Marketing Part II

8. What is Marketing Mix? Explain the various factors which affect Marketing decisions?

The process of marketing involves creating a ‘Market Offering’ to satisfy needs and wants of the
present and potential buyers. Suppose a firm sees a profitable business opportunity in the field of
producing soft drinks. To develop and market a new brand of soft drinks market offering needs to be
created, in which a number of important decisions will have to be taken, like whether to go for any
collaboration or not, whether to produce for local market or for a wider market, what will be the
features of the new product and so on.

There are various factors, which affect marketing decisions. They can be broadly divided into two
categories:

Controllable factors

: it refers to those factors which can be influenced at the level of the firm. For example, decisions
regarding packaging, brand name, selling price, distribution network, tools of promotion etc.

Non-Controllable factors

or environmental variables : it refers to those factors which affect the marketing decisions but are not
controllable at the firm’s level. For example, it is very difficult to control political factors like
government policy or economic factors like inflation rate.

To be successful, organization must take decisions regarding controllable factors after taking
environmental variables into consideration.

The Controllable variables become marketing tools, which are constantly shaped and reshaped by
marketing managers, to achieve marketing success, From a number of alternatives available, a firm
chooses a particular combination to develop a market offering. The combination of variables chosen
by a firm to prepare its market offering is also called marketing mix.

Thus, marketing mix refers to set of marketing tools that a firm uses to pursue its marketing objectives
in a target market.

9.The elements of marketing mix are popularly known as 4 Ps of Marketing. Explain these elements?

There are various ingredients or elements of marketing mix. But, ‘Four Ps’ popularized by McCarthy,
are universally accepted. These four elements are used by the management while formulating
marketing plans. The elements of marketing mix are Product – Price - Place – Promotion.
Product : Product means goods or services or anything of value, which is offered to the market for
sale. For example, LG offers large number of electronic items like Televisions, Refrigerators, Mobiles
etc.

-the concept of product relates not only to physical product but also to the benefits offered by the
product form customer’s view point. For example, toothpaste is bought for whitening teeth,
strengthening gums etc.

-the concept of product also include the extended product or what is offered to the customers by way
of after sales services, handling complaints, availability of spare parts etc. These aspects are very
important especially in the marketing of consumer durable products like automobiles, refrigerators
etc.

-the important product decisions include deciding about the features, quality, packaging, labeling and
branding of the products.

ii) Price : Price is the amount of money, which the customers have to pay to obtain the product.
It is a very crucial element of marketing mix as customers are highly price sensitive and level of price
affects the level of demand.

Marketers have not only to decide about the objectives of price setting but to analyse the factors
determining the price and fix a price for the firm’s products.

Decisions have also to be taken in respect of discounts to customers, traders and credit terms etc, so
that customers perceive the price to be in line with the value of the product.

iii)Place : place or physical distribution includes activities that make firm’s products available to the
target customers.

It also involves decisions regarding selection of intermediaries and providing support to them by way
of discounts, promotional campaigns etc.

The intermediaries in turn keep inventory of the firm’s products, demonstrate them to potential
buyers, negotiate price with buyers, close sales and also service the products after the sale.

Other decision areas relate to managing inventory, storage and warehousing and transportation of
goods.
iv)Promotion : Promotion refers to all such activities that communicate availability, features,
merits, etc of the products to the target customers and persuade them to buy it.

Organisations undertake various promotional activities and spend substantial money on promotion of
their goods through using number of tools such as advertising, personal selling, sales promotion
techniques and public relation.

The organization needs to take various decisions in each of the area specified above. For example, in
respect of advertising, it is important to decide about the message, media to be used etc.

The success of a firm depends on how well these elements are mixed to create superior value for the
customers and simulataneously achieve their sale and profit objectives. The elements of marketing
mix must work together. They must support each other to create the total effect, i.e, create the
desired market position.

PRODUCT

Product means anything of value, which is offered to the market to satisfy a want or need. The
concept of product relates not only to physical product but also to benefits offered by the product. For
Example: the decision to buy a car is affected not only by its physical qualities, but also by certain
intangible factors like brand name of the car, guarantee offered, status symbol, image of car company
and many other such attributes.

Thus, product is a mixture of tangible and intangible features, which can be exchanged for a value in
order to satisfy customer needs.

