the company. For example, to become a world-class company and to achieve global dominance has been the mission of
Reliance Industries of India. Similarly to become a research based international pharma company has been stated as mission of
Ranbaxy Laboratories of India.
Factor 3# Organisation Structure:
Organisation structure means such things as composition of board of directors, the number of independent directors, the extent of
professional management and share -holding pattern. The nature of organisational structure has a significant influence over
decision making process in an organisation. An efficient working of a business organisation requires that its organisation structure
should be conducive to quick decision making. Delays in decision making can cost a good deal to a business firm.
The board of directors is the highest decision making body in a business organisation. It takes general policy decisions regarding
direction of growth of business of the firm and supervises its overall functioning. Therefore, the managerial capability of the board of
directors is of crucial importance for the functioning of a business firm and for achievement of its overall mission and objectives.
For efficient and transparent working of the board of directors in India it has been suggested that the number of independent
directors be increased. Many private corporate firms in India are managed by family members of their promoters which is not
conducive to the efficient working of these firms.
It is therefore highly desirable to increase the extent of professional management of private corporate companies. The share holding
pattern has also an important implication for business management. In some Indian companies the majority of shares is held by the
promoters of the company themselves.
In some others share-holding pattern is quite diversified among the public. In India financial institutions such as UTI, LIC, GIC,
IDBI, IFC etc. have large share holdings in prominent Indian corporate companies and the nominees of these financial institutions
play a critical role in making major business policy decisions of these corporate companies.

Technically, shareholders elect directors who make up the board of directors. The directors then appoint companys top managers
who take various business decisions. However, most of the shareholders delegate the voting rights to the management or do not
attend the general body meeting.
Thus, most of the shareholders regard ownership of the company as a purely financial investment. However, in recent years in
developed countries like the United States the shareholders have come to wield a great influence.
The bankruptcy of business giants such as Enron, World Com. in the United States have created great awareness as well as mistrust
among shareholders. In the last few years there has been frequent law suits filed by shareholders against directors and managers for
ignoring the interests of shareholders or in fact cheating them by not declaring dividends. That is why there is worldwide debate on
proper corporate governance of business firms.
Factor 4# Corporate Culture and Style of Functioning of Top Management:
Corporate culture and style of functioning of top managers is important factor for determining the internal environment of a
company. Corporate culture is generally considered as either closed and threatening or open and participatory.
In a closed and threatening type of corporate culture the business decisions are taken by top-level managers, while middle level and
work-level managers have no say in business decision making. There is lack of trust and confidence in subordinate officials of the
company and secrecy pervades throughout in the organisation. As a result, among lower level managers and workers there is no
sense of belongingness to the company.
On the contrary, in an open and participatory culture, business decisions are taken at lower levels of management, and top
management has a high degree of trust and confidence in the subordinates. Free communication between the top level management
and lower-level managers is the rule in this open and participatory type of corporate culture. In this open and participatory system
the participation of workers in managerial tasks is encouraged.
Closely related to corporate culture is the style of functioning of top management. Some top managers believe in just giving orders
and want them to be strictly followed without holding consultations with lower level managers. This style of functioning is not
conducive to the adaptability and flexibility in dealing with the changing external environment of business.
Factor 5# Quality of Human Resources:
Quality of employees (i.e. human resources) of a firm is an important factor of internal environment of a firm. The success of a
business organisation depends to a great extent on the skills, capabilities, attitudes and commitment of its employees. Employees
differ with regard to these characteristics.
It is difficult for the top management to deal directly with all the employees of the business firm. Therefore, for efficient
management of human resources, employees are divided into different groups. The manager may pay little attention to the technical
details of the job done by a group and encourage group cooperation in the interests of a company. Due to the importance of human
resources for the success of a company these days there is a special course for managers how to select and manage efficiently human
resources of a company.
Factor 6# Labour Unions:
Labour unions are other factor determining internal environment of a firm. Unions collectively bargain with top managers regarding
wages, working conditions of different categories of employees. Smooth working of a business organisation requires that there
should be good relations between management and labour union.
Each side must implement the terms of agreement reached. Sometimes, a business organisation requires restructuring and
modernisation. In this regard, the terms and conditions reached with the labour union must be implemented in both letter and spirit
if cooperation of workers is to be ensured for the reconstruction and modernisation of business.
Factor 7# Physical Resources and Technological Capabilities:
Physical resources such as plant and equipment, and technological capabilities of a firm determine its competitive strength which is
an important factor determining its efficiency and unit cost of production. R and D capabilities of a company determine its ability to
introduce innovations which enhance productivity of workers.
It is however important to note that rapid technological progress, especially unprecedented growth of information technology in
recent years has increased the relative importance of intellectual capital and human resources as compared to physical resources of
a company. The growth of Bill Gates Microsoft Company and Murthys Infosys Technologies is mostly due to the quality of human
resources and intellectual capital than to any superior physical resources.

Macro Environment of Business: Economic Environment and Non-Economic Environment

Macro environment refers to those factors which are external forces in the companys activities and do not concern the immediate
environment.
Macro environment are the forces which indirectly affect companys operation and working condition. These factors are
uncontrollable and the company is powerless and incapable of exercising any control over them.
Macro environment can be classified into economic environment and non-economic environment. Since the business is basically an
economic activity, economic environment of business both national and international gets importance.
The economic environment of the country includes economic system, macroeconomic parameters, and stages of business cycle,
financial system and economic policies of the government.
Non-economic environment includes political system, government policies, legal framework social system, cultural values,
demographic factors, technological development and natural environment of the country. Intact, all these factors are very relevant to
the present business.
(A) Economic Environment of Business:
Economic environment of business has reference to the broad characteristics of the economic system in which the business firm
operates. The present day economic environment of business is a mixture of national and international environments. The existing
economic environment of business is highly complex and it is not easy to comprehend it. It is the reason the firms operating in the
same economic environment often take different decisions.
The business sector has economic relations with the government, capital market, and household sector. These different sectors
together influence the trends and structure of the economy. Individually business firms can do little to change their economic
environment.
(i) National Environment:
The economic condition of a country, for example level of income, distribution of income and assets, economic resources, and
stages of development are among the very important determinants of business strategies.
Economic conditions are those forces in the economy, such as consumer buying power, consumer spending behaviour and the
business cycle, that influence organisations abilities to compete and consumers willingness and ability to purchase goods and
services.
To study the national environment, under the economic environment, a business firm generally studies the following factors and
trends:
(i) Trends in gross national product and real income growth.
(ii) Pattern of income distribution.
(iii) Variations in geographical income distribution and its trends.
(iv) Expenditure patterns and trends.
(v) Trends of consumer savings and how consumer like to hold their savings, i.e., either in the form of bank account, investments in
bonds and securities, purchase of real estate, insurance policies or any other assets.
(vi) Borrowing pattern, trends and governmental and legal restrictions.
(vii) Major economic variables, e.g., cost of living, interest rates, repayment, terms and disposable income.
These factors determine the purchasing power, along with savings and credit availability. Study and knowledge of economic forces
is essential for preparing effective business plans. No firm is immune to economic forces although some are less vulnerable than
others. Anticipation of future economic conditions will enable the firm to devise appropriate strategies.
The economic policy of the government has a very great impact on business. Some categories of business are favorably affected by
government policy, while some adversely affected. Any way the government concern over the economic power should spread all
around the nation.
(ii) International Environment:
The environment consists of those factors which have an impact on foreign trade of a country. Those factors may be foreign policy,
international treaties and foreign investment policy and various acts which are concerned with the dealings with other countries in
trade matters. With the charges in government and their policies, there will be change in international environment.
With the introduction of economic reforms and the policy of liberalisation in our country, our exports have increased considerably
and many foreign companies started to trade with our country.
With the formation of World Trade Organisation (WTO), there is a tremendous change in the international trading environment.
Although Government of Indias policy has been encouraging foreign investment in Indian companies, subject to certain conditions,
and several factors like the domestic economic policy and the domestic economic situation have been deterrents to foreign
investment to Indian companies.
(B) Non-Economic Environment of Business:

The non-economic environment exercises a strong influence on the business. Normally the noneconomic environmental factors are
the key factors for all kinds of business activities in India. We will now discuss them one by one.
(1) Socio-Cultural Environment:
In India, the social environment of a business consists of the class structure and mobility, social roles, nature of the social
organisation and development of social institution. Basically the class structure in the society depends upon the occupation of
people and their income levels.
In rural areas, the occupational groups consist of farmers, artisans and traditional craft workers. There is little scope of mobility
among the social classes in such a society. The urban areas are comprises of doctors, engineers, lawyers, software professionals,
industrial workers, government servants as well as business people.
Every organisation develops its own internal culture. The management or managers generally to create, that will help to maintain a
common behaviour. The organizations are supported by three legs: assumptions, values and goal. Each of these legs plays an
important part in the life of an organisation.
In a modern business, social and cultural forces usually influence the welfare of a business concern in the long run. The nature of
goods and services in demand depends upon the changes in habits and customs of people in the society. With rise in population the
demand for household as well as other goods has increased.
The nature of food and clothing pattern has also changed to a great extent. Demand for packaged food and readymade garments
have increased in recent times. All these force the business to produce goods accordingly. So the social and cultural factors have
affected the production pattern of business.
(2) Natural Environment:
The natural environment consists of Geographical environment and ecological environment.
(a) Geographical Environment:
Geographical considerations influence and determine the number of business decisions. Tea and coffee cultivators are preferred to
be located in hill regions, where the climate is suitable for cultivating the crops.
The people tend to have similar tastes in a particular geographical region. Thus, the product very much consumed by South Indian
people, may not find buyers in northern India, because of regional differences.
Also, the availability of raw materials like minerals and other products in a particular geographical region affects locational decisions
of a business. Because it is always cheaper to transport finished product as compared to raw material. For example, the steel plants
are invariably located near the iron ore mines.
The natural structure of the area, i.e., whether it is plain, hilly or sea coast, also affects certain strategic business decisions. The
manufacturing units and factories, for instance, will not be suitably located in the hilly regions for difficulties in transport, unless raw
materials availability or suitable climatic conditions justify its location in that region. Similarly, what should be produced 0r traded to a
great extent depends upon the geographical environment.
(b) Ecological Environment:
Ecology is a science telling about the relationship of all living beings (i.e., human beings, animals and plants), with non-living
beings (air, water, soil, rivers, land and mountains). Eco System is a complex and wider term denoting the relationship between
living and non-living things as a whole in a particular region.
To preserve the society, it is important to protect the environment. Therefore, every business must take measures to protect the
environment rather than damaging it. Nature has given us: air, land including mountains, hills, forests etc. and water in the form of
rivers, lakes, sea etc.
It will create an environment to live. Our health is largely dependent on the quality of such environment. However, it is observed that
the quality of this environment is deteriorating day by day. We are getting neither pure water to drink nor clean air to breathe. We are
also suffering from various diseases because of such lower quality of environment.
(i) Air pollution:
Air pollution refers to the presence of any unwanted gases, dust particles etc., in the air, that can cause damage to people as well as
nature. Some of the common causes of air pollution are:
Emission of smoke dust and chemicals from manufacturing plants.
Emission of gases and dust arising from atomic plants.
Emission of smoke from oil refineries, burning of trees and plants in forests, burning of coal, etc.
(ii) Water pollution:
Water pollution refers to contamination of water due to presence of unwanted and harmful substances thus, making water unfit for
use. The various reasons of water pollution are:
Dumping of wastes and effluents by various industrial units into the rivers and canals.
Drainage of toxic substances like chemicals and fertilizers used in cultivation, into streams and rivers.
(iii) Land pollution:
Land pollution refers to dumping to useless, unwanted as well as hazardous substances on the land that degrades the quality of soil
we use. The main causes of land pollution are:
1. Excessive use of fertilizers, chemicals and pesticides in cultivation.
2. Disposal of solid waste of industries mines and quarries.
(iv) Noise Pollution:

Noise pollution refers to an unwanted and unwarranted sound created at a wrong time and in a wrong place, causing physical and
psychological disturbances to the people who are subject to the hearing of these noises. The main causes of noise pollution are:
In industrial centers, with the working of the engines, rotary drills, riveters, pumps, motors, compressors, vibrating screens.
Construction of buildings, using of bull-dozers, cranes, compactors, excavators, concrete mixers.
Role of Business in Environmental Pollution:
From the above discussion on environmental pollution, one thing can clearly be identified, that it is business that mainly contributes
to all sorts of pollution i.e., air, water, land and noise. The Government of India has taken a major step in protecting the environment
by passing the Environment Protection Act, 1986 in addition to having Water (Prevention and Control of Pollution) Act, 1974, Air
(Prevention and Control of Pollution) Act, 1981, and several other Acts.
Business can equally be instrumental in fighting pollution and protecting the environment: To minimise the environmental pollution
and improve the quality of environment the business can have three types of role, that is,
(i) Preventive role:
It means business should take all steps so that no further damage is done to the environment. For this, business must follow the
regulations laid down by the government to control pollution. For example, more, and more environmental friendly products can be
produced, filters can be used in chimneys; silencers can be fitted in generators; instead of dumping industrial wastes into river and
land it can be treated properly for further productive use etc.
Businessmen should come forward to play a major role in preventing further damage done to the environment by human beings.
Sulabh International is the leading example of how to provide proper sanitation facilities to the public.
(ii) Curative role:
It means business should rectify whatever damage has been done to the environment. In addition, if it is not possible to prevent
pollution then simultaneous curative measures can be taken. For example, planting of trees (Afforestation programmes) can
substantially reduce air pollution near the industrial area.
(iii) Awareness role:
It means making people (both the employees as well as the general public) aware about the causes and consequences of
environmental pollution. So that they voluntarily try to protect rather than damage the environment.
For example, business can undertake public awareness programmes. Now a days some business houses have taken the
responsibilities to develop and maintain parks and gardens in cities and towns, which show that they care for the environment.
3. Demographic Environment:
Demography refers to the study of human population especially with reference to age, sex, education, occupation, income size,
density, geographic concentration and dispersion urban and rural population, etc.
Such information about the population is of great significance to business It not only helps in selecting of items to produce, but also
help to select the channel of distribution advertising media, choice of marketing methods and other business decisions.
The choice of manufacturing or trading site would be influenced by the size of the population. However, the improved transport
facilities has enabled the buyers to shop at distant places, the sellers may therefore sometimes find that accommodation in thickly
populated areas may be and they may instead offer goods and services at substantially lower prices by locating themselves a little
away, thus attracting more customers.
The policy of balanced regional development prompts the government to offer infrastructure and basic facilities at cheaper rates to
attract business in backward regions. This is turn benefits the business, not only in terms of lower cost of such facilities but also the
labour available at lower rates.
It also helps to develop all the ancillaries and supporting business. For example, establishment of a cement factory or steel plant in
the backward area will generate employment not only in the factory itself but a full-fledged market to cater to the consumption and
other needs of those employees shall also come up.
So business will have the opportunity to establish canteen/hotels, textile shop, entertainment centres, and provisional stores medical
shops and so on. Besides, the government always looks to the demographic considerations in terms of their licensing policy.
Manufacturing units, particularly those which cause air or noise pollution are not permitted to operate in congested areas. That is the
reason why every state government has established industrial estates away from residential areas.
(4) Physical and Technological Environment:
(a) Physical Environment:
Potential shortages of certain raw materials e.g., oil, coal, minerals, unstable cost of energy; increased levels of pollution; changing
role of government in environment protection are a few of the dangers this world is facing on physical environment forces. Keeping
these forces in mind, world thinkers have expressed their concern over whether the physical environment is being irreparably
damaged by the industrial and other business activities of todays modern nations.
Environmentalism has now sprung up. Every nation is trying to conserve and recycle their natural resources through legislation and
vigorous campaign. It is because the world is about to face crisis on may counts if current rate of consumption of materials
continues without check. Ecological balance may also be disturbed. All these are bound to have an impact on business decisions.

The application of modern technology in industry, it is now felt, leads to rapid economic growth at a huge social cost of deterioration
of the physical environment around us, i.e., water, pollution, air pollution, noise pollution, so on and so forth.
The nature of such costs is being assessed by biologists, ecologists, sociologists, consumers and conservationists. In the high of
this, much talk is there about the social responsibilities of business. Business now has to calculate the social net profitability (social
benefit-social cost) of its ventures.
In this calculation business must consider the physical environmental factors such as the quantity and quality of existing forest
wealth, Possibility of artificial rain, the exploitation of sea products like fish, the health hazards out of pollution, social costs of rapid
urbanisation and industrialisation etc.
(b) Technological Environment:
Technological environment consists of those factors related to knowledge applied and the materials and machines used in the
production of goods and services t at have an impact on the business of an organisation.
The important factors operating in the technological environment are as follows:
(i) Sources of technology like company sources, external sources and foreign sources, cost of technology acquisition, collaboration
in and transfer of technology.
(ii) Technological development, stages of development, rate of change of technology and research and development.
(iii) Impact of technology on human beings, the man-machine system and the environmental effects of technology.
(iv) Communication and infrastructure technology and technology in management.
In the Indian context, we find that the state of technological development varies among different sectors of the industry. Generally it
is felt that the technological aspect of competition varies with customer needs and government policy. At the macro level. Foreign
technical collaborations are popular in India but subjected to strict regulation regarding indigenization, impact on local technological
development and employment export commitments etc.
The technological developments are strong and pervasive force in the business environment. Although technology can be beneficial
for business, it can also have unfavorable effects. Technology can affect business in two major ways.
(i) Impact of technology on society:
Technology affects the society. In fact, we feel its effect on our everyday life. It affects economic growth, our standard of living, and
our culture. However, whereas some of the effects of technology are highly beneficial, others are detrimental.
(ii) Impact of technology on business:
The technology also affects the business operations. It also has very strong, direct effects on such business activities as production,
product development, employment, finance, marketing and information, processing. The effects of technology on these activities can
be extremely beneficial or extremely harmful to business organisations.
Normally, technological advancement always leads to improvement in the process of production, transportation and communication.
Change in technology is mostly associated with better service and cost efficiency.
In recent years, information processing and storage with the use of computers and telecommunication facilities have developed
rapidly. People now prefer to use mobile phones in place of landline phones. Now a days electronic appliances have replaced
electrical equipment vary widely.
Business activities are bond to suffer if enterprises do not adopt up-to-date technology as and when necessary. So the business
firms are very much required to pay attention to the changing technological environment and to see as to how new technologies can
serve best to the human needs.
(5) Political and Government Environment:
Generally the government is a political institution but it has a social purpose, it provides the ways and means of maximising social
benefits and minimising social costs. In the present world, government intervention in business activity is a hard fact.
Under a democratic set up, the ideology of the ruling party influences ownership, management and size of a business. The rightist
inclination of the ruling party will formulate liberal pro-business policies while its leftist inclination will accept measures like
nationalisation and expansion of the public sector.
Political stability of the country is another factor which affects business activities. Business thrives where there is political stability. All
business firms are affected greater or lesser level by government programmes at central, state or local bodies changes in such
programmes are usually the result of shifts in the political weather arising from changes in the attitudes, preferences and objectives
of voters and political leaders. Businessmen try to anticipate changes in government policies or in the political forces at the back of
them so that they may be able to operate successfully.
(a) Legal Environment:
Legal systems play a significant role in business. Business law is the complex system of regulation that forms the legal environment
of business. Knowledge of business law is necessary for many management decisions. However the legal environment is becoming
so complex that many laws are only partially understood.
The legal environment is also referred to as public policy environment. The vast governmental network of laws and regulations,
policy decisions, government bureaucracy, and the legislative processes have raised impact on Business decisions. The history of
business legislation during the past hundred years has been characterised by three distinct legislative philosophies, that is,
(i) To prevent monopoly and protect competition.
(ii) To protect individual consumers, and
(iii) To protect the society.
The important laws that affect business are
(i) Indian Contract Act, 1872
(ii) Import and Export Control Act, 1947.

(iii) Capital Issues (Control) Act, 1947.

(iv) Factories Act, 1948.
(v) Industrial Development and Regulation Act, 1951.
(vi) Essential Commodities Act, 1955.
(vii) Companies Act, 1956.
(viii) Monopolies and Restrictive Trade Practices Act, 1969
(ix) Foreign Exchange Regulation Act, 1973
(x) Laws relating to income-tax, sales tax and other duties
(xi) Foreign Exchange Management Act, 1999.
(xii) Securities and Exchange Board of India Act, 1992.
(xiii) Consumer Protection Act, 1986
(xiv) Environment (Protection) Act, 1986
The politico-legal environment of business depends on:
(i) Legal rules of business-its formation and implementation, its efficiency and effectiveness.
(ii) Political stability-impact of factors like civil war, the declaration of presidents rule and emergency, changes in the form and
structure of governmental administration.
(iii) Flexibility and adaptability of Law-Constitutional amendments, their urgency and frequency, velocity of public policies.
(iv) Foreign Policy-alignment or non-alignment, tariffs, customs, and other foreign trade related policies.

MIS: Marketing Information System (With Diagram)

Marketing Information System (MIS) is a permanent arrangement (system or setup) for
provision of regular availability of relevant, reliable, adequate, and timely information for making
marketing decisions.

MIS concerns with setting and maintaining of a permanent system (network) to avail necessary
information on regular basis. The system consists of people, equipments, facilities, and
procedures directed to gather, analyze, evaluate, update, distribute, and preserve the
information to assist marketing decision-making, i.e., analyzing, planning, implementing, and
controlling of marketing activities.

Components of MIS:
MIS is made of parts, subparts or subsystems which are called the components. Typically,
according to Philip Kotler, a marketing information system consists of four interrelated
components Internal Reports (Records) System, Marketing Research System, Marketing
Intelligence System, and Marketing Decision Support System, as shown in Figure 1. All
components are interrelated and interdependent.
1. Internal Records System:
Internal records system is a major and easily accessible source of information. It supplies the
results data. It consists of all records of marketing operations available within organisation. This
system concerns with collecting, analyzing, interpreting, and distributing needed information
from records of various departments of the company.
Main sources include various records on sales and purchase, ordering system, sales force
reporting system, inventory level, receivable-payables, marketing staff, costs, the past research
works, and other literatures/reports available within organisation. Particularly, for sales orders

and sales force reporting, the computer technology is excessively used for accurate, efficient,
and speedy transmission of information.
To manage the internal record system, some companies appoint internal MIS committee to deal
with all aspects of internal information.
The committee:
(1) Attends request for all type of information required by managers,
(2) Determines sources of the information and tools needed to collect, evaluate, and analyze
information,
(3) Deals with presenting, distributing and updating the information,
(4) Handles complaints of employees , and
(5) Performs all types functions related to information.
Internal records system keeps regular circulation of the information throughout the organisation
without much expense and efforts. Managers can get the up-to-date information about
marketing operations. Once the system is set up properly, it can serve the purpose continually.
2. Marketing Intelligence System:
While internal report system concerns with information available from internal records of
organisation, the marketing intelligence system supplies the managers with happening data. It
provides information about external happenings or external environment.
Marketing intelligence system is:
The set of procedures and sources used by managers to obtain every-day information regularly
about pertinent developments in the marketing environment. A manager can try to expose
external environment in various ways.
Marketing intelligence system consists of various methods.
A manager can use one or more below mentioned methods:
i. Reading newspapers, books, and other publications.
ii. Watching TV, hearing radio, or Internet surfing.
iii. Talking to customers, dealers, suppliers, and other relevant parties.
iv. Talking to other managers and employees of his company as well as of other companies.
v. Maintaining live contacts with other officials and agencies.
vi. Purchasing useful information from professional sources.
vii. Assigning marketing intelligence task to professional agencies, etc.
Effective marketing intelligence system can facilitate managers to take immediate actions like
reacting to competitors, meeting changing needs of customers, solving dealers problems, and
so on.
3. Marketing Research System:
Marketing research is a powerful and independent branch of the MIS. In certain cases,
managers need detailed information on the specific problem of the specific marketing area.
Thus, it is a formal study of specific problems, opportunities, or situations. Normally, it is carried
out for solving the specific problem.
In this sense, it is not a part of routine activity. It collects need-based information. Nowadays, it
is treated as the separate discipline or subject. Philip Kotler defines: Marketing Research is the
systematic design for collection, analysis, and reporting of data and findings relevant to specific
marketing situations facing the company.

Marketing research consists of collecting primary and secondary data from various respondents
using various tools through various methods for definite period of time, analyzing data using
appropriate statistics tools, and presenting findings in forms of a report. It is conducted by
internal expert staff or external professionals.
4. Marketing Decision Support System (MDSS):
Previously, the component was known as Analytical Marketing System. While former three
components supply data, the marketing decision support system concerns more with processing
or analyzing available data. This component can improve efficiency and utility of the whole
marketing information system.
The system is used to help managers make better decisions. John D. C. Little defines: A
marketing decision support system (MDSS) is coordinated collection of data, systems, tools,
and techniques with supporting software and hardware by which an organisation gathers and
interprets relevant information from environment and turns it into a basis for making decisions.
//////////////////////////////////////////////////////
According to the definition, the MDSS includes tools, techniques or models used for:
(1) Data collection,
(2) Data analysis,
(3) Interpreting results, and
(4) Supporting managerial decision-making.
In real sense, it is not a separate component, but extension of other components. Statistical
tools, new models, and software are used to help marketing managers analyze, plan, and
control their operations. The MDSS consists of two sub-components the statistical bank and
the model bank.
The Statistical Bank:
It consists of quantitative tools used in marketing decision-making. It is popularly known as
Operations Research (OR).
The statistical tools used for data analysis include:
i. Simple statistical techniques like averages, mode, medium, etc.
ii. Regression-multiple regression analysis
iii. Discriminant analysis
iv. Correlation analysis
v. Factor analysis
vi. Cluster analysis
vii. Input-output analysis
viii. Conjoint analysis
ix. Multidimensional scaling, etc.
The Model Bank:
This component includes decision support models. It is a collection of models and software that
can help managers develop better marketing decisions. The model is a series of variables, their
interrelationships, and programmes to represent some real systems. The models are developed
by scientists who are known as operation researchers. For different purposes, different models
are used.
Widely used models include:
i. The Markov-Process Analysis
ii. Queuing Model
iii. New Product Pretest Models

iv. Sales Response Model

v. Discrete Choice Model
vi. Differential Calculus
vii. Mathematical Programming
viii. Statistical Decision Theory
ix. Game theory
x. Heuristics
xi. Decision Tree Model
xii. Feedback System Model
xiii. Linear v/s Non-linear Model, etc.
Using relevant variables, mathematical operators, and some techniques, the new models can
be developed as per firms needs. Sometimes, such models are also called packages. Some
recently developed decision models include BRAN DAI D (marketing mix model), CALLPLAN
(for sales force to determines number of calls), DETAILER (for sales force to determine type of
customers to call), GEOLINE (for designing sales and service territories), MEDICAC (for
advertising to select media), PROMOTER (for sales promotion programmes), ADCAD (for
selecting type of advertising theme), COVERSTORY (for writing sales reports and memo
writing), etc. Every model consists of variables and their relationships. Each of them can be
applied in specific decision area and for specific purpose.
//////////////////////////////////////////////////////

Difference Between Market Research and Marketing Research

Research is a methodical study of the given problem. It is considered as a prominent tool because
research is the first step of the marketing process. Market research is used to collect the
information about the market. On the other end, we have marketing research in which the study
of the marketing process is conducted. These two terms are highly juxtaposed and used
synonymously.

Content: Market Research Vs Marketing Research

1.
2.
3.
4.

Comparison Chart
Definition
Key Differences
Conclusion

Comparison Chart
BASIS FOR
COMPARISON

MARKET RESEARCH

MARKETING RESEARCH

Meaning

A study undertaken to
collect information about
the market statistics, is
known as market
research.

Marketing research is the

systematic and objective
study, analysis and
interpretation of problem
related to marketing
activities.

Branch of

Marketing Research

Marketing Information

BASIS FOR
COMPARISON

MARKET RESEARCH

MARKETING RESEARCH
System

Scope

Limited

Wide

Nature

Specific

Generic

Involves

Research of marketplace
and the buyer's behavior
within that market.

Research of all the aspects

of marketing.

Dependency

Dependent

Independent

Purpose

To check the viability of

the product in the target
market.

To make effective decisions

regarding marketing
activities and to keep
control on the marketing of
economic output.

Definition of Market Research

Market Research, as its name suggests, it is the study of the target market. It is an act of collecting
information about the marketplace and consumers within that market. It is used to ascertain and
analyse the market structure, size, recent trends, major players, customer needs, taste, preferences,
buying behaviour.
Market Research acts as a guide, that helps you to know about your customers, competitors, needs,
products, markets, etc.. The research helps in determining the viability of the new product in the
target market. Various techniques are employed to know the chances of success, such as product
testing. It can be conducted by the organisation itself or by an external agency. A number of steps are
followed to conduct market research which is as under:

Identifying the problem

Ascertain the party who will conduct the research.
Choosing an appropriate technique for research.
Gathering information
Organization, interpretation and analysis of the result.
Reporting

Definition of Marketing Research

By the term marketing research we mean a well-planned study of the whole marketing process to
collect, analyse and report information. The research is undertaken to find out a perfect solution to a
marketing situation facing the company. The research plays a major role in identifying the consumer
demand and their expectation from a particular product or service along with an efficient way of
satisfying those needs. It involves an array of activities which are provided as under:

Market and Customer Research

Product Research
Pricing Research
Distribution Channel Research
Promotion Research
Sales Research
Advertising Research
Marketing Research is aimed at providing facts and directions to the managers who need the
accurate and authentic information for making important marketing decisions. The process of
marketing research is explained in the following steps:

Identify the problem, decision alternative and research objectives.