A product may provide three types of benefits to a customer : (i) functional benefits ; (ii) psychological
benefits; (iii) Social benefits.

For example, car provides :

-functional benefits in the form of means of transportation,

-psychological benefits by satisfying need for prestige and esteem,

-Social benefits in the form of acceptance from a group,

All these aspects should be considered while planning for a product.

BRANDING
Branding is one of the most important components of product mix.

-firms have to decide whether to sell the product in its Generic Name (such as fan, pen etc) or to sell
under a brand name (such as orient fan or luxor pen)

-generic name refers to the name of the whole class of the product. For example, ‘book’ is a bunch of
papers, which is in a bound form, on which some useful information about a subject is printed. Thus,
all products having these characteristics would be called by the generic name i.e. book.

-if products were sold by generic names, it would be very difficult for the marketers to distinguish their
products form that of their competitors.

-therefore, most of the marketers give a brand name to their products, which help in identifying and
distinguishing their products from the competitor’s products.

-the process of giving a name,, sign or symbol to a product is called branding. Through branding, a firm
tries to build a distinct and unique image for his product in the minds of public. An established brand
name increases the reputation and goodwill of the firm and generates repeat sales.

Important terms related to branding :

-Brand : Brand is a name, sign, design or some combination of them, which is used to identify a
product. It differentiates the product from competing products. For example, some of the common
brands are Bata, Lifebouy, Parker, etc. Brand is a comprehensive term, which has two components:

(i) Brand name :Brand name refers to that part of a brand, which can be spoken. It is the verbal
component of a brand. For example, brand names like Mercedes, Nike, Maggie, Asian Paints etc.

(ii) Brand Mark : Brand mark refers to that part of a brand, which cannot be spoken, but can be
recognized in the form of sign, symbol or design. For example, Star of Mercedes, Swoosh Sign of Nike,
Gattu of Asian Paints etc.

-Trade mark : a brand or part of a brand that is given legal protection is called trademark. The firm
which gets its brand registered, has the exclusive right for its use and no other firm can use such name
or mark in the country.
Though Branding adds to the cost in the form of cost of packaging, labeling, legal protection and
promotion, it provides several advantages to the marketers as well as the customers.

Advantages of Branding to Marketers

Helps in Product differentiation : Branding helps a firm in distinguishing its product from other
competing products. It enables the firm to secure and control the market for its products.
Helps in advertising and display programmes; with a brand name, advertisement not only creates
awareness about the product but also popularize the brand. Without a brand name, the advertiser can
only create awareness for the generic product and can never be sure of the sale for his product.

For example : people will not simply purchase toothpaste, but they will ask for a particular brand, like
closeup, colgate etc.

Differential pricing : an established brand name enables the firm to charge prices higher than the
competing products. It is possible because if customers like a brand and become habitual of it, then
they are ready to pay more for preferable brands.

Ease in introduction of new product : if a new product is introduced under a known brand, then the
new product can enjoy all the advantages of known brand. Thus, many companies with established
brand names decide to introduce new products in the same name. For example, Maggie (noodles)
extended this brand name to introduce many of its new products such as tomato ketchup, soups etc.

Advantages of Branding to customers

Helps in product identification : once a customer is satisfied with a particular brand, he does not make
a close inspection every time. So, branding makes identification of product easier and facilitates
repeat purchase of the product.

Helps in advertising and display programmes : with a brand name, advertisement not only creates
awareness about the product but also popularize the brand. Without a brand name, the advertiser can
only create awareness for the generic product and can never be sure of the sale for his product.

For example, people will not simply purchase toothpaste, but they will ask for a particular brand, like
closeup, colgate etc.

Differential pricing : an established brand name enables the firm to charge prices higher than the
competing products. It is possible because if customers like a brand and become habitual of it, then
they are ready to pay more for preferable brands.

Ease in introduction of new product: if a new product is introduced under a known brand, then the
new product can enjoy all the advantages of known brand. Thus, many companies with established
brand names decide to introduce new products in the same name. For example, Maggie (noodles)
extended this brand name to introduce many of its new products such as tomato ketchup, soups etc.

Advantages of Branding to Customers

Helps in product identification ; once a customer is satisfied with a particular brand, he does not make
a close introspection every time. So, branding makes identification of product easier and facilitates
repeat purchase of the products.
Ensures quality ; branding ensures a particular level of quality of the product. In case of any deviation
in the quality, customers can make a complaint to the manufacturer or the marketer. This builds up
confidence of the customers and helps in increasing his level of satisfaction.