Developing plans for research
Gathering information
Organization and analysis of information
Presentation
Decision making
Key Differences between Market Research and Marketing Research
The distinction between market research and marketing research can be drawn
clearly on the following grounds:
Market Research refers to the study of the entire market and consumer behaviour,
within that market. Marketing research implies well planned and rational study,
analysis and interpretation of marketing problems undertaken for actionable
decision making.
Market research is a branch of marketing research, whereas marketing research is a
component of marketing information system.
The scope of market research is limited as it studies about the aspects of market
and consumer behaviour only. On the other hand, marketing research involves the
study of the whole marketing process, i.e. the research of advertising, pricing,
packaging, policymaking and the market as well.
Market research is specific in nature, i.e. the research gives and understanding
about the particular market which is not applicable to other markets. Conversely,
marketing research is generic in nature, i.e. the study can be helpful in solving
various marketing problems.
Marketing research is dependent while marketing research is independent.
Market research is conducted to check the viability of the product in the target
market. Unlike marketing research is carried out to make effective decisions
regarding marketing activities and to keep control on the marketing of economic
output i.e. goods and services.
Market research involves research of the marketplace and the buyers behaviour
within that market. In contrast to marketing research, that involves the study, of all
aspects of marketing.
Conclusion
After the above discussion, it can be said that marketing research is a wider term than market
research. In fact, the market research itself is a part of marketing research. Both the researches
involve quantitative and qualitative techniques to gather information like focus groups, surveys
(telephonic conversation or face to face communication), interviews, questionnaires.

Moreover, the researches are very helpful for the business startups and the existing businesses to
take effective decisions regarding the business such as product or service you serve your customers,
place of doing business, distribution channels to be employed by the business, promotional channels
and so on.
The market research process or marketing research process is a systematic methodology for informing business decisions.
The figure below breaks the process down into six steps:
Step 1. Define the Objective & Your Problem
Perhaps the most important step in the market research process is defining the goals of the project. At the core of this is
understanding the root question that needs to be informed by market research. There is typically a key business problem (or
opportunity) that needs to be acted upon, but there is a lack of information to make that decision comfortably; the job of a market
researcher is to inform that decision with solid data. Examples of business problems might be How should we price this new
widget? or Which features should we prioritize?
By understanding the business problem clearly, youll be able to keep your research focused and effective. At this point in the
process, well before any research has been conducted, I like to imagine what a perfect final research report would look like to help
answer the business question(s). You might even go as far as to mock up a fake report, with hypothetical data, and ask your
audience: If I produce a report that looks something like this, will you have the information you need to make an informed choice?
If the answer is yes, now you just need to get the real data. If the answer is no, keep working with your client/audience until the
objective is clear, and be happy about the disappointment youve prevented and the time youve saved
Step 2. Determine Your Research Design
Now that you know your research object, it is time to plan out the type of research that will best obtain the necessary data. Think of
the research design as your detailed plan of attack. In this step you will first determine your market research method (will it be
a survey, focus group, etc.?). You will also think through specifics about how you will identify and choose your sample (who are we
going after? where will we find them? how will we incentivize them?, etc.). This is also the time to plan where you will conduct your
research (telephone, in-person, mail, internet, etc.). Once again, remember to keep the end goal in mindwhat will your final report
look like? Based on that, youll be able to identify the types of data analysis youll be conducting (simple summaries, advanced
regression analysis, etc.), which dictates the structure of questions youll be asking.
Your choice of research instrument will be based on the nature of the data you are trying to collect. There are three classifications to
consider:
Exploratory Research This form of research is used when the topic is not well defined or understood, your hypothesis is not well
defined, and your knowledge of a topic is vague. Exploratory research will help you gain broad insights, narrow your focus, and
learn the basics necessary to go deeper. Common exploratory market research techniques include secondary research, focus
groups and interviews. Exploratory research is a qualitative form of research.
Descriptive Research If your research objective calls for more detailed data on a specific topic, youll be conducting
quantitative descriptive research. The goal of this form of market research is to measure specific topics of interest, usually in a
quantitative way. Surveys are the most common research instrument for descriptive research.
Causal Research The most specific type of research is causal research, which usually comes in the form of a field test or
experiment. In this case, you are trying to determine a causal relationship between variables. For example, does the music I play in
my restaurant increase dessert sales (i.e. is there a causal relationship between music and sales?).
Step 3. Design & Prepare Your Research Instrument
In this step of the market research process, its time to design your research tool. If a survey is the most appropriate tool (as
determined in step 2), youll begin by writing your questions and designing your questionnaire. If a focus group is your instrument of
choice, youll start preparing questions and materials for the moderator. You get the idea. This is the part of the process where you
start executing your plan.
By the way, step 3.5 should be to test your survey instrument with a small group prior to broad deployment. Take your sample data
and get it into a spreadsheet; are there any issues with the data structure? This will allow you to catch potential problems early, and
there are always problems.
Step 4. Collect Your Data
This is the meat and potatoes of your project; the time when you are administering your survey, running your focus groups,
conducting your interviews, implementing your field test, etc. The answers, choices, and observations are all being collected and
recorded, usually in spreadsheet form. Each nugget of information is precious and will be part of the masterful conclusions you will
soon draw.

Step 5. Analyze Your Data

Step 4 (data collection) has drawn to a close and you have heaps of raw data sitting in your lap. If its on scraps of paper, youll
probably need to get it in spreadsheet form for further analysis. If its already in spreadsheet form, its time to make sure youve got it
structured properly. Once thats all done, the fun begins. Run summaries with the tools provided in your software package
(typically Excel, SPSS, Minitab, etc.), build tables and graphs, segment your results by groups that make sense (i.e. age, gender,
etc.), and look for the major trends in your data. Start to formulate the story you will tell.
Step 6. Visualize Your Data and Communicate Results
Youve spent hours pouring through your raw data, building useful summary tables, charts and graphs. Now is the time to compile
the most meaningful take-aways into a digestible report or presentation. A great way to present the data is to start with the research
objectives and business problem that were identified in step 1. Restate those business questions, and then present your
recommendations based on the data, to address those issues.
model of consumer behaviour

SOME MODELS OF CONSUMER BEHAVIOUR

The psychoanalytical model : The psychoanalytical model draws from Freudian psychology. According to this model, the
individual consumer has a complex set of deep seated motives which drive him towards certain buying decisions. The buyer has a
private world with all his hidden fears, suppressed desires and totally subjective longings. His buying action can be influenced by
appealing to those desires and longings.
According to Mr. Freud, human personality has three parts namely, 1. the ID, the source of all mental energy which drives one to
an action. 2.the Super Ego, the internal representation of what is socially approvedones conscience.3. the Ego, the conscious
director of ID impulses for finding satisfaction in socially acceptable manner. In other words, ID represents ones animal or basic
impulses, instincts and cravings for immediate and total satisfaction. These instincts might be even anti-social. The Super Ego or
conscience reflects one,s idealised or mended behaviour pattern a via media between the extremes, that is the, conflict between ID
and Super Ego is resolved by Ego. The Ego is the intermediary which mediates and processes the dispute action as a rational control centre between the conflicting extreme sides of ID and Super Ego. It is Ego that directs ones behaviour to satisfy both the ID
and Super Ego. Thus a person is interested in buying say KV-L34MFI SONY TV with characteristics of Hi-black Trinitron Screen
super drum sound system, 100system memory,1 tuner digital picture in picture, A/V Stereo, LD compatibility casting say
Rs.1,05,000 with remote control. Here his ID demands the use of consumer credit liberally to buy that costly T.V. set. The Super
Ego dissuades him from heavy borrowing as credit beyond certain limits is not acceptable. Here the Ego acts like a mediator and
comes with a fine compromise of instalment system without away strains and drain on his financial position. Here self image of a
consumer is a great motivating force inducing him to buy certain products. This model can be presented as follows
Learning model: All theories of buyer behaviour have been basically based on a learning model namely, Stimulation- Response
or more popularly known as SR model. SR learning theory is very useful to modern marketing and marketers. Learning is the
centrifugal point in the entire study to human behaviour. Learning, as noted earlier, refers to a change in the behaviour which occurs
as a result of practice. It is a change in the behaviour that results from previous experience and behaviour in similar situations. What
is important, learning is a product of reasoning, thinking, information processing and, of course, perception. Therefore, behaviour is
deeply affected by the learning experiences of the buyers.
Of all the psychologists, Pavlovian stimulus or learning of buyer behaviour is widely accepted. He says that buyer behaviour is
capable of being manipulated by human drives, stimuli, and responses of the buyer. This model banks on mans ability to leave,
forget and discriminate. Learning process involves three steps namely, Drivea strong internal stimulus which impels action. When
it is directed towards a drive-reducing object, it becomes a motive. A drive- need- thus motivates a person for action to satisfy the
need. Here, the objectives are the stimuli which the drives Cues are weak stimuli. Cues determine when the buyer will respond. Say,
we have cues such as a product advertisement relevant to the situation and existing in our environment.
Response is the final stage which is needed to fulfill the drive or as a need which was acting as a strong stimulus. Thus, the thirst, can
be quenched by an ad. These sequential components of learning link stimulus cue and response finally resulting in a habit. In
marketing, it is better known as a learning brand loyalty brand images and store patronage. Repeated reinforcement leads to a habit
formation and the decision process for an individual becomes a matter of routine. It is worth emphasizing here that we learn
through trial and error and changes in our behaviour are brought about by practice as experience. The SR model of Pavlovian
learning is made clear by given figure:
Sociological model: According to sociological model, the individual buyer behaviour is influenced by societyby intimate
groups as well as social classes. That is, his buying decisions are not totally determined by the concept of utility. That is his buying
decisions are governed by social compulsions. As a part of sociological modeltwo important variations can be considered namely,
one that of Nicosia and another Howard & Sheth.
The marketing scholars have tried to build buyers-behaviour models purely from stand point view of marketing man. Here F.
Nicosia model of 1966 and H. Sheth model of 1969are of this category. These models are systems models where human being
analysed as a system with stimuli as INPUT and behaviour as an output

Nicosia model:

As well known consumer motivation and bevaviour expert Mr. Nicosia presented his buyer model in 1966 which attempts to
establish linkages between the marketing firm and its consumer. The essence is how the activities of the firm influence the consumer
and result in his direction to buy. According to his model the messages from the firm first influence the predisposition of the
consumer towards the product, he develops a certain attitude towards the product depending on the situation. It leads to a search for
the product or on evaluation of the product. In case, these steps have a positive impact on him it may result in decision to by. This is
the sum and substances of the explanation. His model lumps these activities into four basic fields.
Field One has two sub-fields namely, the firms attributes and the consumer attributes.An ad message from the firm reaches
consumers attributes. Depending on the way the messages received by the consumer, a certain attribute may develop and this

becomes the input for the field Two. Field Two is the area of search and evaluation of the advertised product and other alternatives.
If this process results in a motivation to buy, it becomes the input for field three. Field Three consist of the act of purchase. The field
Four consists of use of the purchased item. There is an output from field Four --- feed back of sales results to the firm

HOWARD SHETH MODEL

John Howard and Jagdish Sheth presented their buyer model in 1969. its an
integrated model. It assumes problem solving approach in buying and adopts inputoutput or system approach in buying. Howard introduced learning process in buying.
Satisfaction leads brand loyalty. Discontentments creates brand switching by the
buyers. It other words , the logic of this model that there are inputs in the form of
stimuli. There are output beginning with attention to a given stimulus and ending
the purchase. In between these inputs and outputs , there are variable affecting
perception and learning. These variables are hypothetical as they can not be
directly measured at the time of occurrence.
Model of consumer behavior
Consumers make many buying decisions every day. Most large companies research
consumer
buying decisions in great detail to answer questions about what consumers buy, wh
ere they buy,
how and how much they buy, when they buy, and why they buy. Marketers can stud
y actual
consumer purchases to find out what they buy, where, and how much. But learning
about the whys
of consumer buying behavior is not so easy-the answers are often locked deep within the
consumer's head.
The central question for marketers is: How do consumers respond to various
marketing efforts the
company might use? The company that really understands how consumers will resp
ond to
different product features, prices, and advertising appeals has a great advantage ov
er its
competitors. The starting point is the stimulus-response model of buyer behavior sh
own in Figure
. This figure shows that marketing and other stimuli enter the consumer's "black box
" and produce
certain responses. Marketers must figure out what is in the buyer's black box.
Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other
stimuli
include major forces and events in the buyer's environment: economic,
technological, political, and
cultural. All these inputs enter the buyer's black box, where they are turned into a s
et of observable
buyer responses: product choice, brand choice, dealer choice, purchase timing, and
purchase
amount.
The marketer wants to
understand how the stimuli are changed into responses inside the
consumer's black box, which has two parts. First, the buyer's characteristics influenc
e how he or
she perceives and reacts to the stimuli. Second, the buyer's decision process itself a
ffects the

buyer's behavior. This chapter looks first at buyer characteristics as they affect buyi
ng behavior,
and then discusses the buyer decision process
Consumer purchases are influenced strongly by cultural, social, personal, and psych
ological
characteristics, For the most part, marketers cannot control such factors, but
they must take them into account
///////////////////////////////////////////////////
Factors influencing consumer behavior
Consumer behavior is influenced by the buyer's characteristics and by the buyer's d
ecision process.
Buyer characteristics include four major factors: cultural, social, personal, and psych
ological. We
can say that following factors can influence the Buying decision of the buyer:
a.
Cultural
b.
Social
c.
Personal
d.
Psychological
a. Cultural Factors
Cultural factors exert the broadest and deepest influence on
consumer behavior. The marketer
needs to
understand the role played by the buyer's culture, subculture, and social class.
I. Culture
Culture is the most basic cause of
a person's wants and behavior. Human behavior is largely
learned. Growing up in a society, a child learns basic values, perceptions,
wants, and behaviors
from the family and other important institutions. A person normally learns or
is exposed to the
following values: achievement and success, activity and involvement, efficiency and
practicality,
progress, material comfort, individualism, freedom, humanitarianism, youthfulness,
and fitness and
health.
Every group or society has a culture, and cultural influences on buying behavior ma
y vary greatly
from country to country. Failure to adjust
to these differences can result in ineffective marketing or
embarrassing mistakes. For example, business representatives of
a U.S. community trying to
market itself in Taiwan found this out the hard way. Seeking more foreign trade, they
arrived in
Taiwan bearing gifts of green baseball caps. It turned out that the trip was schedule
d a month

before Taiwan elections, and that green was the color of the political opposition part
y. Worse yet,
the visitors learned after the fact that according to Taiwan culture, a man wears gre
en to signify
that his wife has been unfaithful. The head of the community delegation later noted,
"I don't know
whatever happened to those green hats, but the trip gave us
an understanding of the extreme
differences
in our cultures." International marketers must understand the culture in each
international market and adapt their marketing strategies accordingly.
II. Subculture
Each culture contains smaller subcultures or groups
of people with shared value systems based on
common life experiences and situations. Subcultures include nationalities,
religions, racial groups,
and geographic regions. Many subcultures make up important market segments, an
d marketers
often design products and marketing programs tailored
to their needs. Here are examples of four
such important subculture groups.
III. Social Class
Almost every society has some form of social class structure. Social Classes are soci
ety's relatively
permanent and ordered divisions whose members share similar values, interests, an
d behaviors.
Social class is not determined by a single factor, such as
income, but is measured as a combination
of occupation, income,
education, wealth, and other variables. In some social systems, members of
different classes are reared for certain roles and cannot change their social positions
. Marketers are
interested in social class because people within a
given social class tend to exhibit similar buying
behavior.
Social classes show distinct product and brand preferences in areas such
as clothing, home
furnishings, leisure activity, and automobiles.
b. Social Factors
A consumer's behavior also is influenced by social factors, such as the consumer's
small groups,
family, and social roles and status.
I. Groups
Many small groups influence a person's behavior. Groups that have a
direct influence and to which
a person belongs are called membership groups.
In contrast, reference groups serve as direct (faceto-face) or indirect points of comparison or reference in forming a person's attitudes
or behavior.

Reference groups
to which they do not belong often influence people. Marketers try to identify
the reference groups of their target markets. Reference groups expose a person
to new behaviors
and lifestyles, influence the person's attitudes and self-concept, and create pressure
s to conform
that may affect the person's product and brand choices.
The importance of group influence varies across products and brands. It tends to be
strongest
when the product is visible
to others whom the buyer respects. Manufacturers of products and
brands subjected to strong group influence must figure out how to reach opinion lea
ders--people
within a reference group who, because of special skills,
knowledge, personality, or other
characteristics, exert influence on others.
Many marketers try to identify opinion leaders for their products and direct marketin
g efforts
toward them. In other cases, advertisements can simulate opinion leadership, there
by reducing the
need for consumers to seek advice from others.
The importance of group influence varies across products and brands. It tends to be
strongest
when the product is visible
to others whom the buyer respects. Purchases of products that are
bought and used privately are not much affected
by group influences because neither the product
nor the brand will be noticed by others.
II. Family
Family members can strongly influence buyer behavior. The family is the most impor
tant
consumer buying organization in
society, and it has been researched extensively. Marketers are
interested in the roles and influence of the husband, wife, and children on the purch
ase of different
products and services.
Husband-wife involvement varies widely by product category and by stage in the bu
ying process.
Buying roles change with evolving consumer lifestyles.
Such changes suggest that marketers who've typically sold their products to only w
omen or only
men are now courting the opposite sex. For example, with research revealing that w
omen now
account for nearly half of all hardware store purchases, home improvement retailers
such as Home
Depot and Builders Square have turned what once were intimidating warehouses int
o femalefriendly retail outlets. The new Builders Square II outlets feature
decorator design centers at the

front of the store. To attract more women, Builders Square runs ads targeting wome
n in Home,
House Beautiful, Woman's Day, and Better Homes and Gardens. Home Depot even o
ffers bridal
registries.
Similarly, after research indicated that women now make up 34 percent
of the luxury car market,
Cadillac has started paying more attention to this important segment. Male car desi
gners at Cadillac
are going about their work with paper clips on their fingers to
simulate what it feels like to operate
buttons, knobs, and other interior features with longer fingernails. The Cadillac Cate
ra features an
air-conditioned glove box to preserve such items as lipstick and film. Under the hoo
d, yellow
markings highlight where fluid fills go.
Children may also have a strong influence on family buying decisions. For example, i
t ran ads to
woo these "back-seat consumers"
in Sports Illustrated for Kids, which attracts mostly 8- to 14year-old boys. "We're kidding ourselves when we think kids aren't aware of
brands," says Venture's
brand manager, adding that even she was surprised at how often parents told her t
hat kids played a
tie-breaking role in deciding which car to buy.
In the case of expensive products and services, husbands and wives often make join
t decisions.
III. Roles and Status
A person belongs to many groups--family, clubs,
organizations. The person's position in each
group can be defined in terms
of both role and status. A role consists of the activities people are
expected to perform according to the persons around them
///////////////////////////////////////////
Factors Affecting Consumer Behavior
Consumer behavior refers to the selection, purchase and consumption of goods and services for the satisfaction of their
wants. There are different processes involved in the consumer behavior. Initially the consumer tries to find what commodities
he would like to consume, then he selects only those commodities that promise1 greater utility. After selecting the
commodities, the consumer makes an estimate of the available money which he can spend. Lastly, the consumer analyzes
the prevailing prices of commodities and takes the decision about the commodities he should consume. Meanwhile, there
are various other factors influencing the purchases of consumer such as social, cultural, personal and psychological. The
explanation of these factors is given below.
1. Cultural Factors
Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and social class.
Culture
Basically, culture is the part of every society and is the important cause of person wants and behavior2. The influence of
culture on buying behavior varies from country to country therefore marketers have to be very careful in analyzing the
culture of different groups, regions or even countries.
Subculture

Each culture contains different subcultures such as religions, nationalities, geographic regions, racial groups etc2. Marketers
can use these groups by segmenting the market into various small portions. For example marketers can design products
according to the needs of a particular geographic group.
Social Class
Every society possesses some form of social class which is important to the marketers because the buying behavior of
people in a given social class is similar. In this way marketing activities could be tailored according to different social classes.
Here we should note that social class is not only determined by income but there are various other factors as well such as:
wealth, education, occupation etc.
2. Social Factors
Social factors also impact the buying behavior of consumers. The important social factors are: reference groups, family, role
and status.
Reference Groups
Reference groups have potential in forming a person attitude or behavior. The impact of reference groups varies across
products and brands. For example if the product is visible such as dress, shoes, car etc then the influence of reference
groups will be high. Reference groups also include opinion leader (a person who influences other because of his special
skill, knowledge or other characteristics).
Family
Buyer behavior is strongly influenced by the member of a family. Therefore marketers are trying to find the roles and
influence of the husband, wife and children. If the buying decision of a particular product is influenced by wife then the
marketers will try to target the women in their advertisement. Here we should note that buying roles change with change in
consumer lifestyles.
Roles and Status
Each person possesses different roles and status in the society depending upon the groups, clubs, family, organization etc.
to which he belongs. For example a woman is working in an organization as finance manager. Now she is playing two roles,
one of finance manager and other of mother. Therefore her buying decisions will be influenced by her role and status.
3. Personal Factors
Personal factors can also affect the consumer behavior. Some of the important personal factors that influence the buying
behavior are: lifestyle, economic situation, occupation, age, personality and self concept.
Age
Age and life-cycle have potential impact on the consumer buying behavior. It is obvious that the consumers change the
purchase of goods and services with the passage of time. Family life-cycle consists of different stages such young singles,
married couples, unmarried couples etc which help marketers to develop appropriate products for each stage.
Occupation
The occupation of a person has significant impact on his buying behavior. For example a marketing manager of an
organization will try to purchase business suits, whereas a low level worker in the same organization will purchase rugged
work clothes.
Economic Situation
Consumer economic situation has great influence on his buying behavior. If the income and savings of a customer is high
then he will purchase more expensive products. On the other hand, a person with low income and savings will purchase
inexpensive products.
Lifestyle
Lifestyle of customers is another import factor affecting the consumer buying behavior. Lifestyle refers to the way a person
lives in a society and is expressed by the things in his/her surroundings. It is determined by customer interests, opinions,
activities etc and shapes his whole pattern of acting and interacting in the world.
Personality
Personality changes from person to person, time to time and place to place. Therefore it can greatly influence the buying
behavior of customers. Actually, Personality is not what one wears; rather it is the totality of behavior of a man in different
circumstances. It has different characteristics such as: dominance, aggressiveness, self-confidence etc which can be useful
to determine the consumer behavior for particular product or service.
4. Psychological Factors
There are four important psychological factors affecting the consumer buying behavior. These are: perception, motivation,
learning, beliefs and attitudes.
Motivation
The level of motivation also affects the buying behavior of customers. Every person has different needs such as
physiological needs, biological needs, social needs etc. The nature of the needs is that, some of them are most pressing
while others are least pressing. Therefore a need becomes a motive when it is more pressing to direct the person to seek
satisfaction.
Perception
Selecting, organizing and interpreting information in a way to produce a meaningful experience of the world is called
perception. There are three different perceptual processes which are selective attention, selective distortion and selective
retention. In case of selective attention, marketers try to attract the customer attention. Whereas, in case of selective

distortion, customers try to interpret the information in a way that will support what the customers already believe. Similarly,
in case of selective retention, marketers try to retain information that supports their beliefs.
Beliefs and Attitudes
Customer possesses specific belief and attitude towards various products. Since such beliefs and attitudes make up brand
image and affect consumer buying behavior therefore marketers are interested in them. Marketers can change the beliefs
and attitudes of customers by launching special campaigns in this regard.

the Psychological Factors Influencing Buyer Behavior

Psychological factors are the fourth major influence on consumer buying. A persons buying choices are influenced by the
psychological factors of motivation, perception, learning, beliefs, and attitudes.
Motivation A person has many needs at any given time. A need becomes a motive when it is aroused to a sufficient level
of intensity. A motive is a need that is sufficiently pressing to drive the person to act. Three best known theories of human
motivation include the theories of Sigmund Freud, Abraham Maslow, and Frederick Herzberg.
a. Freuds theory Sigmund Freud assumed that the psychological forces shaping peoples behavior are largely
unconscious. A person cannot fully understand his or her own motivations. A technique called laddering can be used to race
a persons motivations from the stated instrumental ones to the more terminal ones. Then the marketer can decide at what
level to develop the message and appeal. In line with Freuds theory, consumers react not only to the stated capabilities of
specific brands, but also to other, less conscious cues. Successful marketers are therefore mindful that shape, size, weight,
material, color, and brand name can all trigger certain associations and emotions.
b. Maslows theory Abraham Maslow sought to explain why people are driven by particular needs at particular times. He
arranged human needs in a hierarchy, from the most to the least pressing. In order of importance, these five categories are
physiological, safety, social, esteem, and self-actualization needs. A consumer will try to satisfy the most important need first;
when that need is satisfied, the person will try to satisfy the next-most-pressing need. Maslows theory helps marketers
understand how various products fit into the plans, goals, and lives of consumers.
c. Herzbergs theory Frederick Herzberg developed a two-factor theory that distinguishes dissatisfiers (factors that cause
dissatisfaction) from satisfiers (factors that cause satisfaction). The absence of dissatisfiers is not enough; satisfiers must be
actively present to motivate a purchase. In line with this theory, marketers should avoid dissatisfiers and they should also
identify and supply the major satisfiers or motivators of purchase, because these satisfiers determine which brand
consumers will buy.
Perception
How a consumer determines what they will buy is heavily influenced by their perception of the situation they are in at that moment in
time. Perception is the process by which consumers select, organize, and interpret information and environmental stimuli in order to form a more
meaningful picture of the world around them.
One of the most massive forms of environmental stimuli is advertising. On average, consumers are exposed to 3000 - 5000 advertisements everyday.
It is physically impossible for a consumer's brain to actively pay attention to all of that stimuli. Add to that all of the other environmental stimuli around
them: smells, tastes, sounds, conversations; it's a wonder that humans are able to concentrate on anything at all. As a result, the brain controls what
stimuli it will engage with. It is this process that creates perception. Consumers form their perceptions through the brain's distinct processes of
selective attention, selective distortion, and seletice retention.
1) Selective Attention is the tendency for consumers to screen out most of the information they are exposed to. We have to work very hard to get the
consumer's attention.
2) Selective Distortion: Every consumer fits incoming stimuli into their own mind-set - through their own set of "rose colored glasses". Selective
distortion is the tendency of people to interpret information in a way that will support what they already believe, or what they want to believe.
3) Selective Retention: Consumers will usually forget much of the stimuli they have been exposed to. Consumers will usually store the information
that best supports their existing attitudes and beliefs (or the ones they want to have), so selective retention allows them "remember" the good points
they favor and "forget" the negative points that have been made about other brands that they don't like.
These processes are why marketers use so much repetition in their advertising campaigns. We have to battle our way into the minds of the consumer,
force our way in, and in the end, convince the mind of the consumer that our message is the right one to pay attention to.
Learning
When people perform an activity, they are actively learning. Most learning theorists believe that the majority of human behavior is "learned" behavior.
Consumer buyer behavior is a partly learned behavior. Consumers "learn" their buyer behavior through drives, cues, responses, and reinforcement.
Each one of these builds upon the other.
Drives are strong internal stimuli inside the consumer's mind that create calls for action. These calls for action, if strong enough, will create a motive
(see above), and lead the consumer to attempt to move towards an object of stimuli. That object usually will be what satisfies the need.
Drives create Cues. Cues refer to more "minor" stimui that condition the consumer's behavior. Cues help the consumer decide when, where, and how
to respond to a drive.

Responses are the consumer's actions based off of drives, motives, and cues from environmental stimuli.
Responses build Reinforcement, which influences the consumer's future buyer behavior. If the purchase experience and immediate experience with
the product has been positive, then the consumer will likely consider buying that same product in the future. If the consumer's experience is somewhat
negative, then they are likely to seek a different product later when the need has to be fulfilled again.
Beliefs and Attitudes
Through our daily activities, we build beliefs and attitudes that in turn influence our buying behavior.
A consumer's beliefs are descriptive thoughts that they have about something, while attitudes are a consumer's "relatively" consistent evaluations,
feelings, and tendencies toward an object or idea. Attitudes put people into specific frames of mind, and help to move them towards or away from
certain products and brands. Unfortunately attitudes can be very difficult to change. Attitudes are a part of a consumer's learned behavior patterns.
Changing a consumer's attitudes and beliefs usually will require us try to change many other perceptions and attitudes in other areas of the consumer's
mind. Often it is easier to position a product into an existing attitude, than to fight against them and try to change them.
Marketers need to understand these beliefs and attitudes in order to best position their messaging in front of the target consumer. If we believe some
of the target consumer's beliefs and attitudes are wrong about us, thereby preventing sales, then we can understand how to launch focused messaging
campaigns to change beliefs about our products and brands.

consumer buying decision process

The marketer is responsible for selling the goods in the market so he must have the knowledge how the
consumers actually make their buying decisions. For this he must study the consumer buying decision process
or model. It involves five stages.
1.) Need recognition:- consumer buying decision process starts with need recognition. The marketer must
recognize the needs of the consumer as well as how these needs can be satisfied. For example if a person is
hungry then food is desired or if it is a matter of thirst than water is desirable.
2.) Information search: in consumer buying decision process information search comes at second
number. In this stage consumer searches the information about the product either from family, friends,
neighborhood, advertisements, whole seller, retailers, dealers, or by examining or using the product.
3.) Evaluation of alternatives: after getting the required knowledge about the product the consumer
evaluate the various alternatives on the basis of its want satisfying power, quality and its features.
4.) Purchase decision: after evaluating the alternatives the buyer buys the suitable product. But there are
also the chances to postpone the purchase decision due to some reasons. In that case the marketer must try to
find out the reasons and try to remove them either by providing sufficient information to the consumers or by
giving them guarantee regarding the product to the consumer.
5.) Post purchase behavior: after buying the product consumer will either be satisfied or dissatisfied. If
the consumer is not satisfied in that case he will be disappointed otherwise If he is satisfied than he will be
delighted. It is usually said that a satisfy consumer tell about the product to 3 people and a dissatisfy consumer
tell about the product to 11 people. Therefore it is the duty of the marketer to satisfy the consumer.

Consumer Buying Behaviours: 4

Important Types of Consumer Buying
Behaviours
Consumer Buying Behaviours: 4 Important Types of Consumer Buying Behaviours!
Consumer decision-making varies with the type of buying decision. There are great differences
between buying toothpaste, a tennis racket, a personal computer, and a new car. Complex and
expensive purchases are likely to involve more buyer deliberation and more participants.
Involvement is the perceived importance or personal relevance of an object or event. It is about
the degree to which the consumer feels attached to the product or brand, and the loyalty felt
towards it. Involvement has both cognitive and affective elements: it plays on both the brain and
the emotions. For example, a car owner might say, I love my old Ambassador [affect] because it
never lets me down [cognition]. There can be 3 levels of involvement:

i. Low level of involvement occurs if attributes are irrelevant to consequences

ii. Medium level of involvement occurs if the attributes only link to function
iii. High product involvement will come about if the consumer feels that product attributes are
strongly-linked to end goals or values. Although it is the behaviour of the decision-maker that
determines the level of involvement of a decision, there are 3 common factors, which increase
the likelihood of high involvement. These are:
i. The cost of purchase relative to income
ii. The amount of time for which the purchase will be owned
iii. The extent to which the purchase reflects the self-image
High-involvement purchases are those products, which figure greatly in the consumers lifestyle.
In other words, they involve decisions which is important to get right, preferably first time.
Typically, the products with which the consumer is highly involved will also be the ones which
the consumer knows most about, and about which he or she has strong opinions.
Following table compares high-involvement, medium-involvement and low involvement
considerations.
TABLE 2.3: Comparison of involvement levels
High
Medium
Involvement
involvement
Low involvement
Attributes
strongly linked to Attributes only link Attributes irrelevant to
end goals
to function
consequences
Need to have
Results perceived to be
Important to get it reasonably reliable the same whichever
right first time
results
product chosen
Consumer has in- Consumer has
depth knowledge knowledge of the No strong feelings,
and strong
product group, no knowledge of product
opinions
strong feelings
group irrelevant
Discrepant
Discrepant
information
information
ignored or
considered
Discrepant information
discounted
carefully
ignored
For example, a technology-savvy IT professional might have very strong views on which PC
would give the best performance. Discrepant information (a salespersons attempt to persuade
him to try another brand, for example) is discounted and disparaged, and may even lower the
esteem of the source of the information (the IT professional will think the salesperson is stupid,
or is trying to unload an inferior brand of computer).
On the other hand, a computer novice is less likely to have formed a close involvement with a
product and hence is more likely to be prepared to listen to what the salesperson has to say.
This means that high-involvement consumers are hard to persuade; they are not be easily
swayed by advertising or even by persuasive sales pitches.
High involvement always has a strong affective component, and this does not necessarily mean
a high cost commitment. People also fall in love with cheap products. So involvement does not
always equate to price. A high-involvement good is not necessarily a high-priced one, nor is a
low-involvement good necessarily a cheap one. Smokers can become very involved with their
brand of cigarettes costing very few (Take the example of bidi or Charminar cigarette).
Conversely, some people may not get involved deeply with a highly costly 5-star hotel.

Assael distinguished four types of consumer buying behaviour based on the degree of buyer
involvement and the degree of differences among brands. The four types are named in the
following table and described in the following paragraphs.
TABLE 2.4: Four types of buying behaviour
Level of
Significances
Between Brands High Involvement Low Involvement
Complex Buying
Variety-seeking Buying
Significant
Behaviour
Behaviour
Dissonancereducing Buying
Habitual Buying
Few
Behaviour
Behaviour

1. Complex Buying Behaviour:

Consumers go through complex buying behaviour when they are highly involved in a purchase
and aware of significant differences among brands. Consumers are highly involved when the
product is expensive, bought infrequently, risky and highly self-expressive. Typically the
consumer does not know much about the product category and has much to learn. F01
example, a person buying a personal computer may not know what attribute to look for. Many of
the product features like 16K.memory disc storage, screen resolution carry no meaning to
him or her.

2. Dissonance-Reducing Buying Behaviour:

Sometimes the consumer is highly, involved in a purchase but sees little difference in the
brands. The high involvement is again based on the fact that the purchase is expensive,
infrequent, and risky. In this case, the buyer will shop around to learn what is, available but will
buy fairly quickly because brand differences are not pronounced. The buyer may respond
primarily to a good price or to purchase convenience.

3. Habitual Buying Behaviour:

Many products are bought under conditions of low consumer involvement and the absence of
significant brand differences. Consider the purchase of salt. Consumers have little involvement
in this product category. They go to the store and reach for the brand. If they keep reaching for
the same brand, it is out of habit, not strong brand loyalty.

4. Variety-Seeking Buying Behaviour:

Some buying situations are characterised by low consumer involvement but significant brand
differences. Here consumers are often observed to do a lot of brand switching. An example
occurs in purchasing cookies. The consumer has some beliefs, chooses a brand of cookies
without much evaluation, and evaluates it during consumption. But next time, the consumer may
reach for another brand out of boredom or a wish for a different taste. Brand switching occurs
for the sake of variety rather than dissatisfaction.
Marketers can try to convert the low-involvement product into one of higher involvement.
The ways are:
i. This can be accomplished by linking the product to some involving issue, as when Crest
toothpaste is linked to avoiding cavities.
ii. The product can be linked to some involving personal situation, for instance, by advertising a
coffee brand early in the morning when the consumer wants to shake oft sleepiness.
iii. The advertising might seek to trigger strong emotions related to personal values or ego
defense.
iv. An important product feature might be added to a low-involvement product, such as by
fortifying a plain drink with vitamins,
These strategies at best raise consumer involvement from a low to a moderate level, they do
not propel the consumer into highly involved buying behaviour.

The stages of the buying decision process

5 steps to understanding your

customers buying process
The customer buying process (also called a buying decision process) describes the journey your
customer goes through before they buy your product. Understanding your customers buying
process is not only very important for your salespeople, it will also enable you to align your sales
strategy accordingly.
The five stages framework remains a good way to evaluate the customers buying process. John
Dewey first introduced the following five stages in 1910:
1. Problem/need recognition
This is often identified as the first and most important step in the customers decision process. A
purchase cannot take place without the recognition of the need. The need may have been
triggered by internal stimuli (such as hunger or thirst) or external stimuli (such as advertising or
word of mouth).
2. Information search
Having recognised a problem or need, the next step a customer may take is the information
search stage, in order to find out what they feel is the best solution. This is the buyers effort to
search internal and external business environments, in order to identify and evaluate information
sources related to the central buying decision. Your customer may rely on print, visual, online
media or word of mouth for obtaining information.
3. Evaluation of alternatives
As you might expect, individuals will evaluate different products or brands at this stage on the
basis of alternative product attributes those which have the ability to deliver the benefits the
customer is seeking. A factor that heavily influences this stage is the customers attitude.
Involvement is another factor that influences the evaluation process. For example, if the
customers attitude is positive and involvement is high, then they will evaluate a number of
companies or brands; but if it is low, only one company or brand will be evaluated.

4. Purchase decision
The penultimate stage is where the purchase takes place. Philip Kotler (2009) states that the
final purchase decision may be disrupted by two factors: negative feedback from other
customers and the level of motivation to accept the feedback. For example, having gone through
the previous three stages, a customer chooses to buy a new telescope. However, because his
very good friend, a keen astronomer, gives him negative feedback, he will then be bound to
change his preference. Furthermore, the decision may be disrupted due to unforeseen situations
such as a sudden job loss or relocation.
5. Post-purchase behaviour
In brief, customers will compare products with their previous expectations and will be either
satisfied or dissatisfied. Therefore, these stages are critical in retaining customers. This can
greatly affect the decision process for similar purchases from the same company in the future,
having a knock-on effect at the information search stage and evaluation of alternatives stage. If
your customer is satisfied, this will result in brand loyalty, and the Information search and
Evaluation of alternative stages will often be fast-tracked or skipped altogether.
On the basis of being either satisfied or dissatisfied, it is common for customers to distribute
their positive or negative feedback about the product. This may be through reviews on website,
social media networks or word of mouth. Companies should be very careful to create positive
post-purchase communication, in order to engage customers and make the process as efficient
as possible.
Markets , what are markets?
Market is an aggregate of people who have the needs for products in a product lcass and who
have the ability, willingness, and authority to purchase such products. They are broadly
categorized as
Homogenous markets markets in which a large proportion of customers have similar needs for
a product.
Heterogeneous markets - markets made up of individuals or organizations with diverse product
needs for products in a specific product class.
Market segmentation
Market segmentation is one of the oldest marketing trick in the books. With the customer
population and preferences becoming more wider, and the competitive options becoming more
available, market segmentation has become critical in any business or marketing plan. In fact,
people launch products keeping the market segmentation in mind.
There are three ways to classify what the customer wants. It is known as needs, wants and
demands. However, to decide the needs, wants and demands, you need to carry out
segmentation first. And in segmentation, the first step is to determine which type of customer
will prefer your products. Accordingly, that customer will be from your targeted segment. Who
would want your product and whether it falls in the needs segment, the wants segment or the

demands segment. Once you decide the product you are going to make, then you decide on the
market segmentation.
There are 4 different types of market segmentation and all of them vary in their implementation
in the real world. Let us discuss each of them in detail.
Demographic segmentation Demographic segmentation is one of the simplest and most
widest type of market segmentation used. Most companies use it to get the right population in
using their products. Segmentation generally divides a population based on variables. Thus
demographic segmentation too has its own variables such as Age, gender, family size, income,
occupation, religion, race and nationality. To read more, click on this link for demographic
segmentation.

Demographic segmentation can be seen applied in the automobile market. The automobile
market has different price brackets in which automobiles are manufactured. For example
Maruti has the low price bracket and therefore manufactures people driven cars. Audi and BMW
have the high price bracket so it targets high end buyers. Thus in this case, the segmentation is
being done on the basis of earnings which is a part of demography. Similarly, Age, life cycle
stages, gender, income etc can be used for demographic type of market segmentation.
Behavioral segmentation This type of market segmentation divides the population on the
basis of their behavior, usage and decision making pattern. For example young people will
always prefer Dove as a soap, whereas sports enthusiast will use Lifebuoy. This is an example of
behavior based segmentation. Based on the behavior of an individual, the product is marketed.
This type of market segmentation is in boom especially in the smart phone market. For example
Blackberry was launched for users who were business people, Samsung was launched for
users who like android and like various applications for a free price, and Apple was launched for
the premium customers who want to be a part of a unique and popular niche.
Psychographic segmentation Psychographic segmentation is one which uses peoples
lifestyle, their activities, interests as well as opinions to define a market segment. Psychographic
segmentation is quite similar to behavioral segmentation. But psychographic segmentation also
takes the psychological aspects of consumer buying behavior into accounts. These psychological
aspects may be consumers lifestyle, his social standing as well as his AIO. Do refer more
to Activities, interests and opinions.
Application of psychographic segmentation can be seen all across nowadays. For example
Zara markets itself on the basis of lifestyle, where customers who want the latest and differential
clothing can visit the Zara stores. Similarly Arrow markets itself to the premium office lifestyle
where probably your bosses and super bosses shop for the sharp clothing. Thus, this type of
segmentation is mainly based on lifestyle or AIO.
Geographic segmentation This type of market segmentation divides people on the basis of
geography. Your potential customers will have different needs based on the geography they are
located in. In the article on geographic segmentation, i have explained how people who are
located in non municipal areas might require a RO water purifier whereas those located in
municipal areas might need UV based purifiers. Thus, the need can vary on the basis of
geography.
Similarly in cold countries, the same company might be marketing for heaters whereas in hot
countries, the same company might be targeting air conditioners. Thus, many companies use
geographic segmentation as a basis for market segmentation. This type of segmentation is the
easiest but it was actually used in the last decade where the industries were new and the reach

was less. Today, the reach is high but still geographic segmentation principles are used when you
are expanding the business in more local areas as well as international territories.
Thus, the above are the 4 main types of market segmentation. Usage based market
segmentation, price based market segmentation, all these different types of segmentation are a
derivative of the above 4 types only. So what type of market segmentation can you use for
business and how would you like to implement segmentation?

customer relationship management (CRM)

Customer relationship management (CRM) is a term that refers to practices, strategies and
technologies that companies use to manage and analyze customer interactions and data
throughout the customer lifecycle, with the goal of improving business relationships with
customers, assisting in customer retention and driving sales growth. CRM systems are designed
to compile information on customers across different channels -- or points of contact between
the customer and the company -- which could include the company's website, telephone, live
chat, direct mail, marketing materials and social media. CRM systems can also give customerfacing staff detailed information on customers' personal information, purchase history, buying
preferences and concerns.

How CRM helps you?

Identify and categorise leads
A CRM system can help you to identify and add new leads easily and quickly and categorise them accurately. You can
create customised pitch documents in less time, cutting down on response time and enabling sales teams to move on to the
next opportunity.
With complete, accurate, centrally held information about clients and prospects, sales staff can focus their attention and
energy on the right clients.

Increase referrals from existing customers

By understanding your customers better, cross-selling and up-selling opportunities become clear giving you
the chance to win new business from existing customers.
With better information you'll also be able to keep your customers happy with better service. Happy customers
are likely to become repeat customers, and repeat customers spend more up to 33% more according to
some studies.

Improve products and services

A good CRM system will gather information from a huge variety of sources across your business and beyond.
This gives you unprecedented insights into how your customers feel and what they are saying about your
organisation so you can improve what you offer, spot problems early and identify gaps.

Consumer Goods
Classification and Consumer Rights
Introduction

Consumer goods are products which are purchased for personal consumption. Consumer goods
are classified into three areas: Convenience Goods, Shopping Goods and Speciality Goods.
Purchases made by consumers are often controlled by legislation designed to protect consumers.
In this article we cover consumer goods classifications and the Consumer Rights Act which came
into force in the United Kingdom on the 1st of October 2015.

Convenience Goods
Convenience products are inexpensive frequent purchases, there is little effort needed to
purchase them. Examples include fast food, toiletries and confectionery products. Convenience
products are split into staples, such as milk, eggs and emergency products which are purchased
when the need arises e.g. Umbrellas.
Shopping Goods
Shopping goods are products that consumers do not buy as frequently as convenience goods.
They usually cost more than convenience goods and consumers expect to have them for longer,
so they will do some research prior to purchase. The research will include comparing product
features and price. Examples of shopping goods include white goods (such as fridge/freezers and
washing machines), clothing and furniture.
Speciality Goods and Services
Speciality goods are products with unique features or branding. Consumers do not compare them
with other products as the goods have features unique to them. Instead they will spend time
searching for the retailer selling the product they want. Consumers are often prepared to travel to
purchase their product and pay a premium. Speciality goods include designer clothes, luxury
cars, antiques. Professional services provided by a person known for the effectiveness and
quality of their work can also come under this category. For example Lawyers and Accountants
provide speciality services.

Classification of Industrial products Industrial

products classification

1.
2.
3.
4.

Classification of Industrial products is necessary as it helps decision making for the

organization. Industrial goods are classified on the basis of their relative cost and where they
enter the production process.
There are 4 major classes of Industrial products
Materials & Parts
Capital items
Supplies
Business services
Overall, there are many sub parts of the major classes, and each of them has a separate role in
the classification of Industrial products. Let us delve deeper into the classification.
1) Material & Parts The goods that enter the manufacturers products completely are
classified as Materials and parts. In this, there are two types of materials commonly used for
Industrial goods classification.
a) Farm products Farm products are products which can be re produced or recycled easily.
They are present in ample amount. However, due to their nature, they are perishable and have
to be handled accordingly. But because they are commonly used, there is hardly any marketing
applied to them. Some common products include cheese, eggs, fruits and vegetables, cotton,
wheat etc.
b) Natural products Natural products are products occuring naturally in the earth and
hence they cannot be recycled or re produced. Petrol or Diesel or oil (commonly used) are
products which occur naturally and can be classified as an Industrial product. These products

are found in bulk and the rarer they are, the higher the value. Price is totally dependent on
reliability of supply and keeps changing. Government intervention for these products is high too.
2) Manufactured Materials and parts Raw material which has to be manufactured is
classified as manufactured materials. And Many a times, small manufacturers manufacture
smaller parts which are used in larger machines like an Automobile. These are manufactured
parts, and they are the 2nd type in classification of industrial products.
a) Manufactured Materials If we use the iron supplied to us to make a final product then,
we have manufactured a material and that is the industrial product that we supply. Similarly,
Yarn is woven into cloth to make the final material dresses and clothes. Any process which
requires raw material to be processed to give final products is a part of manufactured materials
classification. The pricing and marketing of the product in this case depends on the raw material
being used. So if the yarn which is used to make the cloth is very high quality, the pricing of the
end product will be high and the marketing will also be premium marketing.
b) Manufactured Parts Using the same example above, if we are making smaller units
which play their role in larger products, then we are manufacturing parts as an industrial
product. Ball bearings are the perfect example of Manufactured parts. Now, there are so many
ball bearings manufacturers out there, that their marketing has become tedious as there is no or
very less differentiation possible. Hence, pricing and availibility of manufactured parts becomes
a major issue instead of advertising, branding or marketing.
3) Capital items To make any manufacturing business or large scale industry possible,
capital items are used. They are important in the classification of industrial products. Capital
items generally fall under the Assets column of the balance sheet. These are items necessary for
the functioning of the organization, and very useful to be invested in for the long term. Due to
their very nature, these capital items have a residual value to the company. And hence a
company which has large capital, has to ensure that it has large revenue, otherwise Capital
(which is a fixed cost) will bring the company down. There are two types of capital items
a) Installations Large installations such as factories, warehouses and other buildings are
capital items which require long time installation and are used for an even longer time. There
are very few people in between when an installation is bought by a company. Design is critical to
such installations and there is absolute absence of Marketing in installations. The only thing
installations can be used for is to reinforce the reputation of the company (Example ACC has
17 manufacturing plants).
b) Equipments Equipments are both heavy machineries as well as a utility to the
organization using them. Equipments in case of factories will be caterpillars, trucks, cranes and
what not. Equipment in case of industrial services will be computers, hardware and design
equipment, printers, copiers etc. All these are equipments which are assets. They have a short
span of life when compared to installations, but as compared to the life span of normal
operating supplies (paper, pen) they have a longer life span. These equipments are sold mainly
through intermediaries, though larger the equipment, more is the involvement of the brand
directly. In the sale of equipments, personal selling plays a major role as compared to marketing
and advertising.
4) Supplies Any short term goods or material which is necessary for the day to day
operations or a company or businesses is termed as supplies. A simple exam is A4 sized paper.
Can you imagine the amount of paper it takes to make a company like Accenture work? A single
office might need 1000s of papers a day for print outs.

Supplies are marketed via intermediaries and not directly through companies. The reach of the
supplies manufacturers needs to be far and wide and regular supply of the product is more
important then marketing. Supplies are divided in 2 formats
a) Maintenance and repair supplies Paints are a form of maintenance supplies and
Asian paints is the leader in that. Cleaning services are another form of maintenance.
b) Operating supplies Pen and paper, notepads, lubricants for automobiles are part of the
operating supplies needed on a day to day basis. Kangaro is an excellent brand which comes to
mind when it comes to staplers and staple pins.
5) Business services A major product and a growing industry in the classification of
industrial products is Business services. Business services are generally third party services
given to businesses and they are in form right now because businesses do not want to spend the
time or the energy on getting regular things running. Hence they either use Business advisory
services or business maintenance services.
a) Business advisory services Any business out there requires a Chartered accountant.
This accountant can be hired or it can be a firm which handles the business. Similarly legal,
consulting, advertising, marketing are all business agencies within themselves which provide
services to industries. These advisory services are on the rise because of the growing economy of
developing nations.
b) Maintenance and repair services There is a difference between repair goods and
repair services. Where paint is a repair good, a repair service is window cleaning or printer and
copier repairing, something which is best left to the professionals. And there are many
professionals out there who pick industrial contracts for an annual year towards repair and
maintenance of day to day products and equipments within an organization.

Three Levels of a Product

Consumers often think that a product is simply the physical item that he or she buys. In order to
actively explore the nature of a product further, lets consider it as three different products
the CORE product, the ACTUAL product, and finally the AUGMENTED product. This concept is known
as the Three Levels of a Product.
The CORE product is NOT the tangible physical product. You cant touch it. Thats because the core
product is the BENEFIT of the product that makes it valuable to you. So with the car example, the
benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another
core benefit is speed since you can travel around relatively quickly.
The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the
car, it is the vehicle that you test drive, buy and then collect. You can touch it. The actual product is
what the average person would think of under the generic banner of product.
The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added
value, for which you may or may not pay a premium. So when you buy a car, part of the augmented
product would be the warranty, the customer service support offered by the cars manufacturer and
any after-sales service. The augmented product is an important way to tailor the core or actual
product to the needs of an individual customer. The features of augmented products can be converted
in to benefits for individuals.

Product mix and Product line

The complete range of products present within a company is known as the product mix. In any
multi brand organizations, there are numerous products present. None of the organizations
wants to take the risk of being present in the market with a single product. If the company has
only a single product, than the demand of the product will be too great or the company does not
have the resources to expand the number of products it has.
However, if the business market is any example, than all the top companies have multiple
products. Coca cola, Apple, Microsoft, Nestle, Hindustan unilever, Pharmaceutical companies,
so on and so forth. These companies need to have a wide product portfolio to be present in the
market and to have a sustainable business model. The combination of products that they have in
their product portfolio can be the product mix.
Product mix As explained, product mix is a combination of total product lines within a
company. A company like HUL has numerous product lines like Shampoos, detergents, Soaps
etc. The combination of all these product lines is the product mix.
Product line The product line is a subset of the product mix. The product line generally
refers to a type of product within an organization. As the organization can have a number of
different types of products, it will have similar number of product lines. Thus, in Nestle, there
are milk based products like milkmaid, Food products like Maggi, chocolate products like Kitkat
and other such product lines. Thus, Nestles product mix will be a combination of the all the
product lines within the company.

Stretching the product line

Stretching the product line means taking it beyond the established positioning of the
range of products.
Again if we use the Apple example above, in the mobile phone market Apple only offers
smart phones of high quality. If they were to offer a basic smart phone they would be
stretching their product line downward that is, taking it beyond the standard offering
and introducing types of products that would appeal to new parts of the market.
As another example, if Coca-Cola was to introduce some form of high quality gourmet
soft drink that sold at very high prices, this would be also considered stretching the
product line as they would be offering a premium product for the first time.

Stretching downwards

A downward stretch of the product line is when a firm introduces lower quality products that they are normally
associated with such as the Apple example above.
Firms would engage in downward stretching of their product line for several reasons:
to block competitor activities and competitive product offerings
to compete in the budget end of the market, particularly if it is a high volume part of the market
to help broaden their brands positioning to be seen as a more affordable brand overall.

Stretching upwards
An upward stretch of the product line is the opposite to the downward stretch. Here the firm introduces products
that are of high quality as compared to the normal offerings such as the Coca-Cola example above.

Firms often target high quality products and stretch their product line upwards because of several reasons,
including:
high quality products often have a higher unit margin and can be quite profitable at a relatively low
turnover
offering high-quality products helps position the overall brand towards being a status brand, which
often enables price premiums to be charged across the full product line

Both upward and downward stretching at the

same time

Occasionally, firms may look to extend their product line both upwards and downwards although this
is generally rare and more likely in new/growth markets.
This would happen when firms are rapidly expanding their product line and trying to offer a full range of
product offerings in order to reduce the incentive for new competitors. Therefore, the intention of this product
line approach is to try and own/dominate the product category.

Product line filling

A more common approach to product line extensions is to introduce new products that are consistent
with the brands initial positioning. So rather than expanding into the higher or lower quality end of the
marketplace, the brand simply introduces more variations. This is common in fast-moving consumer goods
where, snack foods in particular, have a variety of similar products.

Length of the product mix If a company has 4 product lines, and 10 products within the
product line, than the length of the product mix is 40. Thus, the total number of products
against the total number of product lines forms the length of the product mix. This equation is
also known as product line length.

Width of the product mix Where product line length refers to the total number of product
lines and the products within the product lines, the width of the product mix is equal to the
number of product lines within a company. Thus, taking the above example, if there are 4
product lines within the company, and 10 products within each product line, than the product
line width is 4 only. Thus, product line width is a depiction of the number of product lines which
a company has.
Depth of the product mix It is fairly easy to understand what depth of the product mix will
mean. Where length and width were a function of the number of product lines, the depth of the
product mix is the total number of products within a product line. Thus if a company has 4
product lines and 10 products in each product line, than the product mix depth is 10. It can have
any variations within the product for form the product line depth.
Product line consistency The lesser the variations between the products, the more is the
product line consistency. For example, Amul has various product lines which are all dairy
related. So that product mix consistency is high. But Samsung as a company has many product
lines which are completely independent of each other. Like Air conditioners, televisions, smart
phones, home appliances, so on and so forth. Thus the product mix consistency is low in
Samsung.
Let us take an example of P&G as a company and understand product mix. This will be not be a
precise example and all products of P&G might not be taken into consideration. But the example
will help you understand product mix within an organization.

Detergents Arial, Arial oxyblue, Ariel bar, Tide, Tide naturals, Tide bleach, Tide plus.
Shampoos Head and shoulders, Head and shoulders anti dandruff, Pantene, Pantene damage
repair, Pantene pro-v
In the above example the following can be learned about the product mix of P&G
Product mix Length 12
Product mix Width 2
Product mix Depth 7 in detergents and 5 in shampoos
Product mix consistency High as both are bathroom products.

Product decision
Individual Product Decisions Decisions in the development and marketing of
individual products
In the development and marketing of individual products (and services), individual product decisions need to be made.
These decisions apply to any kind of product and service and set the base for all other decisions. But which fundamental
individual product decisions need to be made?
Individual product decisions required can be sorted into five categories or stages. Firstly, we look at product attributes.
Branding and packaging follow. The individual product decisions are completed by labelling and product support services.
Individual product decisions start by deciding on product attributes. This, in turn, means that the development of a product
starts by defining the benefits it will offer to consumers. These benefits are communicated as well as delivered by the
product attributes. Thus, in stage one of the individual product decisions, we define the product attributes, such as quality,
features, style and design.

Product Quality
One element of the product attributes is the quality of the product. Although quality can be defined in many ways, we can
define it as the characteristics of a product or service that determine its ability to satisfy the customer needs. Therefore, the
quality is one of the most important individual product decisions. It has a direct impact on the products (or services)
performance. It is directly linked to customer value and satisfaction. So, we could say: Quality is when the customer is
satisfied and will come back, while the product does not (come back).
Total Quality Management (TQM) is an approach that deals with quality in every part of the organization. All parts of the
company are involved in the constant improvement of the quality of products, services, and business processes.
To be more specific, defining the products quality involves two levels or dimensions. These are Quality Level and Quality
Consistency. Firstly, we need to choose a quality level which will support the products positioning. At this level, the quality
can be understood as performance quality: the ability of the product to perform its functions. To give an example, a
Mercedes-Benz car provides a higher performance quality than a Dacia Logan: it has a smoother ride, offers more luxury,
comfort, lasts longer etc. The quality level should be chosen so as to meet the target market needs and the quality levels of
competing products.
The second level is the Quality Consistency. Here, the product quality means conformance quality. Thus, we refer to
freedom from defects and the consistency in delivering the targeted quality level (level of performance). At this level, the
Dacia Logan can have as much quality as the Mercedes. Although it does not perform at the same level as the Mercedes
(Quality Level), it can deliver the quality that customers pay for and expect (Quality Consistency).

Product Features
Another product attribute that is highly important for the individual product decisions is that of the product features.
Obviously, we can offer a product with varying features. A low-level model, without any extras, or a high-level model, with a

lot of features. In fact, product features can be seen as a competitive tool for differentiation. By features, we can differentiate
our product from competitors products.
However, just adding features is not the right way to enhance customer value. A remote control does not provide additional
value to a customer if it has 250 buttons and vibrates while playing music. The company always has to assess each
features value to customers first. Do customers really need that feature? Also, the features value has to be contrasted to its
cost to the company. Only features that add substantial value worth more than the marginal costs should be added.

Product Style and Design

Individual product decisions also include the product style and design. Clearly, we can add customer value by means of a
distinctive product style and design. While style describes the appearance of the product, design goes deeper. Good design
does not only contribute to the products look, but also to its usefulness. In order to find the right product design, marketers
should investigate how customers will use and benefit from the product.