Status symbol ; certain brands provide status and prestige to consumers because of their quality.
Consumers feel proud in using usch brands as it gives them psychological satisfaction. It adds to the
level of satisfaction of the customers.

Characteristics of good brand name

Choosing the right brand name is a very important decision because once a brand name is chosen and
the product is launched in the market, it becomes very difficult to change it.

The following factors should be kept in mind while choosing a brand name :

Simple and easily pronounceable ; the brand name should be simple, short and easy to pronounce and
remember. For example, surf, lux, vip etc. companies should avoid difficult words like Heinz.

Suggestive : the brand name should suggest the benefits, quality or purpose of the product. It should
be appropriate to the product’s function. For example, lijjat papad suggests taste of papd.

Distinctive : the brand name should be unique and distinctive so that the product is easily
differentiated. For example, liril, sprite, etc.

Adaptable : the brand name should be adaptable to packing or labeling requirements, to different
advertising media and to different languages.

Versatile : the brand name should be versatile so that it can accommodate any new product added to
the line. For example, names like Maggie, colgate posses this characteristic.

Legal protection : the brand name should be capable of being registered and protected legally to
prevent any kind of imitation by the rivals. For example, haldiram is a registered brand name.

Staying power : the brand name should have staying power, i.e. it should not get out of date. For
example, bata or Philips.

Packaging : Packaging refers to the act of designing and producing the container or wrapper of a
product. In modern marketing, packaging plays a very important role in the marketing success or
failure of many products. For example, packaging has played an important role in success sof many of
the consumer brands like lays, uncle chips, clinic plus and colgate.
Goods are packed into appropriate containers for protection and convenient handling. For example,
soft drinks are packed in bottles, heavy goods are packed in boxes etc.

Levels of Packaging :

There are three different levels of packaging:

Primary package ; it refers to the product’s immediate container.

In some cases, the package remains till the consumer is ready to use the product, like the plastic
packet for socks.

In other cases, the package is kept throughout the entire life of the product, like toothpaste tube.

Secondary Packaging: It refers to an additional package, which provides additional layer of protection
to the product and is kept till the prodct is ready for use.

For example – cardboard box for toothpaste tube. The secondary package is generally thrown when
the consumer start using the inside material from the primary package.

Transportation Packaging – It refers to further packing, which is necessary to protect the product in the
process of transportation and storage. This packaging contains a number of secondary packaging.

For example, Corrugated box containing 50 or 100 units of toothpaste.

Importance of Packaging:

Rising Standards of Health and Sanitation – With the increasing standards of living in the country,
people have become more conscious about health and sanitation. So they prefer packed goods over
loose goods as there are less chances of adulteration or contamination in packed products.

Self – Service Outlets – The self service outlets are becoming very popular, particularly in major cities
and towns. Asa result of this, some of the traditional role assigned to personal selling in respect of
promotion has gone to packaging.

Innovational Opportunity – Recent developments and innovations in the area of packaging have
completely changed the marketing scene in the country.

For example- packaging of of soft drinks, tinned foods etc., keep the products fresh for a longer period.

Product differenciation – Packaging helps in creating the brand image of the product by differentiating
it from other products. The colour, size, material ertc, of the package creates real difference in the
minds of the consumers about the quality of the product.
For example – From the package of cosmetics people can make some guess about the quality of the
product contained in it.

Functions of Packaging

Product Identification – Packaging makes the identification of the product easy.

For example – Broke Bond tea can be easily identified from its packaging. Due to this reason, producers
use attractive packages, so that users remember and identify their products.

Product Protection – Packaging protects the product from spoilage, breakage, leakage, damage,
climatic effect etc., This kind of protection is required during storing, distribution and transportation of
the product.

For example – airtight containers protect the product from moisture .

Facilitating use of the Product – The size and shape of the package should be convenient to open,
handle and use for the consumers.

for example- Pet bottle of Pepsi or Coke is convenient to dtore and transport.

Product Promotion – Packaging acts as a silent salesman as it promotes the product and increases its
sale.

An eye-catching colour scheme, photograph attracts attention of the people at the point of purchase.
At times, it works even better than advertising

Packaging plays an important role in the self-service stores.