Branding Stage two of Individual

Product Decisions
Branding is one of the most crucial individual product decisions. Today, people do not buy a product they buy a brand. A
brand is a name, term, sign, symbol, design or a combination of these elements that identifies the products or services of
one seller and differentiates them from those of competitors. To give an example, look at Coca-Cola. If you buy a bottle of
coke, you do not only buy the pure beverage, you buy the brand. You buy it because you know and value the worldwideknown brand. For clothing, brands are even more important. Many people do not buy a sweatshirt because of its features
they buy it because there is a label on it showing the brand. They become part of the brand, show that they have this brand,
that they can afford this brand and so on. Thus, a brand is much more than only the product, it is the whole identity around
the offerings of a seller.
Therefore, branding adds significant value to a product. In short, a brand is so crucial because customers can attach
meanings to brands and develop brand relationships. Branding also consumers identify products that might benefit them.
The brand says something about the products quality and consistency. And you probably know yourself that buyers who
always buy the same brand know that they will get the same benefits, features and quality each time. To go even further, the
brand is the basis on which a whole story can be built about the products special qualities. The product gets an identity with
which consumers can identify each time they buy a product of that brand.
Today, branding has become so strong that hardly anything goes unbranded. Even homogenous products such as gasoline
or salt are packaged in branded containers or sold as a brand. Likewise, even fruits and vegetables are branded: on many
apples, bananas and other fruits and vegetables you find the brand, such as Chiquita Bananas or Pink Lady Apples.

Packaging Stage three of Individual

Product Decisions
Going on with the individual product decisions, we land at packaging. Packaging refers to activities of designing and
producing the wrapper or container for a product. The packaging of a product is a more important decision than you would
expect it to be. Traditionally, the primary function of a package was to hold and protect the product. However, packaging is
nowadays an important marketing tool, too. This is a result of increased competition and offer of products. Packaging must
now perform many tasks, which include attracting attention, describing the product, and even making the sale.
To illustrate the importance of packaging, we will look at the highly competitive environment in supermarkets. A normal
shopper passes by some 300 items per minute. Therefore, the package may be the sellers best and last chance to
influence the buyer. It has become, in fact, a significant promotional tool.
In addition, poorly designed packages can harm a lot. For instance, hard-to-open packages such as DVD cases with sticky
labels or sealed plastic clamshell containers do not contribute to the buyers satisfaction. Indeed, customer frustration is
often the result.

Finally, in making packaging decisions, companies should also have environmental considerations. Green packaging,
meaning the use of environmentally responsible packaging materials, becomes more and more important and adds value to
many products.

Labelling Stage four of Individual

Product Decisions
Labels perform several functions and are therefore one of the important individual product decisions. The most straightforward function is to identify the product or brand. But the label can also describe several things about the product: who
made it, where and when was it made, the contents, how it is to be used etc. Finally, the label can promote a brand. It
supports the brands positioning and may help to connect with customers. By a brand logo, the label can add personality to a
brand and contribute to the brand identity.
However, a label should only show and state what is true and what the customer can rely upon. Misleading or deceptive
labels must be seen as unfair competition. If labels mislead customers, fail to describe important ingredients or even fail to
mention required safety warnings, legal consequences are likely to follow.
Labelling has also been affected recently by unit pricing (the price per unit of standard measure must be stated), open dating
(the expected shelf life of the product must be mentioned) and nutritional labelling (the nutritional values in the product must
be shown). These elements are required by law.

Product Support Services Stage five

of Individual Product Decisions
Individual product decisions also include product support services. Usually, the companys offer includes some form of
customer service, of product support services. This can be a minor part of the product or a major part of the total offering.
Product support services contribute to the augmented product, as defined by the three levels of product. Without doubt,
support services do also belong to the significant individual product decisions because they contribute to the customers
overall brand experience. The key is to keep customers happy after the sale in order to build lasting relationships.
Besides these individual product decisions, many other choices need to be made. However, these five individual product
decisions built the base for the product development and marketing. If individual product decisions are made carefully in
accordance with consumer needs and wants, the product can become a success.

brand development strategy

Product line extension

Multi-brand
Brand extension
New brand
Please note that the top axis refers to the product category that is, a set of products not an individual
product. Therefore, if Toyota was to introduce a new car, then that would still be considered to be an existing
product, because they already offer and market cars.

Product line extension

A product line extension is introducing a new product that is similar to what the company already offers (that
is, within an existing product line/category) that is targeting an existing market by using the current brand name.
This is a very common approach in marketing. This is because the existing brand name has a customer
following, and new products/variations will tend to be relatively well received by these loyal customers.
We frequently see this approach with product sold through supermarkets channels, where you variations of
tastes/flavors and packaging sizes have some appeal with the marketplace.

Multi brand

A variation of the product line extension above, is to run a multiple brand strategy within the same market. As
you can see from the matrix, a multi-brand strategy involves having more than one brand competing in the
same product category.
Again this is a relatively common approach for large companies. For example, a manufacturer of frozen
vegetables may have multiple brands that to the consumer appeared to compete against each other but
have the same corporate ownership.
The main reasons for this is that these brands can have different positioning in the market, dominate the overall
shelf space, and reduce opportunities for competitors to enter the market or to win market share.
The disadvantage of this multi brand strategy (as opposed to a product line extension strategy) is the cost and
time of developing a new brand name successfully in the marketplace.

Brand extension
A brand extension involves broadening the markets understanding of the brand. This is achieved by offering
more products (of a different nature/category) under the existing brand name.
An example of this in recent years would be McDonalds competing in the gourmet coffee product category
effectively broadening the positioning of McDonalds from fast food only to being perceived as also competing
against Starbucks to some extent.
Brand extensions they usually approached with care, as the market may not fully accept the brands expertise
in another product category. As a hypothetical example, consider if the Coca-Cola brand was extended to
shampoos and detergents the market would see little connection and the overall brand would be damaged.
Therefore, brand extensions work best if the new product category has some relationship to the brands
existing product category and perceived area of expertise.

New brand
The final brand development strategy is a new brand. A new brand occurs when the firm is expanding is
offering by developing a new product line that they havent not offered before and as a result, need to build
a new brand.

Product Life Cycle Stages

As consumers, we buy millions of products every year. And just like us, these products have a life cycle. Older, long-established products eventually
become less popular, while in contrast, the demand for new, more modern goods usually increases quite rapidly after they are launched.
Because most companies understand the different product life cycle stages, and that the products they sell all have a limited lifespan, the majority of
them will invest heavily in new product development in order to make sure that their businesses continue to grow.

Product Life Cycle Stages Explained

The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean different things for business that are trying to
manage the life cycle of their particular products.
Introduction Stage This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the
product is small, which means sales are low, although they will be increasing. On the other hand, the cost of things like research and development,
consumer testing, and the marketing needed to launch the product can be very high, especially if its a competitive sector.
Growth Stage The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from
economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to
invest more money in the promotional activity to maximize the potential of this growth stage.
Maturity Stage During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have
built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also
need to consider any product modifications or improvements to the production process which might give them a competitive advantage.
Decline Stage Eventually, the market for a product will start to shrink, and this is whats known as the decline stage. This shrinkage could be due to
the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to
a different type of product. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to lessexpensive production methods and cheaper markets.

Product Life Cycle Examples

Its possible to provide examples of various products to illustrate the different stages of the product life cycle more clearly. Here is the example of
watching recorded television and the various stages of each method:
1.
2.
3.

Introduction 3D TVs
Growth Blueray discs/DVR
Maturity DVD

4.

Decline Video cassette

The idea of the product life cycle has been around for some time, and it is an important principle manufacturers need to understand in order to make a
profit and stay in business.
However, the key to successful manufacturing is not just understanding this life cycle, but also proactively managing products throughout their lifetime,
applying the appropriate resources and sales and marketing strategies, depending on what stage products are at in the cycle.

For New Product

Development
1. Idea generation

The first step in new-product development is idea generation.

New ideas can be generated by:
Conducting marketing research to find out the consumers' needs and wants.
Inviting suggestions from consumers.
Inviting suggestions from employees.
Brainstorming suggestions for new-product ideas.
Searching in different markets viz., national and international markets for newproduct ideas.
Getting feedback from agents or dealers about services offered by competitors.
Studying the new products of the competitors.
2. Idea screening
Most companies have a "Idea Committee." This committee studies all the ideas very
carefully. They select the good ideas and reject the bad ideas.
Before selecting or rejecting an idea, the following questions are considered or
asked:
Is it necessary to introduce a new product?
Can the existing plant and machinery produce the new product?
Can the existing marketing network sell the new product?
When can the new product break even?
If the answers to these questions are positive, then the idea of a new-product
development is selected else it is rejected. This step is necessary to avoid product
failure.
3. Concept testing
Concept testing is done after idea screening. It is different from test marketing.
In this stage of concept testing, the company finds out:
Whether the consumers understand the product idea or not?
Whether the consumers need the new product or not?
Whether the consumers will accept the product or not?
Here, a small group of consumers is selected. They are given full information about
the new product. Then they are asked what they feel about the new product. They
are asked whether they like the new product or not. So, concept testing is done to

find out the consumers' reactions towards the new product. If most of the
consumers like the product, then business analysis is done.
4. Business analysis
Business analysis is a very important step in new-product development. Here, a
detailed business analysis is done. The company finds out whether the new product
is commercially profitable or not.
Under business analysis, the company finds out...
Whether the new product is commercially profitable or not?
What will be the cost of the new product?
Is there any demand for the new product?
Whether this demand is regular or seasonal?
Are there any competitors of the new product?
How the total sales of the new product be?
What will be the expenses on advertising, sales promotion, etc.?
How much profit the new product will earn?
So, the company studies the new product from the business point of view. If the new
product is profitable, it will be accepted else it will be rejected.
5. Product development
At this stage, the company has decided to introduce the new product in the market.
It will take all necessary steps to produce and distribute the new product. The
production department will make plans to produce the product. The marketing
department will make plans to distribute the product. The finance department will
provide the finance for introducing the new product. The advertising department will
plan the advertisements for the new product. However, all this is done as a small
scale for Test Marketing.
6. Test marketing
Test marketing means to introduce the new product on a very small scale in a very
small market. If the new product is successful in this market, then it is introduced on
a large scale. However, if the product fails in the test market, then the company
finds out the reasons for its failure. It makes necessary changes in the new product
and introduces it again in a small market. If the new product fails again the
company will reject it.
Test marketing reduces the risk of large-scale marketing. It is a safety device. It is
very time-consuming. It must be done especially for costly products.
7. Commercialization
If the test marketing is successful, then the company introduces the new product on
a large scale, say all over the country. The company makes a large investment in
the new product. It produces and distributes the new product on a huge scale. It
advertises the new product on the mass media like TV, Radio, Newspapers and
Magazines, etc.
8. Review of market performance
The company must review the marketing performance of the new product.
It must answer the following questions:

Is the new product accepted by the consumers?

Are the demand, sales and profits high?
Are the consumers satisfied with the after-sales-service?
Are the middlemen happy with their commission?
Are the marketing staffs happy with their income from the new product?
Is the Marketing manager changing the marketing mix according to the changes in
the environment?
Are the competitors introducing a similar new product in the market?
The company must continuously monitor the performance of the new product. They
must make necessary changes in their marketing plans and strategies else the
product will fail.

Definition of Service Marketing:

Service marketing is marketing based on relationship and value. It may be used to market a
service or a product. With the increasing prominence of services in the global economy, service
marketing has become a subject that needs to be studied separately. Marketing services is
different from marketing goods because of the unique characteristics of services namely,
intangibility, heterogeneity, perishability and inseparability.
In most countries, services add more economic value than agriculture, raw materials and manufacturing combined. In developed economies, employment is dominated by service jobs and
most new job growth comes from services.
Jobs range from high-paid professionals and technicians to minimum-wage positions. Service
organizations can be of any size from huge global corporations to local small businesses. Most
activities by the government agencies and non-profit organizations involves services.

Features of Services:
1. Intangibility:
A physical product is visible and concrete. Services are intangible. The service cannot be
touched or viewed, so it is difficult for clients to tell in advance what they will be getting. For
example, banks promote the sale of credit cards by emphasizing the conveniences and
advantages derived from possessing a credit card.
2. Inseparability:
Personal services cannot be separated from the individual. Services are created and consumed
simultaneously. The service is being produced at the same time that the client is receiving it; for
example, during an online search or a legal consultation. Dentist, musicians, dancers, etc.
create and offer services at the same time.
3. 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 minimize the
differences in performance (through training, standard setting and quality assurance). The
quality of services offered by firms can never be standardized.

4. Perishability:
Services have a high degree of perishability. Unused capacity cannot be stored for future use. If
services are not used today, it is lost forever. For example, spare seats in an aeroplane cannot
be transferred to the next flight. Similarly, empty rooms in five-star hotels and credits not utilized
are examples of services leading to economic losses. As services are activities performed for
simultaneous consumption, they perish unless consumed.
5. Changing demand:
The demand for services has wide fluctuations and may be seasonal. Demand for tourism is
seasonal, other services such as demand for public transport, cricket field and golf courses
have fluctuations in demand.
6. Pricing of services:
Quality of services cannot be standardized. The pricing of services are usually determined on
the basis of demand and competition. For example, room rents in tourist spots fluctuate as per
demand and season and many of the service providers give off-season discounts.
7. Direct channel:
Usually, services are directly provided to the customer. The customer goes directly to the
service provider to get services such as bank, hotel, doctor, and so on. A wider market is
reached through franchising such as McDonalds and Monginis.

Problems in Marketing Services:

1. A service cannot be demonstrated.
2. Sale, production and consumption of services takes place simultaneously.
3. A service cannot be stored. It cannot be produced in anticipation of demand.
4. Services cannot be protected through patents.
5. Services cannot be separated from the service provider.
6. Services are not standardized and are inconsistent.
7. Service providers appointing franchisees may face problems of quality of services.
8. The customer perception of service quality is more directly linked to the morale, motivation
and skill of the frontline staff of any service organization.

Pricing Objectives
What price point should you set for your products and services? This important and common question can better be
answered by determining company objectives. Several common company objectives are:

Survival
Maximize current profits
Increase market share

Skim the market

Seek product-quality leadership
Survival: Companies facing new and intense competition, over capacity, or changing consumer behavior may pursue a
survival strategy. Survival is clearly a short run objective to make it through tough times. As long as price exceeds variable
costs and covers some fixed costs, the company can carry on. In the long run, the company must adapt and find ways to
add value.
Maximize current profits: Maximizing current profit is a common company objective. To do so, costs and consumer
demand have to be estimated for different prices. The price point that generates the highest profit is then chosen. In
practice, it's not always easy to estimate demand accurately (we discuss ways to do this in our article about determining
demand and calculating costs). Additionally, focusing on current profits may mean reducing long run company performance.
Increase market share: A company may pursue an objective of increasing or maximizing market share. This makes sense
especially if a company feels it can achieve lower unit costs with higher volumes, thereby increasing long-term profit. Many
companies set a low initial price to achieve market penetration. This strategy can be advantageous in industries with
consumers that are price sensitive, sales and production costs fall with production experience, and where a low price
discourages the entry of possible competitors.
Skim the market: Skimming means setting high prices initially to target those that are willing to pay the high price, and
then gradually lowering the price to attract the more price sensitive customers. Video game and other software producers
often use this strategy. Die-hard fans are willing to pay the higher initial price, and as sales decline, the company reduces
the price for more casual users. Intel is another prime example a company that successfully uses price skimming. It's latest
computer chips are sold to those who can't wait for well over $1000 initially. A year later, the price drops and there is a new
and more powerful $1000+ chip released.
Product-quality leadership: Companies that produce high quality products relative to the competition often try to position
themselves as the product-quality leader. They charge more, but convince the customer that it's worth it because of the
superior product experience, reliability, or other quality related benefits. Price sensitive customers need to be convinced that
the higher price is worth it in the long run.
The main point is that using price as a strategic tool is better than simply letting costs determine price. If your product is
superior to the competition, you'll be more profitable if you convey that to the market and charge a higher price.

Role and importance of pricing

Importance of pricing

Pricing is an important aspect of Marketing. So it needs to be done carefully. That is why organizations formulate pricing
policies and strategies to fix the price of their products. Pricing affect the sales as well as the profit of the company. It is an
important task. It is a factor which determines the acceptance of the product in the market thereby it determines the future of
the product in the market. The first sept in pricing is to determine the base price of the product, which includes the decision
on pricing objectives.
If we want to get a product from the market we have to pay some money for it. Price is the money paid by us for a product.
Therefore, Price is the exchange value of a product expressed in terms of dollar/Euro/Pound/rupee/yen or any other
monetary unit.

Role and importance of pricing in marketing

Any product or services which is of commercial value has a price. Not only the physical products has a price, but also the
services provided has a price. We use different names to call the price of a service. For example, the price for the services
of a bus, train or airways are called "fare". Rent is the price of hiring a home or a shop. The risk covered by the insurance
company is known as "premium". "Tuition fee" is the price of providing education. "Interest" is the price charged on borrowed
money.
Adam Smith has defined the concept of price as "the price of everything, what everything really costs, is the toil and trouble
of acquiring it".

Price plays an important role in the marketing of a product. After developing a product, the next step of the company is fixing
the price of the product so as to market the product effectively earn earn some money from selling the product. If the price is
not determined correctly, it could affect the sale of the product as well as the profit of the company.
A buyer's decision is largely influenced the price of the product. A company can increase and reduce the demand of a
product through pricing. Pricing can also regulate the competition in the market. Wrong pricing policies can also lead to legal
complications apart from general ill-will and resentment among the buyers.
Fixing a reasonable price for the product is a tough job for the marketing manager. Some people feel that the price should
be as high as the customer can pay, but others feel that it should be low enough to enable the maximum number of persons
to buy the product.
Pricing is an important task not only for the manufacturing concerns, but also to other organizations which provide various
types of services such as advertising, banking, transport, insurance, electricity, entertainment etc. A doctor who is providing
consultation service is very keen to fix a price for his service. Non profit organizations like educational institutions are
interested in fixing a fair and proper tuition fee, to be charged from the students.
The basis of competition in the market for a product is mostly its price. So the competitors carefully watch the price of the
product regularly and fix the price accordingly to improve sales. At the same time price affects the total sales, total revenue
and the total profit of the organization.
Pricing is an important matter not only for the organization which it produce, but also for the buyer and the society. Price
represents the value of the market offering to the buyers. Price can affect the demand of the product. Also price indicate the
quality of the product. Increase in price may be perceived favorably by the buyers who might interpret it as a consequence of
improvement of quality. According to the law of demand, a decrease in price lead to an increase in demand.
Price of a product influences profit, rent, interest, wages which are the prices paid to the factors of production entrepreneurship, land, capital and labor respectively. Thus price acts as a regulator of economy, because it influences the
allocation of the factors of production.

What is 'Price Elasticity Of Demand'

Price elasticity of demand is a measure of the relationship between a change in the quantity demanded of a particular
good and a change in its price. Price elasticity of demand is a term in economics often used when discussing price
sensitivity. The formula for calculating price elasticity of demand is:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic
(or responsive to price changes). Conversely, a product is inelastic if a large change in price is accompanied by a
small amount of change in quantity demanded.

BREAKING DOWN 'Price Elasticity Of Demand'

Price elasticity of demand measures the responsiveness of demand to changes in price for a particular good. If the
price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price
changes). Values between zero and one indicate that demand is inelastic (this occurs when the percent change in
demand is less than the percent change in price). When price elasticity of demand equals one, demand is unit elastic
(the percent change in demand is equal to the percent change in price). Finally, if the value is greater than one,
demand is perfectly elastic (demand is affected to a greater degree by changes in price).
For example, if the quantity demanded for a good increases 15% in response to a 10% decrease in price, the price
elasticity of demand would be 15% / 10% = 1.5. The degree to which the quantity demanded for a good changes in

response to a change in price can be influenced by a number of factors. Factors include the number of close
substitutes (demand is more elastic if there are close substitutes) and whether the good is a necessity or luxury
(necessities tend to have inelastic demand while luxuries are more elastic).
Businesses evaluate price elasticity of demand for various products to help predict the impact of a pricing on product
sales. Typically, businesses charge higher prices if demand for the product is price inelastic.

1.

2.

3.

4.
5.
6.
7.
8.

Factors affecting price elasticity of demand

The number of close substitutes the more close substitutes there are in the
market, the more elastic is demand because consumers find it easy to switch. E.g. Air
travel and train travel are weak substitutes for inter-continental flights but closer
substitutes for journeys of around 200-400km e.g. between major cities in a large
country.
The cost of switching between products there may be costs involved in
switching. In this case, demand tends to be inelastic. For example, mobile phone
service providers may insist on a12 month contract which has the effect of locking-in
some consumers once a choice has been made
The degree of necessity or whether the good is a luxury necessities tend to
have an inelastic demand whereas luxuries tend to have a more elastic demand. An
example of a necessity is rare-earth metals which are an essential raw material in the
manufacture of solar cells, batteries. China produces 97% of total output of rare-earth
metals giving them monopoly power in this market
The proportion of a consumer's income allocated to spending on the
good products that take up a high % of income will have a more elastic demand
The time period allowed following a price change demand is more price
elastic, the longer that consumers have to respond to a price change. They have more
time to search for cheaper substitutes and switch their spending.
Whether the good is subject to habitual consumption consumers become
less sensitive to the price of the good of they buy something out of habit (it has become
the default choice).
Peak and off-peak demand - demand is price inelastic at peak times and more
elastic at off-peak times this is particularly the case for transport services.
The breadth of definition of a good or service if a good is broadly defined,
i.e. the demand for petrol or meat, demand is often inelastic. But specific brands of
petrol or beef are likely to be more elastic following a price change.

Price Determination: 6 Factors Affecting Price Determination

of Product
Main factors affecting price determination of product are: 1. Product Cost 2. The Utility and Demand 3. Extent
of Competition in the Market 4. Government and Legal Regulations 5. Pricing Objectives 6. Marketing Methods
Used.

1. Product Cost:
The most important factor affecting the price of a product is its cost.

Product cost refers to the total of fixed costs, variable costs and semi variable costs incurred during the
production, distribution and selling of the product. Fixed costs are those costs which remain fixed at all the
levels of production or sales.
For example, rent of building, salary, etc. Variable costs refer to the costs which are directly related to the levels
of production or sales. For example, costs of raw material, labour costs etc. Semi variable costs are those which
change with the level of activity but not in direct proportion. For example, fixed salary of Rs 12,000 + upto 6%
graded commission on increase in volume of sales.
The price for a commodity is determined on the basis of the total cost. So sometimes, while entering a new
market or launching a new product, business firm has to keep its price below the cost level but in the long rim,
it is necessary for a firm to cover more than its total cost if it wants to survive amidst cut-throat competition.

2. The Utility and Demand:

Usually, consumers demand more units of a product when its price is low and vice versa. However, when the
demand for a product is elastic, little variation in the price may result in large changes in quantity demanded.
In case of inelastic demand, a change in the prices does not affect the demand significantly. Thus, a firm can
charge higher profits in case of inelastic demand.
Moreover, the buyer is ready to pay up to that point where he perceives utility from product to be at least equal
to price paid. Thus, both utility and demand for a product affect its price.

3. Extent of Competition in the Market:

The next important factor affecting the price for a product is the nature and degree of competition in the
market. A firm can fix any price for its product if the degree of competition is low.
However, when the level of competition is very high, the price of a product is determined on the basis of price of
competitors products, their features and quality etc. For example, MRF Tyre company cannot fix the prices of
its Tyres without considering the prices of Bridgestone Tyre Company, Goodyear Tyre company etc.

4. Government and Legal Regulations:

The firms which have monopoly in the market, usually charge high price for their products. In order to protect
the interest of the public, the government intervenes and regulates the prices of the commodities for this
purpose; it declares some products as essential products for example. Life saving drugs etc.

5. Pricing Objectives:
Another important factor, affecting the price of a product or service is the pricing objectives.
Following are the pricing objectives of any business:
(a) Profit Maximisation:
Usually the objective of any business is to maximise the profit. During short run, a firm can earn maximum
profit by charging high price. However, during long run, a firm reduces price per unit to capture bigger share of
the market and hence earn high profits through increased sales.
(b) Obtaining Market Share Leadership:
If the firms objective is to obtain a big market share, it keeps the price per unit low so that there is an increase
in sales.
(c) Surviving in a Competitive Market:
If a firm is not able to face the competition and is finding difficulties in surviving, it may resort to free offer,
discount or may try to liquidate its stock even at BOP (Best Obtainable Price).
(d) Attaining Product Quality Leadership:
Generally, firm charges higher prices to cover high quality and high cost if its backed by above objective.

6. Marketing Methods Used:

The various marketing methods such as distribution system, quality of salesmen, advertising, type of packaging,
customer services, etc. also affect the price of a product. For example, a firm will charge high profit if it is using
expensive material for packing its product.

Break-Even Analysis and Forecasting

The break-even point is a critical number that must be analyzed within a business. It's the point where sales and expenses
are the same or when the sales of a company are enough to cover the expenses of the business. While being at the breakeven point does not allow for an income for the business, it does mean the company is able to pay all of the expenses
without going in debt or having to close its doors.

Break-even analysis depends on the following variables:

1.

Selling Price per Unit:The amount of money charged to the

customer for each unit of a product or service.
2.
Total Fixed Costs: The sum of all costs required to produce
the first unit of a product. This amount does not vary as production
increases or decreases, until new capital expenditures are needed.
3.
Variable Unit Cost: Costs that vary directly with the
production of one additional unit.
Total Variable Cost The product of expected unit sales and
variable unit cost, i.e., expected unit sales times the variable unit
cost.
4.

Forecasted Net Profit: Total revenue minus total cost. Enter

Zero (0) if you wish to find out the number of units that must be
sold in order to produce a profit of zero (but will recover all
associated costs)
Each of these variables is interdependent on the break-even point
analysis. If any of the variables changes, the results may change.
Total Cost: The sum of the fixed cost and total variable cost for any
given level of production, i.e., fixed cost plus total variable cost.
Total Revenue: The product of forecasted unit sales and unit price,
i.e., forecasted unit sales times unit price.
Break-Even Point: Number of units that must be sold in order to
produce a profit of zero (but will recover all associated costs). In
other words, the break-even point is the point at which your product

stops costing you money to produce and sell, and starts to generate
a profit for your company.
One may use the JavaScript to solve some other associated
managerial decision problems, such as:

setting price level and its sensitivity

targeting the "best" values for the variable and fixed cost
combinations

determining the financial attractiveness of different strategic

options for your company
The graphic method of analysis (below) helps you in understanding
the concept of the break-even point. However, the break-even point
is found faster and more accurately with the following formula:
Q = FC / (UP - VC)
where:
Q = Break-even Point, i.e., Units of production (Q),
FC = Fixed Costs,
VC = Variable Costs per Unit
UP = Unit Price
Therefore,
Break-Even Point Q = Fixed Cost / (Unit Price - Variable Unit Cost)

Relationship between quality and price

Quality and price relationship is an important facet of brand positioning. If the sales
volumes for a particular product are lower than expected, or if initially high sales have
noticeably declined, brand positioning experts may be called in to help promote the product
more effectively to its target market segment or alternatively, to reposition the
product so that it appeals to a more viable market segment.
Quality and price relationship: its complicated
The quality and price relationship is often one of the first factors brand positioning
consultants will consider when working to improve the marketability of a product. Studies
have shown that the price tag is often one of the first things potential customers will look at
when deciding whether to buy a product. However, it would be a mistake to assume that a

lower price will always automatically lead to higher sales. For some products the opposite
may well be the case.
There is a well-known brand positioning legend concerning a British department store,
whose marketing department was perplexed when an umbrella, priced at a very reasonably
10, failed to sell. A management consultant solved this problem with the somewhat
counterintuitive suggestion of raising the price to 20, after which sales immediately
increased. Customers seemed to find the 20 price tag a reassuring confirmation of the
products quality, whereas the much lower original price had been grounds for suspicion.
Analysing quality and price relationship
Significant research has been done into the psychology behind customer perception of the
quality and price relationship, and how this can be utilised by brand positioning experts.
Customer assumptions can be explained by the following rubrics:

Higher price equals higher quality: As in the example given

above, customers use the price of a product as an indication of its quality,
assuming that a higher price will mean that the materials and processes
used to manufacture the product are superior, and that it will perform
better and survive longer.

Price expectancy: Customers approach a product with preconceived ideas of how it should be priced. A price significantly higher or
lower than their expectation may provoke suspicion, either that the
product is of a lower quality than they anticipated, or that the price has
been unreasonably inflated. When determining the price of a product, it is
vital to consider the customers perceived quality and price relationship,
in order to set a price that is within their preferred range.

Prestige pricing: This usually applies to goods marketed as

designer, luxury or high-end, and is designed to attract statusconscious customers, who want to be seen to have spent a lot of money.
Focus groups convened by high-end brands have found that customers
asked to state what they would happily pay for a product will often name
a price far higher than its actual value, even if they have been advised of
it beforehand.

Pricing Strategy
pricing is a process that utilizes data to eliminate as much doubt as possible for key
stakeholders to make a profit maximizing decision. There is no silver bullet, but with data youll
have a nice barrel full of lead.

Cost plus pricing: The oldest and simplest (mostly) method of

setting prices

Cost plus pricing is the simplest method of determining price, and embodies the basic idea
behind doing business. You make something, sell it for more than you spent making it (because
youve added value by providing the product), and buy something nice with the difference. In
practice, a lot of companies calculate their cost of production, determine their desired profit
margin by pulling a number out of thin air, slap the two numbers together and then stick it on a
couple thousand widgets. Its really that simple. This method involves very little market research,
and also doesn't take into consideration consumer demands and competitor strategies.
Fortunately, cost-plus pricing is really simple, requires few resources and hedges against
incomplete knowledge by covering the entirety of a products costs. Yet unfortunately, its
horribly inefficient, because it creates a culture of isolationism and doesnt take a single ounce
of customer perspective to determine prices.
Overall though, cost plus pricing isnt ideal for most businesses, unless you truly cannot spend
some extra time on the most important aspect of your business, which sometimes happens
when youre bogged down by fulfilling orders or just getting off the ground. Regardless of ease,
no software or SaaS company should use cost plus pricing, because the value youre providing
is traditionally much more than your costs of doing business.

Competitive based pricing: Essentially, ineffective plagiarism

Competitive based pricing is a lot like plagiarism - you decide not to do your homework, so you
copy that of those who have already done some work (or that youre assuming have done some
work). Obviously the market doesnt dole out suspensions for copying prices, but the processes
of swiping an essay and competitor based pricing are pretty similar. Also called strategic pricing,
this method involves looking at the prices set by other businesses in the same sector, and then
adopting those numbers, plus or minus a few percent according to how your product looks that
day. The dartboard gets smaller, because theres more data here, allowing you to rely on your
competitors to do the work for you (as long as you trust they actually know whats going on in
the market).
Competitive based pricing remains a simple, low risk way of quickly gauging prices, and in some
cases it can be fairly accurate. Yet, it leads to enormously large missed opportunities, because
companies employing the strategy end up not assessing their true value and get caught in a
race to the bottom through industry group think.
To summarize though, certain businesses need to use competitor based pricing extensively,
because consumers price compare with switching costs from buying a product at store X or
store Y remaining exceptionally low. Yet, for most businesses, especially in the software or
SaaS space, competitor data should not be the central tenet of your pricing strategy, because
there are too many other variables to consider when youre not comparing congruent products.

Value based pricing: It's all about the customer (and the benjamins)
A value based pricing strategy works to determine the true willingness to pay of a target
customer for a particular product by utilizing customer data. Most common pricing strategies
and methodologies forget about the customer, instead focusing on internal reasons and/or
competitive metrics to justify prices. Yet, customers dont care how much something cost you to

make or your competitors, they care how much value theyre receiving at a particular price. By
maintaining this customer focus, value based pricing provides real data, helps you develop
higher quality products, and even improves customer loyalty. Simply put, you have the greatest
amount of data to make an informed decision about your profit maximizing price. Thus,
shrinking down the dartboard.
Of course, value based pricing isnt perfect. The process requires time and resources, along
with consistent dedication, not just a set it and forget it mentality, especially because the
willingness to pay differs for different customer personas, regions, and even offers. A 100%
accurate prediction is impossible, but we can get pretty darn close.
To summarize, almost everyone in the software and SaaS space will benefit from value based
pricing. Even individuals in retail, media, etc. can benefit from the methodology. It takes
dedication, but when done right, provides enormous benefits in terms of more profit, better and
more competitive products, and customer oriented marketing and development.
implementing a pricing strategy
Create a pricing strategy and execution plan. 10 pricing strategies to consider based on your market,
customer, and competitive analysis:

Penetration pricing: Price is artificially low to break into the market

Economy pricing: Everyday low price with the focus on low
manufacturing/delivery cost
Premium pricing: High price for high value
Price skimming: Go into the market with a high price, but once your
competitors follow, lower your cost and implement other pricing strategies
Promotional pricing: Discounts over a period of time, one-time deals
Psychological pricing: Price products or services which triggers action. For
example, charging .99 instead of $1.00
Versioning: Offer different tiers for your services or products: good, better,
best
Sandwich pricing: High, medium and low priced item with the intent to drive
customers to the medium priced item
Competitive pricing: Set the price equal to what your competitors are
charging and win the service game
Value pricing: Understand the value for your customers and their willingness
to pay. Also understand what alternatives do they have

Logistics is the integration and management of the product value chain from suppliers to the customer. It
includes all aspects of the chain of production, including design, suppliers, financing, information, energy,
transportation, distribution, and sales.

HOW IT WORKS (EXAMPLE):

Logistics involves the integration of the production and delivery of a product or service in order to ensure
efficient and effective management. Originally, logistics was used in the military to coordinate the delivery of
soldiers and weapons to the right place at the right time. The critical nature of the place and timing in war
required special integration and precision.

Logistics consists of identifying the steps in a production value chain, ensuring just in time (JIT) delivery of the
inputs for an assembly process, coordinating the flow of information, and the scheduling of delivery. As the
diagram shows, logistics manages the flow from supplier to customer in order to ensure that supply and
product inventory is not accumulated or wasted. An efficient production and delivery process prevents the tying
up or loss of valuable capital.
While logistics is a process used by many companies (made famous by Walmart, for example), it is used
increasingly as a business model by various warehouse and distribution companies (such as UPS and Fedex).
These four functions of marketing logistics help the organization to reach the target customers and deliver the products or services
sold by the organization to these customers.

Product Delivery

One function of logistics marketing is finding out who your customer is and how to get the product or service to the
customer. Each customer can have individualized needs so the logistical services provided may vary from customer
to customer. Regardless of these differences, the customers expects 100 percent conformance and assured
reliability at all times with every transaction. The goals of this aspect of marketing logistics include filling the order,
on-time delivery, precise invoicing and zero damage.

Price
An organization bases pricing decisions on both internal and external factors. Marketing logistics must recognize
price drivers. The profile of the customer, the product and the type of order are factors that drive the price. These
changes are not typically controlled by marketing logistics. However, marketing logistics must react to these factors
and understand how the factors affect customers decisions. Discounts for quantities and the related logistical cost
structure can impact the price the customer will ultimately pay for the product or service. Additional factors driving
price include the shipping costs based on the size, weight and distance the organization will ship the item. Further,
the size of the manufacturing run, labor costs and the types, quantities and quality of the materials used in the
manufacturing process can affect price.

Promotion
Promotion is another important aspect of an organizations marketing logistics process. When bringing a product to
market, the organization must coordinate the logistics of the various marketing materials. For example, the art
department might design the artwork for the product's box and an outside supplier might manufacture the boxes
with the artwork. Marketing logistics can help to ensure that all of these entities work together and produce the
marketing materials needed to sell the product.

Place
The function of place in marketing logistics allows the organization to simplify the transactions between a logistics
provider and the customer. The organization must execute logistics in such a way that the customer is not aware of
the complexities involved in the logistics process. For the customer, the output is always more important than the
process. The organization should, therefore, never expose the backroom processes involved with logistics delivery
to the customer. Also the location of the factory, warehouse and customer can greatly impact the marketing
logistics process by increasing or reducing costs. For example, locating a factory in Mexico might reduce the labor
costs associated with a product. However, at the same time locating the factory in Mexico might increase the
shipping costs and negate any cost savings.

Supply chain management (SCM) is the oversight of materials, information, and finances as
they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
Supply chain management involves coordinating and integrating these flows both within and
among companies. It is said that the ultimate goal of any effective supply chain management
system is to reduce inventory (with the assumption that products are available when needed).
As a solution for successful supply chain management, sophisticated software systems with

Web interfaces are competing with Web-based application service providers (ASP) who promise
to provide part or all of the SCM service for companies who rent their service.
Supply chain management flows can be divided into three main flows:
The product flow
The information flow
The finances flow

The product flow includes the movement of goods from a supplier to a customer, as well as any
customer returns or service needs. The information flow involves transmitting orders and
updating the status of delivery. The financial flow consists of credit terms, payment schedules,
and consignment and title ownership arrangements.
There are two main types of SCM software: planning applications and execution applications.
Planning applications use advanced algorithms to determine the best way to fill an order.
Execution applications track the physical status of goods, the management of materials, and
financial information involving all parties.
Some SCM applications are based on open data models that support the sharing of data both
inside and outside the enterprise (this is called the extended enterprise, and includes key
suppliers, manufacturers, and end customers of a specific company). This shared data may
reside in diverse database systems, or data warehouses, at several different sites and
companies.

How Do You Do Supply Chain Management (SCM)?

A firms SCM efforts start with the development and execution of a long-term supply chain strategy. Among other things, this strategy
should:

Identify what supply chains the firm wants to compete in.

Help managers understand how the firm will provide value to the supply chain.
Guide the selection of supply chain partners, including suppliers, subcontractors, transportation providers, and
distributors.
As firms struggle to understand what supply chains they compete in, it is often valuable to map the physical flows and information
flows that make up these supply chains. From these maps, firms can begin to understand how they add value, and what information
is needed to make the supply chain work in the most effective and efficient way possible.
Of course, the firms supply chain strategy does not exist in a vacuum. It must be consistent with both the overall business strategy
and efforts within such areas as purchasing, logistics, manufacturing and marketing.

What does the term value delivery network mean? Explain.

In todays world of business and to be successful, companies are partnering with others in
themarketing system. This creates improved performance through the use of the value
delivery network.The value delivery network is the network made up of the company,

suppliers, its distributors,and ultimately, its customers.(1) To create the value delivery
network, the company steps out of itsown internal value chain to include the value chains of
the suppliers, distributors, and its customers.The company does this to increase customer
value. Strong relationships are needed between thecompany and the suppliers, or in the
supply chain. The supply chain is responsible for providing anarray of things from raw
material to finances to create a product or service. This is referred to as theupstream side of
the supply chain. The downstream side of the supply chain is known as themarketing or
distribution channels. These channels include a companys wholesale and retail outlets.A
close knit relationship is required for success because these channels build the bridges that
connectthe company to the customers.Competitors no longer compete between themselves
individually. In todays world, its thecompanys entire value delivery network verses the
competitors value delivery network. For example,Lowes Hardware Stores offer a better
value on tools, but because of The Home Depots bettercustomer service and better tools
warranty support, Lowes Hardware may lose the particular market.Companies now create a
value delivery network as a means to improve customer value. The deliverynetwork is an
essential part of conducting business in today's world.

Marketing Channels---Supply Chain and the Value Delivery Network:

how did Enterprise become such a powerful industry leader?

"Firms rarely work alone in creating value for customers and building profitable customer
relationships. Instead, most of them are only a single link in a large supply chain and
marketing channel. As such, an individual firm's success depends on not only how well it
performs but also on how well its entire marketing channel competes with competitor's
channels.

Enterprise, the number one rental car company in the world, leaves car rental competitors
such as number-two Hertz and Avis in its rear view mirror more than a decade ago and has
never looked back. Enterprise Holdings now captures 53 percent of the total rental car
market with Hertz a distant second at 16 percent. What's more is that the privately owned
Enterprise is much more profitable as well. You must eagerly want to know how did
Enterprise become such a powerful industry leader?

What contributed most to Enterprise taking the lead was a groundbreaking, industrychanging, and customer-centered distribution strategy.
Enterprise started more than half a century ago when its founder Jack Taylor discovered an
unmet customer need in center-city and neighborhood area. Taylor opened its first carleasing office just in neighborhood area, avoiding the head-one competition with Hertz and
Avis serving travelers at airports. These locations closed to its target customers and also
gave Enterprise a cost advantage: property rents were lower, and he didn't have to pay
airport taxes and fees. Later, the Taylor family opened multiple locations in St.Louis and
other cities, and continued to focus steadfastly on what it called the "home city" market,
primarily serving customers who'd been in wrecks or whose cars were being served. With the
acquisition of other car rental firms, Enterprise Holdings now captures a more than 31
percent share of the airport market. Another secret to Enterprise's success is its passion
for creating customer satisfaction. Enterprise developed its own ESQi(Enterprise Service
Quality index) to measure customer satisfaction and its promotion policy that Enterprise
managers do not get promoted unless they keep customers completely satisfied, helping
Enterprise become the brand number one in customer's heart. Looking ahead, rather than
resting on its laurels, Enterprise Rent-A-Car continues to seek better ways to keep
customers happy by getting cars where people want them.

"As the dynamics of our industry continue to evolve, it's clear to us that the future
belongs to the service providers who offer the broadest array of services for anyone(?? who
is their target customer? anyone who needs or wants to rent a car???) who needs or wants to

rent a car." Says Enterprise-Rental-A-Car's CEO, Andy Taylor.

"While competitors Hertz and Avis focused on serving travelers at airports, Enterprise-ARental-Car opened off-airport, neighborhood locations that provided short-term car
replacement rentals for people whose cars were wrecked, stolen, or being serviced." And
then, it gradually acquired more than half of the whole rental car markets in the United
States through acquisitions and customer-centered distribution and good services.

Enterprise's story tells us that "good distribution strategies can contribute strongly to
customer value and create competitive advantage for a firm."

Why companies use marketing channels?

Author Comment: We all know that in creating customer value, a company cannot go alone. It
must work with an entire network of partners--a value delivery network--to accomplish this
task. Individual companies and brands don't compete, their entire value delivery networks
do. "A value delivery network is made up of the company, suppliers, distributors, and,
ultimately, customers who "partner" with each other to improve the performance of the
entire system in delivering customer value

The company, suppliers, distributors, and, customers compound the company's Supply Chain,
which includes the company's upstream and downstream partners. " Upstream from the company
is the set of firms that supply the raw materials, components, parts, information,
finances, and expertise needed to create a product or service. Marketers, however, have
traditionally focused on the downstream side of the supply chain--on the marketing channels
(or distribution channels) that look toward the customer. Downstream marketing channel
partners, such as wholesalers and retailers, form a vital connection between the firm and
its customers

With the advent of the Internet and other technologies, companies are now forming more
numerous and complex relationships with other firms, rather than taking a step-by-step,
linear view of purchase-production-consumption activities. Most large companies today are
engaged in building and managing a complex, dynamic Value Delivery Network, from which they
can imaginatively use to gain competitive advantage.

How Channel Members Add Value ?

The use of intermediaries results from their greater efficiency in making goods available in target markets. Some of the
benefits of channel partners include:
1. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the firm more than
it can achieve on its own.
2. The role of marketing intermediaries is to transform the assortments of products made by producers into the assortments
wanted by consumers.
3. Producers make narrow assortments of products in large quantities, but consumers want broad assortments of products
in small quantities.
4. Intermediaries play an important role in matching supply and demand.
5. Channel members add value by bridging the major time, place, and possession gaps that separate goods and services
from those who would use them.
Members of the marketing channel perform many key functions:
1. Information: gathering and distributing marketing research and intelligence.
2. Promotion: developing and spreading persuasive communications about an offer.
3. Contact: finding and communicating with prospective buyers.
4. Matching: shaping and fitting the offer to the buyers needs.
5. Negotiation: reaching an agreement on price and other terms of the offer.
6. Physical distribution: transporting and storing goods.
7. Financing: acquiring and using funds to cover the costs of the channel work.
8. Risk taking: assuming the risks of carrying out the channel work.
In dividing the work of the channel, the various functions should be assigned to the channel members who can add the most
value for the cost.

Channel Levels Consumer and industrial marketing

channels
Channel levels consist of consumer marketing channels or the industrial marketing
channels. A factor common among both channel levels is that both include the producer as
well as the end customer.
1) Zero Level channel / Direct Marketing Channel Consists of a manufacturer directly
selling to the end consumer. This might mean door to door sales, direct mails or
telemarketing. Dell online sales is a perfect example of a zero level channel marketing.
2) One Level channel As the name suggests, the one level channel has an intermediary in
between the producer and the consumer. An example of this can be insurance in which there is
an insurance agent between the insurance company and the customer. Even E-commerce is an
excellent one channel level example wherein the companies tie up directly with E-commerce
portals and then sell in the market.
3) Two level Channel Two level channel involves the movement of goods from the company
to an intermediary, from from the intermediary to another and then to customer. This is also
commonly known as breaking the bulk in FMCG market. A widely used two level marketing
channel especially in the FMCG and the consumer durables industry which consists of a
wholesaler and a retailer. So the goods go from company to distributor, distributor to retailer
and retailer to consumer.
4) Three level channel Again observed in both the FMCG and the consumer durables
industry, the three level channel can combine the roles of a distributor on top of a dealer and a
retailer. The distributor stocks the most and spreads it to dealers who in turn give it to retailers.
In the three level channel, the example can be taken of Ice cream market. Because of the
manufacturing levels required, Ice cream markets have C&F agents who stock the ice cream in
refrigerated cold rooms. These ice creams are then transported to local distributors who also
have refrigerated cold rooms. The distributors then transport to local dealers who will have 1012 small freezers. And finally it is transported to the retailer who will have 1-2 freezer of each
company.

CHANNEL BEHAVIOR AND ORGANIZATION

Distribution channels are more than simple collections of firms tied together by
various flows. They are complex behavioral systems in which people and companies
interact to accomplish individual, company, and channel goals. Some channel
systems consist only of informal interactions among loosely organized firms; others
consist of formal interactions guided by strong organizational structures. Moreover,
channel systems do not stand stillnew types of intermediaries emerge and whole
new channel systems evolve. Here we look at channel behavior and at how
members organize to do the work of the channel.
Channel Behavior
A marketing channel consists of firms that have banded together for their common
good. Each channel member depends on the others.
Each channel member plays a specialized role in the channel.

Ideally, because the success of individual channel members depends on overall

channel success, all channel firms should work together smoothly. They should
understand and accept their roles, coordinate their activities, and cooperate to
attain overall channel goals. However, individual channel members rarely take such
a broad view. Cooperating to achieve overall channel goals sometimes means giving
up individual company goals. Although channel members depend on one another,
they often act alone in their own short-run best interests. They often disagree on
who should do what and for what rewards. Such disagreements over goals, roles,
and rewards generate channel conflict.
Channel conflict refers to disagreement over goals, roles, and rewards by channel
members.
Horizontal conflict occurs among firms at the same level of the channel. For
instance, some Ford dealers in Chicago might complain the other dealers in the city
steal sales from them by pricing too low or by selling outside their assigned
territories. Or Holiday Inn franchisees might complain about other Holiday Inn
operators overcharging guests or giving poor service, hurting the overall Holiday Inn
image.
Vertical conflict, conflicts between different levels of the same channel, is even
more common. For example, H&R Block franchisees complained when the parent
company began using the Internet to deal directly with customers. Similarly,
McDonald's created conflict with some of its California dealers when it placed new
stores in areas that took business from existing locations. And office furniture maker
Herman Miller created conflict with its dealers when it opened an online store
www.hmstore.comand began selling its products directly to customers. Although
Herman Miller believed that the Web site was reaching only smaller customers who
weren't being served by current channels, dealers complained loudly. As a result,
the company closed down its online sales operations.
Vertical Marketing System (VMS)
A vertical marketing system (VMS) is one in which the main members of a
distribution channelproducer, wholesaler, and retailerwork together as a unified
group in order to meet consumer needs. In conventional marketing systems,
producers, wholesalers, and retailers are separate businesses that are all trying to
maximize their profits. When the effort of one channel member to maximize profits
comes at the expense of other members, conflicts can arise that reduce profits for
the entire channel.
Major Types of Vertical Marketing System (VMS)
Corporate marketing systems
A corporate vertical marketing system can be involved with the ownership that
of the levels of distribution or production chain that is associated with a single
company. An example for the corporate is Apple who is responsible for doing
everything related with their products.
Apple Company has place for the designing and also the making of the products.
These products that are made by the company are sold in the retailer shops of the
company itself. They need not have to depend on any of the other people for the
purpose of production or even selling of the products.
Contractual marketing systems
This is a kind of vertical marketing system that has formal agreement involved in it
that exists between various levels that of the production or it can be between the

levels of distribution channel. This is done for coordinating the overall process that
is related with the particular company. A common form of contractual VMS is
franchising.
There are three type of franchises. The first type is the manufacturer-sponsored
retailer franchise systemfor example, Ford and its network of independent
franchised dealers. The second type is the manufacturer-sponsored wholesaler
franchise systemCoca-Cola licenses bottlers (wholesalers) in various markets
who buy Coca-Cola syrup concentrate and then bottle and sell the finished product
to retailers in local markets. The third type is the service-firm-sponsored retailer
franchise systemexamples are found in the auto-rental business (Hertz, Avis),
the fast-food service business (McDonald's, Burger King), and the motel business
(Holiday Inn, Ramada Inn).
Administered marketing systems
This is a kind of VMS that has one member from the production as well as the
distribution chain has more dominance and they organize the whole nature that is
associated with the vertical marketing system in an informal manner. This is due to
the sheer size that is associated with the company.
This is a kind of the vertical marketing system that is similar to that of walmart
which is the huge kind of retailer available in the market. They usually dictate their
terms and conditions to the companies that are small and are involved in a kind of
making some products who come under the category of producers a base
component of the VMS.
Advantages and Disadvantages of VMS:
Advantages:
It is easier to control channel behavior.
Easier to eliminate conflicts that results when independent channel members
pursue their own objectives.
It improves distribution efficiency by combining the efforts of individual channel
members.
The economies of scale through the size, bargaining power and eliminating of
duplicating services can be achieved.
Disadvantages:
The integration of business may result in problems related to size such as lack of
coordination.
Conflicts between members.
Decrease in flexibility.
Horizontal Marketing System
Horizontal marketing systems include two or more companies at one level that
join together to follow a new marketing opportunity. Companies combine financial,
production, or marketing resources to accomplish more than any one company
could alone.
Companies might join forces with competitors or noncompetitors. They might work
with each other on a temporary or permanent basis, or they may create a separate
company. For example, the Lamar Savings Bank of Texas arranged to locate its
savings offices and automated teller machines in Safeway stores. Lamar gained
quicker market entry at a low cost, and Safeway was able to offer in-store banking
convenience to its customers. Similarly, McDonald's now places "express" versions
of its restaurants in Wal-Mart stores. McDonald's benefits from Wal-Mart's

considerable store traffic, while Wal-Mart keeps hungry shoppers from having to go
elsewhere to eat.
Such channel arrangements also work well globally. For example, because of its
excellent coverage of international markets, Nestl jointly sells General Mills's cereal
brands in markets outside North America. Coca-Cola and Nestl formed a joint
venture to market ready-to-drink coffee and tea worldwide. Coke provides
worldwide experience in marketing and distributing beverages, and Nestl
contributes two established brand namesNescaf and Nestea. Seiko Watch's
distribution partner in Japan, K. Hattori, markets Schick's razors there, giving Schick
the leading market share in Japan, despite Gillette's overall strength in many other
markets.
Advantages and Disadvantages of HMS:
Advantages:
Employees may attain greater satisfaction due to greater freedom and autonomy.
Keeps the organization ahead of competition
Stream lined communications and reporting processes making the organization
more nimble and adaptable to change.
Disadvantages:
The decentralized structure could lead to a loose ship, as the team and project
leaders have high levels of responsibility for achieving results but little real
authority over their team members.
A resulting lack of control can lead to finger pointing when things go awry, which
can hinder productivity.
Organizations attempting to convert from a vertical to a horizontal structure can
face challenges, as management needs to adjust to a less authoritarian and more
peer-like relationship with subordinates.
Channel Design Decisions

Designing a marketing channel system involves analyzing customer needs,

establishing channel objectives, identifying major channel alternatives, and
evaluating major channel alternatives.
Analyzing Customers desired service output levels:
In designing the marketing channel, the marketer must understand this
service output levels desired by target customers. Channels produce five
service outputs:
(a) Lot size The number of units the channels permits typical customer to
purchase on one occasion. In buying cars for its fleet, Hertz prefers a channel
from which it can buy a large lot size; a household wants a channel that
permits buying a lot size of one.
(b) Waiting and delivery time The average time customers of that channel
wait for receipt of the goods. Customers increasingly prefer faster and faster
delivery channels.
(c) Spatial convenience The degree to which the marketing channel makes it
easy for customers to purchase the product. Chevrolet, for example, offers

greater spatial convenience than Cadillac, because there are more Chevrolet
dealers. Chevrolets greater market decentralization helps customers save on
transportation and search costs in buying ad repairing an automobile.
(d) Product variety The assortment breadth provided by the marketing
channel. Normally, customers prefer a greater assortment because more
choices increase the chance of finding what they need.
(e) Service backup the add-on services (credit, delivery, installation, repairs)
provided by the channel. The greater the service backup, the greater the
work provided by the channel.
The marketing channel designer knows that providing greater service
outputs means increased channel costs and higher process for customers.
Different customers have different service needs. The success of discount
stores indicates that many customers are willing to accept smaller service
outputs if they can save money
Establishing Objectives and Constraints:
Channel objectives should be stated in terms of targeted service output
levels. Under competitive conditions, channel institutions should arrange
their functional tasks to minimize total channel costs and still provide desired
levels of service outputs. Usually, planners can identify several market
segments that want different service levels. Effective planning requires
determining which segments to serve and the best channels for each.
Channel objectives vary with product characteristics. Perishable products require more direct
marketing. Bulky products, such as building materials, require channels that minimize the
shipping distance and the amount of handling. Nonstandard products, such as custom-built
machinery and specialized business forms, are sold directly by company sales
representatives. Products requiring installation or maintenance services, such as heating
and cooling systems, are usually sold and maintained by the company or by franchised
dealers. High-unit-value products such as generators and turbines are often sold through a
company sales force rather than intermediaries.
Channel design must take into account the strengths and weaknesses of different types of
intermediaries. For example, manufacturers reps are able to contact customers at a low cost
per customers because the total cost is shared by several clients, but the selling effort per
customer is less intense than if company sales reps did the selling. Channel design is also
influenced by competitors channels. Channel design must adapt to the larger environment.
When economic conditions are depressed, producers want their goods to market using
shorter channels and without services that add to the final price of the goods. Legal
regulations and restrictions also affect channel design. US law looks unfavorably on channel
arrangement that may tend to substantially lessen competition or create a monopoly.
Identifying Major Channel Alternatives:
Companies can choose from a wide variety of channels for reaching customers from sales
forces to agents, distributors, dealers, direct mail, telemarketing, and the internet. Each
channel has unique strengths as well as weaknesses. Sales forces can handle complex
products and transactions, but they are expensive. The internet is much less expensive, but
it cannot handle complex product. Distributors can create sales, but the company loses
direct contact with customers.

The problem is further complicated by the fact that most companies now use a mix of
channels. Each channel hopefully reaches a different segment of buyers and delivers the
right products to each at the least cost. When this does not happen there is usually channel
conflict and excessive cost.
A channel alternative is described by three elements: the types of available business
intermediaries, the number of intermediaries needed, and the terms and responsibilities of
each channel member

Definition of Retailing
Retail is the sale of goods to end users, not for resale, but for use and consumption by the purchaser.
Retail involves the sale of merchandise from a single point of purchase directly to a customer who intends to use
that product. The single point of purchase could be a brick-and-mortar retail store, an Internet shopping website, a
catalogue, or even a mobile phone.
The retail transaction is at the end of the .
Manufacturers sell large quantities of products to retailers, and retailers attempt to sell those same quantities of
products to consumers.
Also Known As: retailing, retail sale, retail transaction, retail business, retail trade, retail industry
Common Misspellings: retale

Why Is Retailing Is Important?

Retailers are the final link in the supply chain between manufacturers and consumers. Retailing is important because
it allows manufacturers to focus on producing goods without having to be distracted with the enormous amount of
effort that it takes to interact with the end-user customers who want to purchase those goods.
Retailers should make the purchase of goods easy for the consumer. That's why retail stores have salespeople, why
Internet shopping websites have customer service instant chat popups, and why catalogs have descriptions, photos
and toll-free phone numbers.
Retailing is about displaying products, describing the features and benefits of products, stocking products,
processing payments and doing whatever it takes to get the right products at the right price to the right customers at
the right time.
Some retailers offer additional services to the retail transaction like personal shopping consultations, and gift
wrapping to add something extra to the retail customer experience and exceed the retail customer experience.

What's the Difference between Retail and Wholesale?

Wholesalers sell in large bulk quantities, without worrying about many of the aspects of retailing that consumers
expect like visual merchandising.
Wholesalers do not want to deal with a large number of end-user customers. Rather, their goal is to sell large
quantities to a small number of retailing companies.

It is rare for a wholesaler to sell goods directly to consumers. The exception to that would be membership
warehouse clubs like Costco, Sam's and Bj's Wholesale. These members-only retail stores are a hybrid of
wholesaling and retailing in that they sell directly to consumers, but they sell in large quantities, which often allows
them to sell at prices that are lower than other retailers that sell in small quantities from impeccably merchandised
stores in high-rent shopping districts.
The big difference between wholesale and retail is in the price. The retail price is always more than the wholesale
price. The reason for this is because the added cost of selling merchandise to end-user customers - labor, rent,
advertising, etc. - is factored into the pricing of the merchandise. The wholesaler doesnt have to deal with such
expenses, which allows him to sell goods at a lower cost.

How Does The Retail Supply Chain Work?

The retail supply chain consists of manufacturers, wholesalers, retailers and the consumer (end user). The
wholesaler is directly connected to the manufacturer, while the retailer is connected to the wholesaler, and not to the
manufacturer.
Here are the roles of the key players in a typical retail supply chain:
Manufacturers Produce the goods, using machines, raw materials and labor
Wholesalers Purchase finished goods from the manufacturers and sell those goods to retailers in large bulk
quantities
Retailers Sell the goods in small quantities to the end user at a higher price, theoretically at the MSRP
(Manufacturers Suggested Retail Price) .
Consumer End user who buys the goods (or shops) from the retailer for personal use.
There are exceptions to this traditional supply chain, however. Some of the world's largest retail companies like
Walmart, and Amazon.com, for example, are large enough to deal directly with manufacturers, without the need for
a wholesaler in the middle of the transaction.

What are Different Types of Retail Stores?

Here are some examples of the different types of brick-and-mortar retail stores where consumers can purchase
products for immediate use or consumption.
Department Stores
Sell a wide range of merchandise that is arranged by category into different sections of the physical retail space.
Some department store categories include shoes, clothing, beauty products, jewelry, housewares, etc. Examples of
department store retailers include Macy's, Nordstrom, and jcpenney, to name just a few.
Grocery Stores and Supermarkets
Sell all types of food and beverage products, and sometimes also home products, clothing and consumer electronics
Warehouse Retailers
Large no-frills warehouse-type facilities stocked wth a large variety of products packaged in large quantities and
sold at lower-than-retail prices
Specialty Retailers
Specialize in a specific category of products. Toys R Us, Victoria's Secret, and Nike are examples of specialty
retailers.
Convenience Retailer
Usually part of a retail location which sells gasoline primarily, but also sell a limited range of grocery merchandise
and auto care products at a premium "convenience" price from a brick-and-mortar store
Discount Retailer Sell a wide variety of products are often private labeled or generic brands at below-retail prices,
Discount retailers like Family Dollar, Dollar General and Big Lots will often source closeout and discontinued
merchandise at lower-than-wholesale prices and pass the savings onto their customers.

Mobile Retailer - Uses a smartphone platform to process retail transactions and then ships the products that were
purchased directly to the customer.
Internet E-tailer Sell from an Internet shopping website and ship the purchases directly to customers at their
homes or workplaces and without all the expenses of a traditional brick-and-mortar retailer, usually sell merchandise
for a lower-than-retail price

Definition: Scrambled Merchandising

When a shop/retailer sells products in his shop which do not belong to the usual assortment of products he keeps or sells it is
called scrambled merchandizing. A retailer may opt for scrambled merchandizing to boost his top line/bottom line and also
for better space utilization. Scrambled merchandizing indicates scattered product management and can leave a negative
image in the mind of the customer being unsure of what the retailer sands for.
The phenomenon is generally observed with small or medium sized retailers whose only aim is to make more money.
Companies can take objection to scrambled merchandizing if because of it, their sales are taking a hit. Example if you start
selling chocolates in a sweet shop, your sweet sales can take a hit and vice versa.
Example Paan shops generally start from selling only Paan but start cigarettes and other items as they keep on growing.
Slowly, they sell deodrants, mobile recharge coupons etc

Definition: Wheel of Retailing Concept

Most of the retail businesses start on low cost, low price and low margins but as their sales start increasing they quickly shift
to a high cost, high revenue model.

Example

A restaurant started in a temporary location would be offering a limited number of items at low price. It looks to develop its
client base but as soon as the construction is completed or final, it starts providing a lot more variety and introduces a
number of new services (free home deliver y, boarding , and lodging ) it also starts increasing its prices on its earlier
items. This is done to recover its fixed cost quickly and have an early breakeven so that it can start generating some profit
since it is operating in a virgin market it will look to increase its market share.
However

with passage of time when a new restaurant comes up in its vicinity and starts offering the same items

at a lower price in order to retain its customers it will bring down its prices back to where its earlier ones.

wholesaler
A wholesaler is an intermediary entity in the distribution channel that buys in bulk and sells to
resellers rather than to consumers. In its simplest form, a distributor performs a similar role but
often provides more complex services. Distributors and wholesalers often work together
as channel partners.
Types of Wholesaling:
Three broad categories of wholesaling are discussed below:
(i) Manufacturer Wholesaling:
In this case a firm has its own sales offices and wholesale activities are done at these offices.
Sales office may be conveniently located in a market place. This type of arrangement is
preferred when the manufacturer desires more control on marketing and/or customers who may
be few in number and each is a key account.
(ii) Merchant Wholesaling:

Merchant wholesalers buy, take title and take possession of products for further resale.
Merchant wholesalers may perform full range distribution tasks. They provide credit, store and
deliver products, after merchandising and promotion assistance, have a personal sales force,
offer research and training support and provide all necessary information to customers and
provide installation and after-sales services. This class is very commonly prevalent in durable
consumer goods, pharmaceuticals and grocery items etc. Merchant wholesalers demand higher
compensation for performing large number of functions.
(e) Agents and Brokers:
They perform various wholesale tasks, but do not take title of products, unlike merchant
wholesalers. Agents and brokers enable a manufacturer to expand sales volume because of
their special expertise and experience in the field.
Such agents and brokers may work for many firms and carry non competitive and
complementary products in exclusive territories. Agents have little say on marketing and pricing.
This class is prevalent in steel, cement, automobile and white goods. Voltas Ltd. works as
wholesale agent for many white goods manufacturers.
(f) Present Trends in Wholesaling:
Due to phenomenal expansion of marketing activities and entry of many foreign exporters, the
wholesaling has changed dramatically in India. The vast popularity of Internet and mobile
phones have enhanced the importance of wholesalers in India.
These medias have also played a major role in selling books, CDs and PCs etc. Wholesalers
are constantly looking for productivity gains to benefit their customers and themselves and
protect their position in the market place. Wholesaler rendering after-sales service to customer
is very important and it provides him the competitive advantage.
DESIGNING THE BUSINESS PORTFOLIO: PORTFOLIO ANALYSIS BOSTON MATRIX
The business portfolio is one of the most crucial factors for any organization. Why?
Because it is about what the organization plans, sells, and stops to sell. The
business portfolio must be based on the companys mission, objectives and
strategy, in order to fit the companys strengths and weaknesses, philosophy and
competencies to opportunities in the market environment. Designing the business
portfolio involves analysing the companys current portfolio, before strategies for
growth and downsizing can be developed. The Boston Growth-Share Matrix,
developed by the Boston Consulting Group, is a very helpful tool for analysing the
companys current portfolio.
The business portfolio is the complete collection of products and businesses that
make up a company. Designing and maintaining a healthy portfolio involves
thorough understanding of the firms objectives and the markets it wants to serve.
Business portfolio planning consists of two steps, in which the Boston Matrix
provides a great aid. Firstly, the business must analyse its current business portfolio
to determine which businesses (SBUs, see below) should receive more, less, or no
investment. This is significantly influenced by the life cycle stage the products are
in. Does the product reach the end of its life cycle end soon? Then, it should not
receive too much attention anymore. Secondly, the firm must shape its future

portfolio, based on the analysis of the current portfolio, by developing strategies for
growth and downsizing.
To analyse the current portfolio, the Boston Growth-Share Matrix should be applied.
It assists in evaluating the businesses that make up the company and the attention
they should receive. The idea behind this is that management will want to put more
resources into its more profitable products and businesses and on the contrary, less
resources into weaker products and businesses.
The first step that needs to be taken is to identify the key businesses that make up
the company: The Strategic Business Units (SBUs). Strategic Business Units may be
a division of the company, a product line, a brand or even a single product. Then,
the company is able to assess the attractiveness of each SBU in order to decide how
much attention, or support, it should receive. Why should the firm do so? Clearly
because it helps to find the way in which it should best use its strengths and
competencies in order to take advantage of attractive opportunities in the market
environment. Therefore, each SBU should be analysed with regard to the
attractiveness of its market or industry and the strength of its position in that
market or industry.
The Boston Growth-Share Matrix addresses this. It was developed by the Boston
Consulting Group (BCG), which is a leading management consulting group, and is
today the best-known and most popular portfolio-planning method. The Boston
Matrix classifies all the companies SBUs according to the attractiveness of the SBUs
industry or market, which is measured in terms or market growth rate, and the SBUs
position in that industry or market, measured in terms of relative market share the
company has. On the vertical axis, market growth rate provides a measure for the
attractiveness of the SBUs market. On the horizontal axis, relative market share
measures the companys strength in that market.
Change is an inevitable part of community organizing. If you know how to take stock of the
strengths, weaknesses, opportunities, and threats, you are more likely to plan and act effectively.
SWOT provides a tool to explore both internal and external factors that may influence your work.

WHAT IS A SWOT ANALYSIS AND WHY SHOULD YOU USE ONE?

SWOT stands for: Strength, Weakness, Opportunity, Threat. A SWOT analysis guides you to
identify your organizations strengths and weaknesses (S-W), as well as broader opportunities
and threats (O-T). Developing a fuller awareness of the situation helps with both strategic
planning and decision-making.
The SWOT method was originally developed for business and industry, but it is equally useful in
the work of community health and development, education, and even for personal growth.
SWOT is not the only assessment technique you can use. Compare it with other assessment
tools in the Community Tool Box to determine if this is the right approach for your situation. The
strengths of this method are its simplicity and application to a variety of levels of operation.

WHEN DO YOU USE SWOT?

A SWOT analysis can offer helpful perspectives at any stage of an effort. You might
use it to:

Explore possibilities for new efforts or solutions to problems.

Make decisions about the best path for your initiative. Identifying your opportunities for
success in context of threats to success can clarify directions and choices.
Determine where change is possible. If you are at a juncture or turning point, an inventory
of your strengths and weaknesses can reveal priorities as well as possibilities.
Adjust and refine plans mid-course. A new opportunity might open wider avenues, while a
new threat could close a path that once existed.
SWOT also offers a simple way of communicating about your initiative or program and an
excellent way to organize information you've gathered from studies or surveys.

WHAT ARE THE ELEMENTS OF A SWOT ANALYSIS?

A SWOT analysis focuses on Strengths, Weaknesses, Opportunities, and Threats.
Remember that the purpose of performing a SWOT is to reveal positive forces that work together
and potential problems that need to be recognized and possibly addressed.
We will discuss the process of creating the analysis below, but first here are a few sample layouts
for your SWOT analysis.
Ask participants to answer these simple questions: what are the strengths and weaknesses of
your group, community, or effort, and what are the opportunities and threats facing it?
Internal

External

Strengths

Weaknesses

Opportunities

Threats

If a looser structure helps you brainstorm, you can group positives and negatives to think broadly
about your organization and its external environment.
Positives

Negatives

Strengths
Assets
Resources
Opportunities
Prospects

Weaknesses
Limitations
Restrictions
Threats
Challenges

Below is a third option for structuring your SWOT analysis, which may be appropriate for a larger
initiative that requires detailed planning. This "TOWS Matrix" is adapted from Fred
David's Strategic Management text.
STRENGTHS
1.

WEAKNESSES
1.

2.
3.
4.

2.
3.
4.

OPPORTUNITIE
S
1.
2.
3.
4.

Opportunity-Strength (OS)
Strategies
Use the strengths to take
advantage of opportunities
1.
2.

Opportunity-Weakness (OW)
Strategies
Overcome weaknesses by taking
advantage of opportunities
1.
2.

THREATS
1.
2.
3.
4.

Threat-Strength (TS) Strategies

Use strengths to avoid threats
1.
2.

Threat-Weakness (TW) Strategies

Minimize weaknesses and avoid
threats
1.
2.

David gives an example for Campbell Soup Company that stresses financial goals, but it also
illustrates how you can pair the items within a SWOT grid to develop strategies. (This version of
the chart is abbreviated.)
STRENGTHS
Current profit ratio
increased
Employee morale high
Market share has
increased

WEAKNESSES
Legal suits not
resolved
Plant capacity has
fallen
Lack of strategic
management system

OPPORTUNITIES
Western European
unification
Rising health
consciousness in
selecting foods
Demand for soups
increasing annually

Opportunity-Strength (OS)
Strategies
Acquire food company
in Europe (S1, S3, O1)
Develop new healthy
soups (S2, O2)

Opportunity-Weakness (OW)
Strategies
Develop new
Pepperidge Farm products
(W1, O2, O3)

THREATS
Low value of
dollar
Tin cans are not
biodegradable

Threat-Strength (TS)
Strategies
Develop new
biodegradable soup containers
(S1, T2)

Threat-Weakness (TW)
Strategies
Close unprofitable
European operations (W3, T1)

This example also illustrates how threats can become opportunities (and vice versa). The
limitation of tin cans (which aren't biodegradable) creates an opportunity for leadership in
developing biodegradable containers. There are several formats you can use to do a SWOT
analysis, including a basic SWOT form that you can use to prompt analysis, but whatever format
you use, don't be surprised if your strengths and weaknesses don't precisely match up to your
opportunities and threats. You might need to refine, or you might need to simply look at the facts
longer, or from a different angle. Your chart, list or table will certainly reveal patterns.

L I S T I N G YO U R I N T E R N A L FAC T O R S : S T R E N GT H S A N D W E A K N E S S E S ( S , W )
Internal factors include your resources and experiences. General areas to consider:

Human resources - staff, volunteers, board members, target population

Physical resources - your location, building, equipment
Financial - grants, funding agencies, other sources of income
Activities and processes - programs you run, systems you employ
Past experiences - building blocks for learning and success, your reputation in the
community
Don't be too modest when listing your strengths. If you're having difficulty naming them, start by
simply listing your characteristics (e.g.., we're small, we're connected to the neighborhood).
Some of these will probably be strengths.
Although the strengths and weakness of your organization are your internal qualities, don't
overlook the perspective of people outside your group. Identify strengths and weaknesses from
both your own point of view and that of others, including those you serve or deal with. Do others
see problems--or assets--that you don't?
How do you get information about how outsiders perceive your strengths and weaknesses? You
may know already if you've listened to those you serve. If not, this might be the time to gather
that type of information. See related sections for ideas on conducting focus groups, user surveys,
and listening sessions.

L I S T I N G E XT E R N A L FAC T O R S : O P P O RT U N I T I E S A N D T H R E AT S ( O , T )
Cast a wide net for the external part of the assessment. No organization, group, program, or
neighborhood is immune to outside events and forces. Consider your connectedness, for better
and worse, as you compile this part of your SWOT list.
Forces and facts that your group does not control include:

Future trends in your field or the culture

The economy - local, national, or international
Funding sources - foundations, donors, legislatures
Demographics - changes in the age, race, gender, culture of those you serve or in your
area
The physical environment (Is your building in a growing part of town? Is the bus company
cutting routes?)
Legislation (Do new federal requirements make your job harder...or easier?)
Local, national or international events

HOW DO YOU CREATE A SWOT ANA LYSIS?

W H O D E V E LO P S T H E S W O T ?
The most common users of a SWOT analysis are team members and project managers who are
responsible for decision-making and strategic planning.
But don't overlook anyone in the creation stage!
An individual or small group can develop a SWOT analysis, but it will be more effective if you take
advantage of many stakeholders. Each person or group offers a different perspective on the
strengths and weaknesses of your program and has different experiences of both.

Likewise, one staff member, or volunteer or stakeholder may have information about an
opportunity or threat that is essential to understanding your position and determining your
future.

W H E N A N D W H E R E D O YO U D E V E LO P A S W O T A N A LY S I S ?
A SWOT analysis is often created during a retreat or planning session that allows several hours
for brainstorming and analysis. The best results come when the process is collaborative and
inclusive.
When creating the analysis, people are asked to pool their individual and shared knowledge and
experience. The more relaxed, friendly and constructive the setting, the more truthful,
comprehensive, insightful, and useful your analysis will be.

H O W D O YO U D E V E LO P A S W O T A N A LY S I S ?
Steps for conducting a SWOT analysis:

o
o
o
o

o
o
o

Designate a leader or group facilitator who has good listening and group process skills,
and who can keep things moving and on track.
Designate a recorder to back up the leader if your group is large. Use newsprint on a flip
chart or a large board to record the analysis and discussion points. You can record later in a more
polished fashion to share with stakeholders and to update.
Introduce the SWOT method and its purpose in your organization. This can be as simple
as asking, "Where are we, where can we go?" If you have time, you could run through a quick
example based on a shared experience or well-known public issue.
Depending on the nature of your group and the time available, let all participants
introduce themselves. Then divide your stakeholders into smaller groups. If your retreat or
meeting draws several groups of stakeholders together, make sure you mix the small groups to
get a range of perspectives, and give them a chance to introduce themselves.
The size of these depends on the size of your entire group breakout groups can
range from three to ten. If the size gets much larger, some members may not participate.
Have each group designate a recorder, and provide each with newsprint or dry -erase
board. Direct them to create a SWOT analysis in the format you choose-a chart, columns, a
matrix, or even a page for each quality.
Give the groups 20-30 minutes to brainstorm and fill out their own strengths,
weakness, opportunities and threats chart for your program, initiative or effort. Encourage them
not to rule out any ideas at this stage, or the next.
Remind groups that the way to have a good idea is to have lots of ideas.
Refinement can come later. In this way, the SWOT analysis also supports valuable discussion
within your group or organization as you honestly assess.
It helps to generate lots of comments about your organization and your program,
and even to put them in multiple categories if that provokes thought.
Once a list has been generated, it helps to refine it to the best 10 or fewer points
so that the analysis can be truly helpful.
Reconvene the group at the agreed-upon time to share results. Gather information from
the groups, recording on the flip-chart or board. Collect and organize the differing groups' ideas
and perceptions.
Proceed in S-W-O-T order, recording strengths first, weaknesses second, etc.
Or you can begin by calling for the top priorities in each category -the strongest
strength, most dangerous weakness, biggest opportunity, worst threat--and continue to work
across each category.
Ask one group at a time to report ("Group A, what do you see as strengths?") You
can vary which group begins the report so a certain group isn't always left "bringing up the end"
and repeating points made by others. ("Group B, let's start with you for weaknesses.")

o
o
o

Or, you can open the floor to all groups ("What strengths have you noted?") for
each category until all have contributed what they think is needed.
Discuss and record the results. Depending on your time frame and purpose:
Come to some consensus about the most important items in each category
Relate the analysis to your vision, mission, and goals
Translate the analysis to action plans and strategies
If appropriate, prepare a written summary of the SWOT analysis to share with participants
for continued use in planning and implementation.
More ideas on conducting successful meetings can be found in Community Tool Box resources
on conducting public forums and listening sessions, conducting focus groups, and organizing a
retreat.

HOW DO YOU USE YOUR SWOT ANALYSIS?

Better understanding the factors affecting your initiative put you in a better position for action.
This understanding helps as you:

Identify the issues or problems you intend to change

Set or reaffirm goals
Create an action plan
As you consider your analysis, be open to the possibilities that exist within a weakness or threat.
Likewise, recognize that an opportunity can become a threat if everyone else sees the
opportunity and plans to take advantage of it as well, thereby increasing your competition.
Finally, during your assessment and planning, you might keep an image in mind to help you make
the most of a SWOT analysis: Look for a "stretch," not just a "fit." As Radha Balamuralikrishna
and John C. Dugger of Iowa State University point out, SWOT usually reflects your current position
or situation. Therefore one drawback is that it might not encourage openness to new possibilities.
You can use SWOT to justify a course that has already been decided upon, but if your goal is to
grow or improve, you will want to keep this in mind.

1-The culture of a company is conveyed through

a.
b.
c.
d.

Rites
Myths
Rituals
All of the above
(Ans: d)

2-A specialty product is ________ intensively distributed than a shopping product

a.
b.
c.

More
Less
Both of the above
(Ans: b)
3-The demand for a product is ________ when price cut causes revenue to increase.

a.
b.
c.
d.

Income elastic
Price elastic
Cross elastic
None of the above
(Ans: b)
4-Contact awarded to lowest bidder is known as

a.
b.
c.
d.

Negotiated contract
Open bid
Closed bid
Open contract
(Ans: c)

5-Carrying the line of only one manufacturer is known as

a.
b.
c.
d.

Exclusive assortment
Open bid
Negotiated contract
Deep assortment
(Ans: a)
6-Image building objectives are common in _____ type of market structure?

a.
b.
c.
d.

Competition
Oligopoly
Monopoly
Monopsony
(Ans: b)

7-When the market is run by a small number of firms that together control the majority of market
share is known as

a.
b.
c.
d.

Oligopoly
Duopoly
Oligopsony
Perfect competition
(Ans: a)

8-The following is (are) the Tangible source(s)

a.
b.
c.
d.

Capital
Machines
Raw material
All of the above
(Ans: d)
9-The following is (are) the Intangible source(s)

a.
b.
c.
d.

Information
Time
Technology
All of the above
(Ans: d)
10-In marketing, ______ is the focal point.

a.
b.
c.
d.

Profit
Sales
Customer
All of the above
(Ans: c)
11-Reorder point tells

a.
b.
c.
d.

When to order
How much to order
When the order will reach
All of the above
(Ans: a)
12-The brand choice is heavily influenced by reference group in which stage of Product life cycle?

a.
b.
c.
d.

Introduction
Growth
Maturity
Decline
(Ans: c)

13-The major components of marketing mix are

a.
b.
c.
d.

Product
Price
Place
All of the above
(Ans: d) 14-________ guides the development of advertisements and personal sales presentations.

a.
b.
c.
d.

AIEA
AIBA
AICA
AIDA
(Ans: d)
15-Adoption rate will be higher and faster if the product has

a.
b.
c.
d.

Lower price
Greater utility
Compatibility with society
All of the above
(Ans: d)
1. With online advertising program,_________, the companies can reach customers and grow business.
a) AdWords
b) AdSense
c) AdCity
d) AdAlpha

ANSWER: a) AdWords
2. Marketing Management is the _________ of choosing target markets and getting, keeping and growing
customers through creating, delivering and communicating superior customer value.
a) Art
b) Science
c) Art and science
d) None of the above.
ANSWER: c) Art and science
3. Marketers operate in which marketplaces:
a) Consumer and business
b) Global and non-profit
c) a & b both
d) None of the above
ANSWER: c) a & b both
4. Intangible assets make up a large percentage of the value of an organization:
a) Yes
b) No
ANSWER: a) Yes
5. "Better products, Better value, Better living" is the mission statement of which company:
a) VICCO
b) HUL
c) P&G
d) NIRMA
ANSWER: d) NIRMA
6. 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 benefits the
organization and its stakeholders definition is given by
a) Philip Kotler
b) The American Marketing Association
c) The Association of National Advertisers
d) Peter Drucker
ANSWER: b) The American Marketing Association

7. There is always, one can assume, be need for some selling, But the aim of marketing is to make selling
superfluous said by
a) Philip Kotler
b) The American Marketing Association
c) The Association of National Advertisers
d) Peter Drucker
ANSWER: d) Peter Drucker
8. Marketing people market ______ types of entities:
a) four
b) Eight
c) ten
d) two
ANSWER: c) ten
9. Marketing people market following entities:
a) Goods
b) Services
c) Experiences
d) All of the above
ANSWER: d) All of the above
10. At a fast-food restaurant, what is marketed?
a) Goods
b) Service
c) a & B
d) None of the above
ANSWER: c) a & B
The Measures of Market Demand
1. The ___________ is the set of consumers who have interest, income and access to a particular offer.
a) Potential market
b) Target market
c) Available market
d) Penetrated market
ANSWER: c) Available market
2. The _______________ is the set of consumers who are buying the companys products.
a) Potential market
b) Target market
c) Available market
d) Penetrated market

ANSWER: d) Penetrated market

3. The _____________is the part of the available qualified market the company decides to pursue.
a) Target market
b) Potential market
c) Available market
d) Penetrated market
ANSWER: a) Target market
4. Some base sales called the ____________ takes places without any demand-stimulating expenditure.
a) Market potential
b) Market forecast
c) Market minimum
d) None of the above
ANSWER: c) Market minimum
5. Higher levels of industry marketing expenditures would yield higher levels of demand, first at ______ rate
and then at __________ rate.
a) An increasing, a decreasing
b) A decreasing, an increasing
c) An increasing, equivalent
d) None of the above
ANSWER: a) An increasing, a decreasing
6. Marketing expenditures beyond a certain level would not stimulate much further demand, thus suggesting
an upper limit to market demand, called the ________.
a) Market potential
b) Market minimum
c) Market forecast
d) None of the above
ANSWER: a) Market potential
7. The distance between the ________ and the ___________ shows the overall marketing sensitivity of
demand.
a) Market minimum and market potential
b) Market minimum and market forecast
c) Market potential and market forecast
d) None of the above
ANSWER: a) Market minimum and market potential
8. ________ such as the market for racquetball playing is very much affected in size by the level of industry
marketing expenditures.
a) An Expansible market
b) A nonexpansible market
c) A penetrated market

d) None of the above

ANSWER: a) An Expansible market
9. The result generated after comparing the current and potential levels of market demand is termed as
a) Share penetration index
b) Market-penetration index
c) Customer penetration index
d) None of the above
ANSWER: b) Market-penetration index
10. A ______-market-penetration index indicates substantial growth potential for all the firms.
a) Low
b) High
c) Medium
d) None of the above
ANSWER: a) Low
11. Market demand function is a picture of market demand over time.
a) True
b) False
c) Cant say
d) None of the above
ANSWER: b) False
12. Companies interested in marketing potential have a special interest in the ______ percentage, which is
the percentage of ownership or use of a product or service in a population.
a) Product penetration
b) Market penetration
c) Share penetration
d) None of the above
ANSWER: a) Product penetration
13. A __________ is the sales goal set for a product line, company division or sales representative. It is
primarily a managerial device for defining and stimulating sales efforts.
a) Sales budget
b) Sales quota
c) Sales target
d) None of the above
ANSWER: b) Sales quota
14. The market-build up method of assessing area market potential is used primarily by __________.
a) Consumer marketers
b) Business marketers
c) Both a & b
d) None of the above
ANSWER: b) Business marketers

15. The multiple-factor index method of assessing area market potential is used primarily by ___________.
a) Consumer marketers
b) Business marketers
c) Both a & b
d) None of the above
ANSWER: a) Consumer marketers
1. Marketing consultant Pat Lapointe sees __________ as providing all the up-to-the-minute information
necessary to run the business operations for a company.
a) Marketing dashboards
b) Marketing research
c) Marketing information system
d) None of the above
ANSWER: a) Marketing dashboards
2. The _________ pathway looks at how prospects become customers, from awareness to preference to trial
to repeat purchase.
a) Brand metrics
b) Cash-flow metrics
c) The unit metrics
d) The customers metrics
ANSWER: d) The customers metrics
3. The _________focuses on how well marketing expenditures are achieving short-term returns.
a) The cash-flow metrics
b) The unit metrics
c) Brand metrics
d) Offerings metrics
ANSWER: a) The cash-flow metrics
4. Program and campaign ROI comes under
a) Customer metrics
b) Unit metrics
c) Brand metrics
d) Cash-flow metrics
ANSWER: d) Cash-flow metrics
5. Margin optimization is a type of metric that comes under
a) Unit metric
b) Customer metric
c) Brand Metric
d) Cash-flow metric
ANSWER: a) Unit metric
6. Financial Valuation is a type of metric that falls under
a) Unit metric
b) Brand metric

c) Customer metric
d) Cash-flow metric
ANSWER: b) Brand metric
7. Initiative portfolio optimization is a type of metric that comes under:
a) Cash-flow metric
b) Unit metric
c) Brand metric
d) Customer metric
ANSWER: a) Cash-flow metric
8. Marketing is responsible for preparing the sales forecast.
a) True
b) False
c) Cant say
d) None of the above
ANSWER: b) False
9. Sales forecasts are based on estimates of _______.
a) Demand
b) Supply
c) Demand and supply
d) None of the above
ANSWER: a) Demand
10. The ____________ is the set of consumers who profess a sufficient level of interest in a market offer.
a) Potential market
b) Available market
c) Target market
d) Penetrated market
ANSWER: a) Potential market
Which of the following information forms available to the marketing manager can
usually be accessed more quickly and cheaply than other information sources?
a. Marketing intelligence
b. Marketing research
c. Customer profiles
d. Internal databases
All of the following are considered to be drawbacks of local marketing EXCEPT :
a. it can drive up manufacturing and marketing costs by reducing economies of scale.
b. it can create logistical problems when the company tries to meet varied
requirements.
c. it can attract unwanted competition.
d. it can dilute the brand's overall image.
Cognitive dissonance occurs in which stage of the buyer decision process model?
a. Need recognition
b. Information search
c. Evaluation of alternatives
d. Post purchase behavior

That the company that overlooks new and better ways to do things will eventually lose
customers to another company that has found a better way of serving customer needs
is a major tenet of:
a. innovative marketing.
b. consumer-oriented marketing.
c. value marketing.

d. sense-of-mission marketing.

The biggest or greatest amount of involvement in a foreign market comes through

which of the following?
a. Exporting
b. Joint venturing
c. Licensing
d. Direct investment
A is a good offered either free or at low cost as an incentive to buy a
product.
a. patronage reward
b. spiff
c. price pack
d. premium
Setting call objectives is done during which of the following stages of the selling
process?
a. Prospecting
b. Pre approach
c. Approach
d. Handling objections
Pricing to cover variable costs and some fixed costs, as in the case of some automobile
distributorships that sell below total costs, is typical of which of the following pricing
objectives?
a. Current profit maximization
b. Product quality leadership
c. Market share leadership
d. Survival

9. In determining sales force size, when a company groups accounts into different size
classes and then determines the number of salespeople needed to call on them the

desired number of times, it is called the:

a. key-size approach.
b. work-load approach.
c. product-need approach.
d. call-service approach.
10. is products bought by individuals and organizations for further
processing or for use in conducting a business.
a. Consumer products
b. Services
c. Industrial products
d. Specialty products
11. All of the following would be ways to segment within the category of psychographic
segmentation EXCEPT :
a. social class.
b. occupation.
c. lifestyle.
d. personality.
12. The is a person within a reference group who, because of special
skills, knowledge, personality, or other characteristics, exerts influence on others.
a. facilitator
b. referent actor
c. opinion leader
d. social role player

13.

describes changes in an individual's behavior arising from experience.

a. Modeling
b. Motivation
c. Perception
d. Learning
14. Concerns that the manufacturers of harmful products such as tobacco have influence
on lawmakers to the detriment of the public interest is used as evidence of which
criticism of marketing?

a. Too much advertising.

b. Too few social goods.
c. Cultural pollution.
d. Too much political power.
15. The Internet evolved from a network created by during the 1960s.
a. the Commerce Department
b. the Massachusetts Institute of Technology (MIT)
c. Northwestern University
d. the Defense Department
16. In terms of execution styles, a family seated at the dinner table enjoying the advertised
product would be an example of which of the following types of advertising?
a. Slice of life
b. Lifestyle
c. Mood or imagery
d. Personality symbol
17. A child in the United States is normally exposed to all of the following values EXCEPT :
a. achievement and success.
b. activity and involvement.
c. material comfort.

d. collectivism.

18. has contractual authority to sell a manufacturer's entire output.

a. Selling agents
b. Rack jobbers
c. Manufacturer's agents
d. Purchasing agents
19. Sellers that handle their own exports are engaged in:
a. direct exporting.
b. indirect exporting.
c. licensing.
d. contract manufacturing.
20. More and more salespeople are being evaluated and compensated based on different
measures than in the past. All of the following are illustrations of those measures
EXCEPT :

a. long-term customer satisfaction.

b. competitive predatory pricing performance.
c. full customer service.
d. retention rates.
21. includes practices such as overstating the product's features or
performance, luring the customer to the store for a bargain that is out of stock, or
running rigged contests.
a. Deceptive promotion
b. Deceptive packaging
c. Deceptive pricing
d. Deceptive cost structure
22. The orange juice manufacturers know that orange juice is most often consumed in the
mornings. However, they would like to change this and make the drink acceptable

during other time periods during the day. Which form of segmentation would they need
to work with and establish strategy reflective of their desires?
a. gender segmentation
b. benefit segmentation
c. occasion segmentation
d. age and life-cycle segmentation
23. The typical method of retail operation used by supermarkets and catalog showrooms is
called:
a. self-service retailing.
b. limited-service retailing.
c. full-service retailing.
d. service-merchandiser.
24. A(n) are computerized collections of information obtained from data
sources within the company.
a. retrieval systems
b. marketing research reports
c. flow diagrams and PERT charts
d. internal databases
25. The total number of items that the company carries within its product lines refers to
the of the product mix.
a. width
b. depth

c. length
d. consistency
26. The use of price points for reference to different levels of quality for a company's
related products is typical of which product-mix pricing strategy?
a. Optional-product pricing

b. Captive-product pricing
c. By-product pricing
d. Product line pricing
27. If a company's objective were to reach masses of buyers that were geographically
dispersed at a low cost per exposure, the company would likely choose which of the
following promotion forms?
a. Advertising
b. Personal selling
c. Public relations
d. Sales promotion
28. Using a successful brand name to introduce additional items in a given product
category under the same brand name (such as new flavors, forms, colors, added
ingredients, or package sizes) is called a(n):
a. line extension.
b. brand extension.
c. multi branding.
d. new brands.
29. Successful service companies focus their attention on both their customers and their
employees. They understand , which links service firm profits with
employee and customer satisfaction.
a. internal marketing
b. service-profit chains
c. interactive marketing
d. service differentiation

30.

is quoted as saying that "everyone lives by selling something.

a. Bill Gates
b. Robert Louis Stevenson

c. Arthur Miller
d. Henry Ford
31. Anything that can be offered to a market for attention, acquisition, use, or consumption
that might satisfy a want or need is called a(n):
a. idea.
b. demand.
c. product.
d. service.
32. The type of sales presentation approach that requires good listening and problemsolving skills is the:
a. canned approach.
b. formula approach.
c. need-satisfaction approach.
d. critical-thinking approach.
33. Yahoo, Info seek, and Excite are all called:
a. browsers.
b. Webcasters.
c. search engines.
d. software.
34. Successful depends on how well a company blends its people,
organizational structure, decision and reward systems, and company culture into a
cohesive program that supports its strategies.
a. marketing strategy
b. marketing control
c. marketing analysis

d. marketing implementation
35. Wal-Mart owned Sam's club is an example of a retail form called a(n):
a. factory outlet.
b. super specialty store.
c. seconds store.
d. warehouse club.
36. is the general term for a buying and selling process that is supported by
electronic means.

a. Internet commerce
b. Web commerce
c. Computer commerce
d. Electronic commerce
37. When a company enters a new product category for which its current brand names are
not appropriate, it will likely follow which of the following brand strategies?
a. Product extensions
b. Line extensions
c. Brand extensions
d. New brands
38. consists of dividing a market into distinct groups of buyers on the basis
of needs, characteristics, or behavior who might require separate products or
marketing mixes.
a. Product differentiation
b. Market segmentation
c. Market targeting

d. Market positioning

39. are ads that appear while subscribers are surfing online services or
Web sites, including banners, pop-up windows, "tickers," and "roadblocks."

a. Online infomercials
b. Online ads
c. Online broadcasts
d. Online bullets

40. In terms of special product life cycles, a is a basic and distinctive mode of
expression.
a. genre
b. style
c. fashion
d. fad
41. is a principle of enlightened marketing that requires that a company
seek real product and marketing improvements.

a. Innovative marketing
b. Consumer-oriented marketing
c. Value marketing
d. Sense-of-mission marketing
42. Many U.S. firms have sought relief from foreign competition by demanding
protectionism policies by the U.S. government. A better way for companies to compete
is to expand into foreign markets and:
a. lower prices.
b. increase promotion both at home and abroad.
c. continuously improve their products at home.
d. join into cartels at home.

43. is the process of evaluating each market segment's attractiveness

and selecting one or more segments to enter.

a. Mass marketing
b. Market segmentation
c. Market targeting
d. Market positioning
44. It is a fact that there are 24 million left-handed people in the United States, however,
most marketers do not attempt to appeal to or design products for this group because
there is little in the way of census data about this group. Therefore, this group fails in
one of the requirements for effective segmentation. Which of the following is most
likely to apply in this case?
a. actionable
b. substantial
c. differentiable
d. measurable
45. The fact that services are sold, produced, and consumed at the same time refers to
which of the following service characteristics?
a. Intangibility
b. Inseparability
c. Variability
d. Perishability
46. factors are the most popular bases for segmenting customer groups.
a. Geographic
b. Demographic

c. Psychographic
d. Behavioral
47. A manufacturer has four sponsorship options. A is a brand created
and owned by a reseller of a product or service.

a. licensed brand

b. manufacturer's brand
c. private brand
d. co-brand

48. When Michael Jordan and Tiger Woods use marketing to promote their careers and
improve their impact and incomes, they are using:
a. cause-related marketing.
b. idea marketing.
c. nonprofit marketing.
d. person marketing.
49. 3M runs a Pollution Prevention Pays program that has led to a substantial reduction in
pollution and costs. This would be an example of responding to which of the following?
a. Nader's raiders.
b. The "green movement."
c. Governmental regulation.
d. International competition.
50. When an international seller sells a plant, equipment, or technology to another country
and agrees to take payment in the resulting products, it is called:
a. barter.
b. buy-back.
c. counter purchase.
d. like-value exchange.
51. The stage is the product life cycle that focuses on expanding market and creating
product awareness and trial is the:
a. decline stage.
b. introduction stage.
c. growth stage.

d. maturity stage.

52. Which of the following promotional budget methods wrongly views sales as the cause
of promotion rather than as the result?
a. Affordable method
b. Percentage-of-Sales method
c. Competitive-parity method
d. Objective-and-task method
53. If the field sales force has been supplied with new leads (via the telephone) that have
been qualified, they have probably been assisted by:
a. master salespersons.
b. sales assistants.
c. technical support persons.
d. telemarketers.
54. is setting the price steps between various products in a product line
based on cost differences between the products, customer evaluations of different
features, and competitors' prices.
a. Optional-product pricing
b. Captive-product pricing
c. Product line pricing
d. By-product pricing
55. Rolls Royce uses which of the following distribution formats?
a. Intensive distribution
b. Exclusive distribution
c. Selective distribution
d. Open distribution

56. Drop shippers perform which of the following functions?

a. Assumes title and ships coal, lumber, or heavy equipment to a buyer.
b. Stocks the bread rack in a grocery store.
c. Maintains, owns, and stocks a CD display in a grocery store.
d. Sells jewelry out of a catalog.
57. A set of interdependent organizations involved in the process of making a product or
service available for use or consumption by the consumer or business user is called
a(n):
a. retailer.

b. wholesaler.
c. distribution channel.
d. logistics.
58. beliefs and values are open to some degree of change.
a. Crucial
b. Core
c. Primary
d. Secondary

59. According to Engel's law, as income rises:

a. the percentage spent on food rises.
b. the percentage spent on housing increases.
c. the percentage spent on other categories increases.
d. the percentage spent on savings remains constant.
60. The Wheeler-Lea Act gives the Federal Trade Commission the power to regulate:
a. interstate commerce.

b. marketing ethics.
c. unfair and deceptive acts or practices.
d. competitive advertising of objective product benefits.
61. In evaluating messages for advertising, telling how the product is better than the
competing brands aims at making the ad:
a. meaningful.
b. distinctive.
c. believable.
d. remembered.
62. When an importing country sets limits on the amount of goods it will accept in certain
product categories it is called a(n):
a. quota.
b. barrier.
c. tariff.
d. embargo.
63. According to the price/quality strategy matrix, when a company overprices its product
in relation to its quality it is considered to be using which type of strategy?
a. Good-value strategy.
b. Premium strategy.

c. Overcharging strategy.
d. Snob strategy.
64. is the practice of adopting policies and developing strategies that
both sustain the environment and produce profits for the company.
a. Environmentalism
b. Environmental sustainability

c. Consumerism

d. Consumer accountability

65. A is a promotion strategy that calls for using the sales force and trade
promotion to move the product through channels.
a. push strategy
b. pull strategy
c. blocking strategy
d. integrated strategy
66. Consumer goods with unique characteristics or brand identification often requiring a
special purchase effort are called:
a. custom products.
b. specialty products.
c. convenience products.
d. shopping products.
67. Even though buying roles in the family change constantly, the has
traditionally been the main purchasing agent for the family.
a. wife
b. husband
c. teenage children
d. grandparent
68. A(n) is a retail store that carries a narrow product line with a
deep assortment within that line.
a. shopping goods store
b. convenience store
c. specialty store

d. department store

69. The purpose of strategic planning is to find ways in which the company can best:
a. overcome losses.
b. use its strengths to take advantage of attractive opportunities in the environment.
c. avoid paying taxes.
d. avoid the expense of costly research and development while still getting the
benefits.
70. Which of the following is NOT one of the five stages of the buyer decision process?
a. need recognition
b. brand identification
c. information search
d. purchase decision
71. A is a need that is sufficiently pressing to direct the person to seek
satisfaction.
a. motive
b. want
c. demand
d. requirement
72. If a firm were to bid to do a "turnkey" operation where they would choose a building
site, designing a cement factory to build the plant, hire construction crews, assemble
materials and equipment to run the new factory, and turn over the finished factory
ready to operate to the owners, the firm would be using which of the following?
a. Core process products selling
b. Design products selling
c. Reciprocal selling
d. Systems selling

73. According to the text, the most dramatic of the environments that affect marketing and

appears to be now shaping our world is the environment.

a. natural
b. demographic
c. economic
d. technological

74. The "in" suppliers are most likely to get nervous and feel pressure to put their best foot
forward in which of the following types of buying situations?
a. modified rebuy
b. new task buying
c. straight rebuy
d. indirect rebuy
75. All of the following are ways that marketing plays a key role in the company's strategic
planning EXCEPT :
a. marketing provides a guiding philosophy.
b. marketing is the only discipline that can provide a formal structure for the planning
effort.
c. marketing provides inputs to strategic planners by helping to identify attractive
market opportunities.
d. within individual business units, marketing designs strategies for reaching the unit's
objectives.
76. Which of the following is foreign owned (even though it is traditionally thought of as a
U.S. company)?
a. IBM
b. Xerox
c. Kodak
d. Universal Studios

77. In an example discussed in your text, Johnson & Johnson's recall of their Tylenol

product following the discovery that several bottles of Tylenol had been laced with
cyanide is consistent with which business philosophy?
a. The marketing concept.
b. The product concept.
c. The selling concept.
d. The societal marketing concept.
78. is the step in the selling process in which the salesperson learns as
much as possible about a prospective customer before making a sales call.
a. Prospecting
b. Pre approach
c. Approach
d. Handling objections
79. A company's compensation plan should reflect its overall marketing strategy. For
example, if the overall strategy is to grow rapidly and gain market share, the

compensation plan should reward:

a. loyalty and perseverance.
b. spot selling and old product rejuvenation.
c. high sales performance and encourage capturing new accounts.
d. high pressure situations and competitive reaction.
80. Traditionally, companies have defined their businesses in product terms or in
technological terms. However, mission statements should be all of the following
EXCEPT :
a. market oriented.
b. a statement of religion.
c. motivating.
d. based on distinctive competencies.

81. A price reduction to buyers who buy in large volumes is called a(n):

a. quantity discount.
b. cash discount.
c. seasonal discount.
d. trade discount.

82. R&D and engineering first produce the product concept into a physical product during
which of the following stages of the new product development process?
a. Concept development and testing
b. Marketing strategy
c. Business analysis
d. Product development

83. All of the following are criticisms leveled against marketing by critics EXCEPT :
a. harming consumers through high prices.
b. harming consumers through deceptive practices.
c. harming consumers through high-pressure selling.
d. harming consumers through too many product choices.

84. If Toyota describes one of its cars of the future as being "a moderately priced
subcompact designed as a second family car to be used around town; the car is ideal
for running errands and visiting friends," then the company has just stated a potential

new product in terms of a(n):

a. product idea
b. product image
c. product concept
d. product feature

85. The primary reason that many companies work to become the "low-cost producers" in
their industry is because:
a. they can generate more advertising.
b. they can please top management.

c. they can gain tax advantages.

d. they can set lower prices that result in greater sales and profits.
86. Conflicts between different levels of the same channel of distribution are referred to as:
a. horizontal conflicts.
b. vertical conflicts.
c. layer-based conflicts.
d. parallel conflicts.
87. is a philosophy holding that a company's marketing should support the
best long-run performance of the marketing system.
a. Enlightened marketing
b. Myopic marketing
c. Fundamental marketing
d. Conceptual marketing
88. A company is practicing if it focuses on subsegments with distinctive
traits that may seek a special combination of benefits.
a. micromarketing
b. niche marketing
c. mass marketing
d. segment marketing
89. If a consumer describes a car as being the "most economical car on the market," then
this descriptor is a:
a. rule.
b. attitude.
c. belief.

d. cue.

90. All of the following are commonly recognized promotion budget formats EXCEPT :
a. the affordable method.
b. the LIFO method.
c. the percentage-of-sales method.
d. the objective-and-task method.
91. When a company reviews sales, costs, and profit projections for a new product to find
out whether these factors satisfy the company's objectives, they are in which of the
following new process development stages?
a. Concept development and testing.
b. Commercialization.
c. Business analysis.
d. Marketing strategy development.
92. is a strategy of using a successful brand name to launch a new or
modified product in a new category.
a. Duo branding
b. Line extension
c. Brand extension
d. Multi branding
93. The fact that services cannot be stored for later use or sale is evidence of their:
a. intangibility.
b. inseparability.
c. variability.
d. perishability.
94. is the concept under which a company carefully integrates and
coordinates its many communications channels to deliver a clear, consistent, and
compelling message about the organization and its products.
a. The promotion mix

b. Integrated international affairs

c. Integrated marketing communications

d. Integrated demand characteristics

95. Catalog marketing is big business in the United States. The average household receives
catalogs per year.
a. 25
b. 50
c. 75
d. 100
96. A company faces several major decisions in international marketing. The first of these
decisions is often:
a. deciding whether to go international.
b. looking at the global marketing environment.
c. deciding which markets to enter.
d. deciding how to enter markets.
97. A is the way consumers perceive an actual or potential product.
a. product idea
b. product image
c. product concept
d. product feature
98. The American Marketing Association suggests a list of code of ethics. All of the
following are ethics suggested in the area of distribution EXCEPT :
a. not manipulating the availability of a product for purpose of exploitation.
b. not using coercion in the marketing channel.
c. using gray marketers whenever possible to save the consumer money.
d. not exerting undue influence over the reseller's choice to handle a product.

99. Given recent information about growth trends and growth potential of ethnic
populations within the U.S. market, which of the following ethnic groups would be a
best bet to double during the next half century and become one of the U.S. market's
most viable segments?
a. Hispanics and Asians
b. African Americans
c. Western Europeans
d. Middle Eastern
100. All of the following are methods by which a company can divide up its sales
responsibilities EXCEPT :
a. territorial sales force structure.
b. pychographic trait sales force structure.
c. product sales force structure.

d. customer sales force structure.

101. If your company were to make a product such as a suit of clothes and sold that product
to a retailer, your company would have sold to the market.
a. reseller
b. business
c. government
d. service
102. The course of a product's sales and profits over its lifetime is called:
a. the sales chart.
b. the dynamic growth curve.
c. the adoption cycle.
d. the product life cycle.
103. The type of trade-promotion discount in which manufacturers agree to reduce the price
to the retailer in exchange for the retailer's agreement to feature the manufacturer's

products in some way is called a(n):

a. discount.
b. allowance.
c. premium.
d. rebate.
104. The most logical budget setting method is found in the list below. Which is it?
a. Affordable method
b. Percentage-of-Sales method
c. Competitive-parity method
d. Objective-and-task method
105. The place in the business buying behavior model where interpersonal and individual
influences might interact is called the:
a. environment.
b. response.
c. stimuli.
d. buying center.
106. When producers, wholesalers, and retailers act as a unified system, they comprise a:
a. conventional marketing system.
b. power-based marketing system.
c. horizontal marketing system.

d. vertical marketing system.

107. One common misuse of marketing research findings in contemporary business is the
tendency for marketing research to:
a. become a vehicle for pitching the sponsor's products.
b. become a vehicle for discriminating in the marketplace.
c. become a means for raising prices.

d. become a means for unfair competition.

108. is a person's distinguishing psychological characteristics that lead to

relatively consistent and lasting responses to his or her own environment.
a. Psychographics
b. Personality
c. Demographics
d. Lifestyle
109. has the advantage of being high in selectivity; low cost; immediacy;
and interactive capabilities.
a. Direct Mail
b. Outdoor
c. Online
d. Radio
110. The choice between high markups and high volume is part of which of the following
retailer marketing decisions?
a. Target market decisions
b. Product assortment and services decisions
c. Pricing decisions
d. Promotion decisions
111. If an advertiser wants flexibility, timeliness, good local market coverage, broad
acceptability, and high believability, the advertiser will probably choose which of the
following mass media types?
a. Newspapers
b. Television
c. Direct Mail

d. Radio

112. If your company were to make light bulbs to be used in photocopiers, you would most
likely be selling to a market.

a. reseller
b. business
c. government
d. service
113. If a government uses barriers to foreign products such as biases against a foreign
company's bids, or product standards that go against a foreign company's product
features, the government is using:
a. protectionism.
b. exchange controls.
c. exchange facilitators.
d. nontariff trade barriers.
114. A(n) is a name, term, sign, symbol, or design, or a combination of these
that identifies the maker or seller of a product or service.
a. product feature
b. sponsorship
c. brand
d. logo
115. All of the following factors can affect the attractiveness of a market segment EXCEPT :
a. the presence of many strong and aggressive competitors.
b. the likelihood of government monitoring.
c. actual or potential substitute products.
d. the power of buyers in the segment.
116. A is any activity or benefit offered for sale that is essentially intangible
and does not result in the ownership of anything.

a. demand

b. basic staple
c. product
d. service
117. If Mark Mars pays Hershey Foods Corporation for the right to use their name on his line
of T-shirts, then Mr. Mars is using which type of branding?

a. Licensed brand
b. Manufacturer's brand
c. Private brand
d. Co-brand
118. When personal interviewing involves inviting six to ten people to gather for a few hours
with a trained interviewer to talk about a product, service, or organization, the method
is called:
a. selective sponsorship.
b. probing.
c. focus group interviewing.
d. the Delphi method.
119. The holds that consumers will favor products that are available and
highly affordable (therefore, work on improving production and distribution efficiency).
a. product concept
b. production concept
c. production cost expansion concept
d. marketing concept
120. If advertising constantly sends out messages about materialism, sex, power, and
status, which of the following categories of social criticism most closely matches this
problem?
a. Too much advertising.

b. Too few social goods.

c. Cultural pollution.
d. Too much political power.
121. A company is in the stage of the new product development process
when the company develops the product concept into a physical product in order to
assure that the product idea can be turned into a workable product.
a. product development
b. commercialization
c. marketing strategy
d. business analysis
122. The shrinking of distances due to technological advances such as computer and fax
connections by telephone, are one characteristic of what new challenge to marketing?
a. Rapid globalization.

b. The changing world economy.

c. The call for more socially responsible marketing.
d. The micro-chip revolution.
123. Joining with foreign companies to produce or market products and services is called:
a. direct exporting.
b. indirect exporting.
c. licensing.
d. joint venturing.
124. The major advantage of survey research is its:
a. simplicity.
b. structure.
c. organization.
d. flexibility.

125. The type of salesforce structure in which the salesforce sells along product lines is
called a:
a. territorial salesforce.
b. product salesforce.
c. customer salesforce.
d. retail salesforce.

126. A "three-day cooling off period" in which buyers can cancel a contract after re-thinking
it is to protect the consumer from:
a. creative selling
b. high pressure selling
c. detail selling
d. hard core selling
127. The practice of going after a large share of a smaller market or subsets of a few
markets is called:
a. undifferentiated marketing.
b. differentiated marketing.
c. concentrated marketing.
d. turbo marketing.
128. When Coca-Cola and Nestle formed a joint venture to market a ready-to-drink coffee
and tea worldwide, the type of marketing system that was formed would best be
described as being a(n):

a. vertical marketing system

b. parallel marketing system
c. diversified marketing system

d. horizontal marketing system

129. is screening new-product ideas in order to spot good ideas and drop
poor ones as soon as possible.
a. Idea generation
b. Concept development and testing
c. Idea screening
d. Brainstorming
130. When a marketing research organization chooses a segment of the population that
represents the population as a whole, they have chosen a .
a. group
b. bi-variant population
c. sample
d. market target
131. The goal of the marketing logistics system should be to provide:
a. a targeted level of promotional support.
b. a targeted level of customer service at the least cost.
c. a targeted level of transportation expense ratio.
d. a targeted level of field support.
132. Setting the promotion budget so as to match the budgets of the competition is
characteristic of which of the following budget methods?
a. Affordable method
b. Percentage-of-Sales method
c. Competitive-parity method
d. Objective-and-task method
133. If a company (considering its options on the product/market expansion grid) chooses to
move into different unrelated fields (from what it has ever done before) with new
products as a means to stimulate growth, the company would be following which of the

following general strategies?

a. market penetration
b. market development

c. product development
d. diversification
134. Technological advances, shifts in consumer tastes, and increased competition, all of
which reduce demand for a product are typical of which stage in the PLC?
a. decline stage
b. introduction stage
c. growth stage
d. maturity stage
135. If Honda uses its company name to cover such different products as its automobiles,
lawn mowers, and motorcycles, it is practicing which of the following strategies?
a. new brand strategy
b. line extension strategy
c. multibrand strategy
d. brand extension strategy
136. The process that turns marketing strategies and plans into marketing actions in order
to accomplish strategic marketing objectives is called:
a. Marketing strategy.
b. Marketing control.
c. Marketing analysis.
d. Marketing implementation.
137. Each salesperson is assigned to an exclusive area in which to sell the company's full
line of products or services in which type of salesforce structure?

a.

Territorial sales force.

b.

Product sales force.

c.

Customer sales force.

d.

Hybrid sales force.

138. The last stage in the selling process is the

stage.

a. approach
b. handling objections
c. closing
d. follow-up
139. In 1985, the Coca-Cola Company made a classic marketing blunder with its deletion of
its popular Coca-Cola product and introduction of what it called New Coke. Analysts
now believe that most of the company's problems resulted from poor marketing
research. As the public demanded their "old Coke" back, the company relented and
reintroduced Coca-Cola Classic (which has regained and surpassed its former position)
while New Coke owns only 0.1 percent of the market. Which of the following marketing
research mistakes did Coca-Cola make?
a. They did not investigate pricing correctly and priced the product too high.
b. They did not investigate dealer reaction and had inadequate distribution.
c. They defined their marketing research problem too narrowly.
d. They failed to account for the Pepsi Challenge taste test in their marketing efforts.
140. Costs that do not vary with production or sales levels are called:
a. fixed costs.
b. variable costs.
c. standard costs.
d. independent costs.

141. All of the following are thought to be sources of new product ideas EXCEPT :
a. internal sources.

b. customers.
c. competitors.
d. the local library.
142. Today, advertising captures about percent of total promotion spending.
a. 15

b. 23
c. 29
d. 33
143. The first modern environmental movement in the United States began in the:
a. 1940s.
b. 1950s.
c. 1960s and 1970s.
d. mid-1980s.
144. One of the most common problems with using internal database information is that:
a. since it was probably collected for some other purpose, it may be incomplete or
wrong.
b. it is usually expensive to retrieve.
c. top executives are usually unwilling to relinquish data, therefore, the data has
limits.
d. the data is almost always unsecured and, therefore, suspect as to reliability.
145. Regulations that arise to ensure that firms take responsibility for the social costs of
their products or production processes stem from which reason for government
legislation of business?
a. To protect companies from each other.
b. To protect consumers from unfair business practices.

c. To protect the interests of society.

d. To protect businesses from unfair consumer demands.

146. The advantages of audience selectivity, no ad competition and personalization apply to
which type of media?
a. Newspapers
b. Television
c. Direct Mail
d. Radio
147. One of the most promising developments in multivariable segmentation is called
where a host of demographic and socioeconomic factors are used.
a. terragraphic segmentation
b. fermagraphic segmentation
c. geothermy segmentation
d. geodemographic segmentation
148. When companies make marketing decisions by considering consumers' wants and the

long-run interests of the company, consumer, and the general population, they are
practicing which of the following principles?
a. Innovative marketing
b. Consumer-oriented marketing
c. Value marketing
d. Societal marketing
149. The study of human populations in terms of size, density, location, age, gender, race,
occupation, and other statistics is called:
a. Geothermy.
b. Demography.
c. Ethnography.
d. Hemos-popography.

150. Marketers are sometimes accused of deceptive practices that lead consumers to
believe they will get more value than they actually do. includes practices
such as falsely advertising "factory" or "wholesale" prices or a large price reduction
from a phony high retail price.
a. Deceptive promotion
b. Deceptive packaging
c. Deceptive pricing

d. Deceptive cost structure

Answer Key - Marketing Sample Questions

1. d
2. c
3. d
4. a
5. d
6. d
7. b
8. d
9. b
10. c
11. b

12. c
13. d
14. d
15. d
16. a
17. d
18. a
19. a
20. b
21. a
22. c
23. a
24. d
25. c
26. d
27. a
28. a

29. b
30. b
31. c
32. c
33. c
34. d
35. d
36. d
37. d
38. b
39. b
40. b
41. a
42. c
43. c
44. d

45. b
46. b
47. c
48. d
49. b
50. b
51. b
52. b
53. d
54. c
55. b
56. a
57. c

58. d
59. c
60. c
61. b
62. a
63. c
64. b
65. a
66. b
67. a
68. c
69. b
70. b
71. a
72. d
73. d
74. a
75. b
76. d

77. d
78. b
79. c
80. b
81. a
82. d
83. d
84. c
85. d
86. b

87. a
88. b
89. c
90. b
91. c
92. c
93. d
94. c
95. b
96. b
97. b
98. c
99. a
100. b
101. a
102. d
103. b
104. d
105. d
106. d
107. a
108. b
109. c

110. c
111. a
112. b
113. d
114. c
115. b

116. d
117. a
118. c
119. b
120. c
121. a
122. a
123. d
124. d
125. b
126. b
127. c
128. d
129. c
130. c
131. b
132. c
133. d
134. a
135. d
136. d
137. a
138. d
139. c
140. a
141. d

142. b
143. c
144. a

145. c
146. c
147. d
148. d
149. b
150. c

1. Marketing Dashboards are a _________ way to disseminate the insights gleaned from marketing measures
and marketing mix modeling within an organization.
a) Unstructured
b) Structured
c) Both a & b
d) None of the above
ANSWER: b) Structured
2. Marketing metrics approach is used for
a) Assessing marketing effects
b) Estimate casual relationships
c) Measure how marketing activity affects outcomes
d) None of the above
ANSWER: a) Assessing marketing effects
3. _____________ estimate casual relationships and measures how marketing activity affects outcomes.
a) Marketing metrics
b) Marketing Dashboards
c) Marketing-mix modeling
d) None of the above
ANSWER: c) Marketing-mix modeling
4. Marketing metrics can be used by _________ to justify and design marketing programs and
by____________ to decide on financial allocations.
a) Senior Managers, Marketing Managers
b) Senior Management, Brand Managers
c) Brand Managers, Senior Management
d) None of the above
ANSWER: c) Brand Managers, Senior Management
5. _____________focuses on incremental growth instead of baseline sales or long-term effects.
a) Marketing-mix modeling
b) Marketing metrics
c) Marketing Dashboard
d) None of the above
ANSWER: a) Marketing-mix modeling
6. The integration of metrics such as customer awareness and satisfaction and brand equity into marketingmix modeling is ________.

a) Limited
b) Unlimited
ANSWER: a) Limited
7. Management can assemble a summary set of relevant internal and external measures in a ___________ for
synthesis and interpretation.
a) Marketing System
b) Marketing Dashboards
c) Marketing information system
d) None of the above
ANSWER: b) Marketing Dashboards
8. As input to the marketing dashboard, companies should include _______ key market-based scorecards
that reflect performance and provide possible entry warning signals.
a) Four
b) Three
c) Two
d) None of the above
ANSWER: c) Two
9. Relative price is a type of ________ sample marketing metric.
a) Internal
b) External
c) Varies
d) None of the above
ANSWER: b) External
10. The two market based scorecards in a marketing dashboard are:
a) Customer-performance scorecard and Stakeholder performance scorecard
b) Stakeholder-performance scorecard and Suppliers performance scorecard
c) Customer-performance scorecard and Distributors performance scorecard
d) None of the above
ANSWER: a) Customer-performance scorecard and Stakeholder performance scorecard

BASICS OF MARKETING- 106

MULTIPLE CHOICE QUESTIONS

1. Good marketing is no accident, but a result of careful planning and ________.

execution
selling strategies research
2. Marketing management is ________. managing the marketing process

monitoring the profitability of the companys products and services

the art and science of choosing target markets and getting, keeping, and growing customers
through creating, delivering, and communicating superior customer value

developing marketing strategies to move the company forward

3. Chimney Sweeps employs people to clean fireplaces and chimneys in homes and apartments.
The firm is primarily the marketer of which one of the following?

An image
A service
A good
An idea

4. Marketers often use the term ________ to cover various groupings of customers.
people
buying power
demographic segment
market

5. The ________ concept holds that consumers and businesses, if left alone, will ordinarily not
buy enough of the organizations products.
production
selling
marketing

holistic marketing

6. .Which of the following would be the best illustration of a subculture?

A religion.
A group of close friends.
Your university.
Your occupation.

7. The buying process starts when the buyer recognizes a _________.

Product
an advertisement for the product
a salesperson from a previous visit
problem or need

8. If actual performance exceeds the expected performance of the product, Then customer is

___________________
Satisfied
Dissatisfied
Delighted
Neutral

9. Bread and milk are which kind of products?

Specialty Products
Convenience products
Shopping products
Unsought products

10. Parents buy toys for their children act as _______________ in the buying process.
Decider
Buyer
Maintainer
All of the above

11. If a firm is practicing ____________________, the firm is training and effectively motivating
its customer-contact employees and all of the supporting service people to work as a team to
provide customer satisfaction.
double-up marketing
interactive marketing
service marketing
internal marketing

12. A cluster of complementary goods and services across diverse set of industries is called as

_____________
Market place
Meta market
Market space
Resource Market

13. Adding new features to a product is advocated by which of the approaches?

Product Approach
Production Approach
Marketing Approach
Selling Approach

14. One of the key tasks of marketers is ____________ and to create consumer perceptions that
the product is worth purchasing.

To make products easily visible and available

To promote sales of products
To differentiate their products from those of competitors
To do marketing surveys

15. What is the last stage of the consumer decision process?

problem recognition

post purchase behavior

alternative evaluation purchase

16. ________ markets are made up of members of the distribution chain. Consumer

Business-to-business (industrial)

Channel

Institutional

17. Which of the following is considered a key player in the marketing industry?
marketer

suppliers or vendors distributors or retailers all of the above

18. Marketing Mix is the most visible part of the marketing strategy of an organization.

True

False

19. Businesses spend most of their advertising rupees on business-to-business markets.

True

False

20. A transaction in which the organization is making an initial purchase of an item to be used to
perform a new job refers to which of the following purchases?

Straight rebuy purchase

Delayed purchase

New-task purchase

Modified rebuy purchase

21.________ markets include a wide variety of profit and nonprofit organizations, such as
hospitals, government agencies, and schools, which provide goods and services for the benefit of
society.

Consumer

Business-to-business (Industrial)

Reseller

Institutional

22.Which of the following is NOT considered a type of reseller?

wholesaler

retailer

manufacturer

distributor

23.The promotion P of marketing is also known as ________.

Product Differentiation

Distribution

Cost

Marketing Communication

24.When a company distributes its products through a channel structure that includes one or
more

resellers, this is known as ________.

Indirect marketing

direct marketing multi-level marketing integrated marketing

25.In marketing theory, every contribution from the supply chain adds ________ to the product.

value

costs convenience ingredients

26.Institutional markets consist of people who buy products and services for personal use.

True

False

27. Listing alternatives that will solve the problem at hand and determining the characteristics of
each occurs during which stage of the final consumers decision process?

Information search

Purchase

Evaluation of alternatives

Post purchase

28. The act of trading a desired product or service to receive something of value in return is
known as which key concept in marketing?

product

exchange

production

customer

29.The most basic level of a product is called the:

core product.

central product.

fundamental product.

augmented product.

30. Anything that can be offered to a market for attention, acquisition, use, or consumption that
might satisfy a want or need is called a(n):

idea.

demand.

product.

service.

31. In ________ consumers may share a strong need that cannot be satisfied by an existing
product.

negative demand

latent demand

declining demand

irregular demand

32. Marketing is both an art and a science there is constant tension between the formulated
side of marketing and the ________ side.

creative

selling

management

behavior

33. Mr. Lopez buys goods and services for use in the production of products that are sold and
supplied to others. Mr. Lopez is involved in ________.

consumer buying behavior

post-purchase dissonance

retail buyer behavior

business buyer behavior

34. The four unique elements to services include:

Independence, intangibility, inventory, and inception

Independence, increase, inventory, and intangibility

Intangibility, inconsistency, inseparability, and inventory

Intangibility, independence, inseparability, and inventory

35. Convenience products usually have intensive distribution because sales of these products
tend to have a direct relationship to availability.

True

False

36. The ________ holds that the organizations task is to determine the needs, wants, and
interests of target markets and to deliver the desired satisfactions more effectively and efficiently
than competitors in a way that preserves or enhances the consumers and the societys wellbeing.

customer-centered business

focused business model

societal marketing concept

ethically responsible marketing

37. A change in an individual's behavior prompted by information and experience refers to which
one of the following concept?

Learning

Role selection

Perception

Motivation

38. Holistic marketers achieve profitable growth by expanding customer share, ________, and
capturing customer lifetime value.

undermining competitive competencies

building customer loyalty

milking the market for product desires

renewing a customer base

39. ________ pricing is the approach of setting a low initial price in order to attract a large
number of buyers quickly and win a large market share.

Market-skimming

Value-based

Market-penetration

Leader

40. While buying milk which kind of behaviour is displayed by a person?

Extensive problem solving behaviour

Routinized buying behaviour

Variety seeking behaviour

None of the above

41.________ markets include a wide variety of profit and nonprofit organizations, such as
hospitals, government agencies, and schools, which provide goods and services for the benefit of
society.

Consumer

Business-to-business (Industrial)

Reseller

Institutional

42.Which of the following is NOT considered a type of reseller?

wholesaler

retailer

manufacturer

distributor

43.The promotion P of marketing is also known as ________.

Product Differentiation

Distribution

Cost

Marketing Communication

44.When a company distributes its products through a channel structure that includes one or
more resellers, this is known as ________.

indirect marketing

direct marketing

multi-level marketing

integrated marketing

45.In marketing theory, every contribution from the supply chain adds ________ to the product.

value

costs

convenience

ingredients

46.Institutional markets consist of people who buy products and services for personal use.

True

False

47. Listing alternatives that will solve the problem at hand and determining the characteristics of
each occurs during which stage of the final consumers decision process?

Information search

Purchase

Evaluation of alternatives

Post purchase

48. The act of trading a desired product or service to receive something of value in return is
known as which key concept in marketing?

product

exchange

production

customer

49.The most basic level of a product is called the:

core product.

central product.

fundamental product.

augmented product.

50. Anything that can be offered to a market for attention, acquisition, use, or consumption that
might satisfy a want or need is called a(n):

idea.

demand.

product.

service.

51. In ________ consumers may share a strong need that cannot be satisfied by an existing
product.

negative demand

latent demand

declining demand

irregular demand

52. Marketing is both an art and a science there is constant tension between the formulated
side of marketing and the ________ side.

creative

selling

management

behavior

53. Mr. Lopez buys goods and services for use in the production of products that are sold and
supplied to others. Mr. Lopez is involved in ________.

consumer buying behavior

post-purchase dissonance

retail buyer behavior

business buyer behavior

54. The four unique elements to services include:

Independence, intangibility, inventory, and inception

Independence, increase, inventory, and intangibility

Intangibility, inconsistency, inseparability, and inventory

Intangibility, independence, inseparability, and inventory

55. Convenience products usually have intensive distribution because sales of these products
tend to have a direct relationship to availability.

True

False

56. The ________ holds that the organizations task is to determine the needs, wants, and
interests of target markets and to deliver the desired satisfactions more effectively and efficiently
than competitors in a way that preserves or enhances the consumers and the societys wellbeing.

customer-centered business

focused business model

societal marketing concept

ethically responsible marketing

57. A change in an individual's behavior prompted by information and experience refers to which
one of the following concept?

Learning

Role selection

Perception

Motivation

58. Holistic marketers achieve profitable growth by expanding customer share, ________, and
capturing customer lifetime value.

undermining competitive competencies

building customer loyalty

milking the market for product desires

renewing a customer base

59. ________ pricing is the approach of setting a low initial price in order to attract a large
number of buyers quickly and win a large market share.

Market-skimming

Value-based

Market-penetration

Leader

60. While buying milk which kind of behaviour is displayed by a person?

Extensive problem solving behaviour

Routinized buying behaviour

Variety seeking behaviour

None of the above

61. Whether to sell via intermediaries or directly to consumers, how many outlets to sell through,
and whether to control or cooperate with other channel members are examples of decisions
marketers must make about

Promotion

Price

Distribution

Product

62. The extended Ps of service marketing mix are :

People, Product, Place

Price Physical Evidence, Promotion

Physical Environment, Process, People

Product, Process, Physical Environment

63. A social and managerial process by which individuals and organizations obtain what they
need and want through value creation refers to which one of the following concepts?

Selling

Advertising

Barter

Marketing

64. What is the basic property of a service which makes it different from a product.

Shape

Size

Very expensive

Intangibility

65.Which one of the following phrases reflects the marketing concept?

The supplier is a king in the market

Marketing should be viewed as hunting not gardening

This is what I make, wont you please buy it?

This is what I want, wont you please make it?

66. The task of any business is to deliver ________ at a profit.

customer needs

customer value

products and services improved quality

67.The solution to price competition is to develop a differentiated:

product, price, and promotion.

offer, delivery, and image.

package and label. international Web site.

68.Red Cross blood donations are considered to be specialty products and,

therefore, have a specialty offer to the consumer.

True

False

69. You purchase cleaning supplies for your custodial help regularly. It is showing which buying
situation?

Modified rebuy

Straight rebuy

Modified straight rebuy

Consumer buy

70. Internal marketing is marketing by a service firm to train and effectively motivate its
customer-contact employees and all the supporting service people to work as a team to provide
customer satisfaction.

True

False

71. Customers evaluation of the difference between all the benefits and all the costs of a
marketing offer relative to those of competing offers refers to which of the following options?

Customer perceived value

Marketing myopia

Customer relationship management

Customer satisfaction

72. Buying goods and services for further processing or for use in the production process refers
to which of the following markets?

Consumer markets

Government markets

Business markets

International markets

73. The packaging concept states what the package should be or do for the product.

True

False

74.Marketing managers should adapt the marketing mix to ___________________ and

constantly monitor value changes and differences in both domestic and global markets.

Sales strategies

Marketing concepts

Cultural values

Brand images

75. Resellers may actually take ownership of the product and participate in the marketing,
including the advertising.

True

False

76. The materials and ingredients used in producing the product are obtained from other
companies who are referred to as distributors.

True

False

77. The ________ refers to the various companies that are involved in moving a product from its
manufacturer into the hands of its buyer.

distribution chain

network chain

supply chain

promotion network

78. ________ is the study of how individuals, groups, and organizations select, buy, use, and
dispose of goods, services, ideas, or experiences to satisfy their needs and wants.

Target marketing

Psychographic segmentation

Product Differentiation

Consumer behavior

79. A persons ________ consist(s) of all the groups that have a direct (face-to-face) or indirect
influence on his/her attitudes or behavior.

culture

subculture

psychographics

reference groups

demographics

Product choice is greatly affected by economic circumstances. All of the following would be
among those circumstances EXCEPT ________.

spendable income

savings and assets

debts

occupation

borrowing power

________ is a set of distinguishing human psychological traits that lead to relatively consistent
and enduring responses to environmental stimuli.

Image

Personality

Beliefs

Heredity

Culture

________ portrays the whole person interacting with his or her environment.

Attitude Reference group

Lifestyle

Culture Subculture

A ________ when it is aroused to a sufficient level of intensity.

need becomes a motive motive becomes a need desire becomes a reality

unfulfilled demand becomes a crisis

personal demand exceeds the ability to rationally reject

The five-stage model of the consumer buying process includes all of the following stages
EXCEPT ________.

problem recognition

information search

social interaction

purchase decision

85. If performance meets consumer expectations, the consumer is ________.

delighted

satisfied

disappointed

surprised.

86. The primary purpose of marketing activities is to facilitate and encourage exchange
transactions with potential customers.

True

False

87. Merchant wholesalers sell goods and services directly to final consumers for their personal,
nonbusiness use.

True

False

88. A service can be defined as any activity or benefit that one party can offer another that is
essentially intangible and that does not result in the ownership of anything.

True

False

89. The intangible nature of many services can create unique challenges for marketers.

True

False

90. Auction sites, such as eBay, QXL are examples of Consumer-to-Consumer (C2C) channels.

True

False

91. Product planners need to think about products and services on three levels. Each level adds
more customer value. Which one of the following is the most basic level that addresses the
question, What is the buyer really buying?

Actual product

Augmented product

Core benefit

Co-branding

92. The mental act, condition or habit of placing trust or confidence in another shows which of
the following options?

Motive

Belief

Behavior

Attitude

93. How do consumers respond to various marketing efforts the company might use? What is a
starting point of a buyers behavior?

Belief

Subculture

Post purchase feeling

Stimulus-response Model

94. Which one of the following factor relates to family that influences consumer behavior?

Cultural

Social

Personal

Business

95. Unique psychological characteristics that lead to relatively consistent and lasting responses to
ones own environment refers to which one of the following?

Belief

Culture

Personality

Self-awareness

96. Which one of the following statements by a company chairman BEST reflects the marketing
concept?

We have organized our business to satisfy the customer needs

We believe that marketing department must organize to sell what we produce

We try to produce only high quality, technically efficient products

We try to encourage company growth in the market

97. Which one of the following is a key to build lasting relationships with consumers?

Price of the product

Need recognition

Customer satisfaction

Quality of product

98. The factors such as the buyers age, life-cycle stage, occupation, economic situation,
lifestyle, personality and self-concept that influences buyers decisions refers to which one of the
following characteristic?

Personal characteristics

Psychological characteristics

Behavioral characteristics

Demographical characteristics

99. A ________ is someone seeking a response (attention, a purchase, a vote, a donation) from
another party, called the ________.

salesperson, customer

politician, voter

marketer, prospect

celebrity, audience

100. Companies selling mass consumer goods and services such as soft drinks, cosmetics, air
travel, and athletic shoes and equipment spend a great deal of time trying to establish a superior
brand image in markets called ________.

business markets

global markets

consumer markets

nonprofit and governmental markets

service markets

101. The ________ is practiced most aggressively with unsought goods, goods that buyers
normally do not think of buying, such as insurance, encyclopedias, and funeral plots.

marketing concept

selling concept

production concept

product concept

holistic marketing concept

102. The ________ concept holds that consumers will favor those products that offer the most
quality, performance, or innovative features.

product

marketing

production

selling

holistic marketing

103. . ________ marketing has the aim of building mutually satisfying long-term relations with
key parties such as customers, suppliers, distributors, and other marketing partners in order to
earn and retain their business.

Holistic

Demand-based

Direct

Relationship

Synthetic

104. One traditional depiction of marketing activities is in terms of the marketing mix or four Ps.
The four Ps are characterized as being ________.

product, positioning, place, and price

product, production, price, and place

promotion, place, positioning, and price

place, promotion, production, and positioning

product, price, promotion, and place

105. David Packard of Hewlett-Packard once said, Marketing is far too important to leave to

________.

the advertising boys uninformed managers novices

the CEO

the marketing department

106. The traditional view of marketing is that the firm makes something and then ________ it.
markets

sells

distributes prices services

107. __________ is the single factor that best indicates social class. Time

Money

Occupation

Fashion

108. Marketing strategies are often designed to influence _______________ and lead to
profitable exchanges.

Consumer decision making

Sales strategies

Advertising strategies

Export strategies

109. __________ refers to the information a consumer has stored in their memory about a
product or service.

Cognitive dissonance

Product knowledge

Product research

Marketing research

110. When consumers are seeking low-involvement products, they are unlikely to engage in
extensive search, so _________________ is important.

Order processing

Order booking

Ready availability

Information about warranty

111. ___________________ constitutes moderate consumer behavior, but still involves time and
effort searching for and comparing alternatives.

Limited decision making

Need recognition

Routine decision making

Post purchase evaluation

112. Experimental sources of information for consumers refer to ____________.

Advertising, marketing, selling, and profit making

Handling, examining, and trying the product while shopping

Buying after a demonstration

Buying the product directly from a manufacturer

113. Which of the following is NOT one of the four philosophies of marketing?

production orientation

societal marketing orientation

sales orientation

promotion orientation

114. Of the four competing philosophies, the Furniture Industry is an example of what kind of
orientation:

Sales Orientation

Societal Marketing Orientation

Marketing Orientation

Production Orientation

115. Marketing is defined by the American Marketing Association as the activity, set of
institutions, and processes for ______, ________, ________, and __________ offerings that
have value for customers, clients, partners, and society at large.

Making, Arranging, Maintaining and Selling

Creating, Communicating, Delivering, and Exchanging

Creating, Advertising, Selling, and Transferring

Performing, Displaying, Offering, and Exchanging

116. The focus of marketing today is _______.

Value and Satisfaction

Quality and Long Term Relationships

All of the Above

None of the Above

117. Which of the following firms emphasizes on products benefits to the customers rather
product attributes?

Product oriented

Market oriented

Sales oriented

Production oriented

118. Products that are usually purchased due to adversity and high promotional back up
rather than desire are called:

Sought goods

Unique goods

Unsought goods

Preferred goods

119. Which product is MOST likely to be purchased through routine decision making?

Television set

Soft drink

Shirt

Car

120. Luxury products, such as Rolex watches, are also known as:

Shopping product

Convenience product Emergency product Specialty product

121. Which of the following is NOT included as a basic idea in the definition of marketing
concepts?

Total company effort

Profit

Productivity

Customer satisfaction

122. Which of the following is the most recent stage of marketing evolution? Marketing
department era

Production era

Sales era

Marketing company era

123.Which of the following is NOT included as a basic idea in the definition of marketing
concepts?

Total company effort

Profit

Productivity

Customer satisfaction

124._______________________ is defined as the difference between the benefits a customer

sees from a market offering and the costs of obtaining those benefits.

Customer value

Satisfaction scale

Profit margin

Competitive benefit

125.Which of the following is NOT included in the marketing management process used by the
marketing manager to achieve its objectives?

Planning marketing activities

Raising funds to finance the marketing projects

Controlling marketing plans

Directing implementation of the marketing plans

126.A channel of distribution is any series of firms (or individuals) who participate in the flow of
products to final user or customer.

True

False.

127. ____________ is defined as communication with large numbers of customers at the same
time.

Personal selling

Sales promotion

Mass selling

All of the above

128.The marketing concept applies to production firms, but not to service industries.

True

False

129. In a ___________________orientation, the role of marketing research is to determine

customer needs and how well the company is satisfying them.

Marketing

Production

Both of the above

None of the above

130.The marketing concept means that an organization aims the majority of its efforts at
satisfying customers, at a profit.

True

False

131.When a manager focuses on making whatever products are easy to produce, and then trying
to sell them, that manager has a ___________________ orientation.

Marketing

Production

Sales

Profit

132. Which of the following is NOT consistent with a manager having a marketing orientation?

Inventory levels are set with customer requirements and costs in mind

Customer relationship focuses on customer satisfaction before and after sale, leading to a
profitable long-run relationship

Focus of advertising is on product features and how products are made

Packaging is designed for customer convenience and as a selling tool

133. Often, the best way to improve customer value, and beat the competition, is to be first to
satisfy a need that others have not even considered.

True

False

134. It is more costly to retain current customers by satisfying their needs, than to get new
customers by taking them away from a competitor.

True

False

135.In addition to businesses, the marketing concept is also applicable to _____________.

Government agencies

Religious groups

Fine arts organizations

All of the above

136. The controllable variables a company puts together to satisfy a target group is called the

____________________.

Marketing strategy

Marketing mix

Strategic planning

Marketing concept

137. In order for exchange to occur:

a complex societal system must be involved.

organized marketing activities must also occur.

a profit-oriented organization must be involved.

each party must have something of value to the other party.

138. Four competing philosophies strongly influence the role of marketing and marketing
activities within an organization. Which if the following is not a component of market
orientation?

Customer orientation.

Profitability orientation.

Marketing orientation.

Competitor orientation.

139. A market orientation recognizes that:

price is the most important variable for customers.

market intelligence relating to current and future customer needs is important.

selling and marketing are essentially the same thing.

sales depend predominantly on an aggressive sales force.

140. When customer expectations regarding product quality, service quality, and value-based
price are met or exceeded, _____ is created.

customer satisfaction

planning excellence

a quality rift

a value line

141. A critical marketing perspective is the process of determining:

the value of a product, person, or idea.

how places compete with each other.

the worth and impact of marketing activities.

which type of promotional strategy works best.

142. The way in which the product is delivered to meet the customers' needs refers to:

new product concepts and improvements.

selling.

advertising and promotion activities.

place or distribution activities.

143. The term 'marketing mix' describes:

a composite analysis of all environmental factors inside and outside the firm. a series of business
decisions that aid in selling a product.

the relationship between a firm's marketing strengths and its business weaknesses.

a blending of strategic elements to satisfy specific target markets.

144. Newsletters, catalogues, and invitations to organisation-sponsored events are most closely
associated with the marketing mix activity of:

Pricing

Distribution

Product development

Promotion

145. Which of the following is not an element of the marketing mix? Distribution.

Product.

Target market.

Pricing.

146. In relationship marketing firms focus on __________ relationships with __________. shortterm; customers and suppliers

long-term; customers and suppliers

short-term; customers long-term; customers

147.A further 3Ps are incorporated into the marketing mix:

physical evidence, process and price.

process people and promotion.

physical evidence, people and production.

physical evidence, process and people.

148. A marketing philosophy summarized by the phrase 'a stronger focus on social and ethical
concerns in marketing' is characteristic of the _________ period.

production

sales

marketing

societal marketing

149. Which of the following statements is correct?

Marketing is the term used to refer only to the sales function within a firm.

Marketing managers don't usually get involved in production or distribution decisions.

Marketing is an activity that considers only the needs of the organization; not the needs of
society as a whole.

Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large.

150. The term marketing refers to:

new product concepts and improvements.

advertising and promotion activities.

a philosophy that stresses customer value and satisfaction.

planning sales campaigns.

151. Which of the following involves designing and manufacturing the container or wrapper for
a product? Labeling

Packaging

Branding

Product line

152. The basic role of promotion is _____.

Information

Manipulation

Communication

Interpretation

153.If the aim of the promotion to introduce a new consumer product is to achieve high
awareness levels, the firm will most likely make heavy use of _______ in the promotional mix.

Advertising

Sales promotion

Personal selling

Publicity

154.A consumer contest is an example of _____.

Personal selling

Sales promotion

Advertising

Indirect selling

155. Advertising appropriations are largest for which type of product?

Industrial products

Convenience goods

High-priced products

Specialty goods

156.A television advertisement showing the safety features of the Volvo 240 DL would be best
classified as which of the following?

Product advertising

Pioneer advertising

Defensive advertising

Societal marketing

157. Need becomes ________ when they are directed towards a specific object.

Actual need

Want

Satisfaction

Demand

158. Which of the following BEST describes the consumers preference for products that are
widely available to them?

Production concept

Marketing concept

Selling concept

Product concept

159.Buying and selling of mass consumer goods and services comes under which of the
following markets?

Business markets

Global markets

Consumer markets

Government markets

160. Which one of the following BEST describes the human need?

Food

French-fries

Burger

Pizza

161.Which of the following firms emphasis on products benefits to the customers rather than on
product attributes.

Product oriented

Market oriented

Sales oriented

Production oriented

162. All of the following are the examples of unsought goods EXCEPT:

Course books

Encyclopedia

Funeral plots

Insurance policy

Unsought Goods

163. While considering the place for a product which of the following is important for
customer.

Communication

Convenience

Cost

Solution

164.Market oriented firms focus on:

Retailers

Distributors

Customers

Wholesalers

165. Price is the only element in the marketing mix that produces:

Fixed cost
Expense
Variable cost
Revenue

166. Identify the products that the customer usually buys frequently and with a minimum
of comparison and buying effort.
Specialty
Convenience
Unsought
Augmented

167. Which of the following is NOT included in product decisions?

Styling
Brand name
Warehousing

Packaging

168. Which of the following takes place at retailers end?

Promotion
Placing
Pricing
Exchange

169. Aggressive selling is a characteristic of which of the following concept of marketing?

Select correct option:

Production concept Marketing concept

Selling concept

Product concept

170. Which of the following is a name, term, sign, symbol, design, or a combination of these,
that identifies that maker or seller of a product or service?

Label

Co-brand

Brand

Product

171. The consumers estimate of the products overall capacity to satisfy his or her needs is
called:

Product Cost

Product Value

Product need

Product Satisfaction

172. According to the text, a product is

everything the customer receives in an exchange.

the physical object the customer receives in an exchange. the service that is rendered to a
customer.

the idea that the customer receives in an exchange.

173. An example of a convenience consumer product is stereo equipment.

petrol.
a motorcycle. a bicycle. athletic shoes.

174. Which one of the following is NOT an industrial product?

oil to be refined into fuel for homes

transistors used as components for portable radios paper, pens, and glue used in bank branch
offices

computer software to help people complete personal tax forms

175. Sai Nath called several airlines to compare rates and chose a flight on British Midland 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

176. Products that are relatively inexpensive and are purchased frequently with minimal effort
can be classified as ___________ products.

shopping

convenience

industrial

specialty

unsought

177. Large tools and machines used in a production process for a considerable length of time are
classified as

major equipment.

accessory equipment.

component parts.

raw materials.

consumable supplies.

178. Items that are purchased routinely, do not become part of the final physical product, and are
treated like expense items rather than capital goods are called
raw materials.
major equipment.
accessory equipment.
component parts.
process materials.

179. Products that are used directly in the production of a final product but are not easily
identifiable are categorised as

accessory products.

component parts.

consumable supplies.

assembly components.

process materials.

180. Industrial products are

purchased for personal consumption.

frequently purchased for both their functional aspects and their psychological rewards.

traditionally classified according to their characteristics and intended uses.

not purchased by non-business organisations.

181. A company designs the product with little or no input from customers, the company is
practicing which of the following concept?
Product concept
Marketing concept
Selling concept
Production concept

182. Which of the following 4Ps of marketing mix involves decisions regarding channels
coverage, assortments, locations, inventories or transports?
Product
Price
Place
Promotion

183. Which of the following is NOT a part of marketing communication mix?

Telemarketing

Public relations

Sales promotion

Advertising

184. A dissonance-reducing buying behavior is designed to probe consumers hidden,

subconscious motivations. True
False

185. Consumer buying behavior refers to the buying behavior of businesses. True

False

186. A fundamental part of the distribution function is to get the product:

To the right place at the right time

Launched into new markets

To intermediaries

To market to avoid channel conflict

187. The _____ identifies the product or brand. Container

Label
Advertisement
Warranty

188. A(n) _____ product exceeds customer expectations.

Strategic
Superior
Augmented
Anticipated

189. Which of the following are products and services bought by final consumers for personal
consumption? These include convenience products, shopping products, specialty products, and
unsought products.

Material and parts

Consumer products

Industrial products

Capital items

190. The skimming, penetration, bargaining and bundling are decided in the ______________ of
the Marketing Mix strategy.
Price Decisions
Place Decisions
Product Decisions

Promotion Decisions

191. Low Consumer involvement in purchase and little significant brand difference comes in
which types of buying behaviors.

Complex
buying
behavior
Dissonance-reducing
buying
behavior
Habitual
buying
behaviors
Variety-seeking buying behaviors

192. Distribution of product to get it in the marks refers to which of the following activities?

Selling Activities
Advertising activities
Promotion Activities
Place or distribution activities

193. How many stages are involved in the consumer buying / adoption process? Six

Seven

Three

Five

194. Which one of the following factor relates to family that influences consumer behavior?

Cultural

Social

Personal

Business

195. Buy it now refers to which one of the following options?

Personal selling

Advertising

Sales promotion

Publicity

196. At least how many parties should be included in Exchange?

Two

Three

Four

Five

197. The buyer decision process consists of five stages. Which of the following is NOT one of
these stages?
Evaluation of Alternatives
Information search
Variety-seeking buying behavior
Post purchase behavior

198. You are planning to install a steel manufacturing plant in your city. For that purpose you
want to have a supplier who supplies you the steel in raw form for manufacturing. Here supplier
supplies you which of the following form of industrial product?
Material and parts
Capital items
Supplies and services
None of the given options

199. How are you telling consumers in your target group about your product This question
belongs to which marketing concept?

Product
Price
Place
Promotion

200. A transaction in which the organization is making an initial purchase of an item to be used
to perform a new job refers to which of the following purchases?
Straight rebuy purchase

Delayed purchase
New-task purchase
Modified rebuy purchase