LABELLING :

Label is a part of the product or a tag attached directly to the product, which carries information about
the product or the seller. Label may be a small slip or a printed statement to denote its nature,
contents, ownership, price, instructions for use, etc. Labelling is the process of attaching or putting
labels on the product.

Labels can be :

-Simple Tag : In case of local products like sugar, wheat, pulses, etc, a simple tag is attached to the
product to provide some information about the quality or price.
-Descriptive Label : In case of branded products, descriptive or elaborate labels provide complete
information about the use, performance and features of the product.

Labels are useful in providing detailed information about the product, its contents, method of use, etc.

Functions performed by Labels :

1.Describe the product and specify its contents : One of the most important functions of labels is to
describe the product, its usage, cautions in use and specify its contents. Through labels, manufacturer
provides clear description about the product to the consumer. For example, label of a canned food
item describe the procedure of cooking it. Similarly, package of a brand of Cocoanut Oil describes the
product as pure cocoanut oil with Heena, Amla, Lemon and specifies how these are good for Hair.

2. Identify the product or brand : Label makes easier to identify the product with a distinct label. For
example, the name ‘Tiger’ imprinted on the package helps us to identify the brand out of various
packets of biscuits.

3. To help in Grading of the Products : Labels help to grade the products into different categories
according to their features of quality. For example, Tata differentiates its three qualities of tea with
three different labels (Tata Agni, Tata Premium and Tata Gold)

4. Helps in promotion of products : An important function of label is to help in promotion of the

products. A carefully designed attractive label encourages the consumer to buy the product. For
example, label of Ariel detergent powder providing promotional message of ‘Chamak Rakhein Naye
Jaisi’. Labels also play an important role in sales promotional schemes, such as labels mentioning, ‘Buy
2 get 1 Free ‘ or ‘25% extra’

PRICE : Price refers to amount of money paid by a buyer in consideration of the purchase of a
producgt or a service. This money represents the sum of values that consumers exchange for the
benefit of having or using the product or service.

Price is known by different names. For example, price for transport service is termed as fare, price of
school education as school fees or price of insurance policy is known by the name of premium.

Pricing involves determination of price of the product. Pricing plays an important role in the marketing
of goods and services. No product can be launched without a price tag or at least some guidelines for
pricing.

Price is often used as a regulator of product’s demand. According to law of demand, consumers
usually demand more at a low price than a higher price.
Pricing is considered as an effective weapon during stiff competition as many firms compete with each
other on the basis of price. Price affects the revenue and profits of a firm. Due to all these reasons,
determination of price is the most crucial decision for most of the marketing firms.

Factors affecting Price Determination :

The various factors, which are considered while fixing price of a product are :

Product Cost : The cost of production is the first important factor in product pricing. It includes the
total cost of producing, distributing and selling the product.

Total Cost includes three types of cost – Fixed Costs, Variable Costs and Semi-Variable Costs. (i) Fixed
Costs does not vary directly with level of output, like rent or insurance.

(ii) Variable Cost varies directly with output, like payment for raw material, wages, power etc.

(iii) Semi-Variable Cost varies with output level, but not in direct proportion, like salary plus
commission on sales.

Sum total of all these three costs sets the minimum level at which the product may b e sold. Generally,
all firms set a price, which covers all their costs and reasonable profit margin.

However, at the time of introducing a new product or while entering a new market, products may be
sold at a price, which does not cover all the costs. But in the long run, a firm can survive only when al
its costs are covered.

Utility and Demand of the Product :

While the product costs set the lower limit of the price, the utility provided by the product and
intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to
pay.

-The product price must reflect the interest of both buyer and seller. The buyer may be ready to pay
up to the point where the utility from the product is at-least equal to the sacrifice made in terms of
price paid. However, the seller would try to at least cover the costs.

-According to the law of demand, consumers usually purchase more units at a low price than at a high
price.
-Price is also affected by intensity or price elasticity of demand. When demand is elastic (i.e. greater
than one), a relatively small change in price results in large change in the quantity demanded. In case
of inelastic demand, total revenue increases with increase in price, i.e. if the demand is inelastic, the
firm is in a better position to fix higher wages.

For example, a product with large substitutes (say, LG TV) is highly elastic, as slight rise in its price shifts
the consumers to competitors product (say, Samsung TV or Sony TV)

Extent of Competition in the Market :

Price of a product cannot be fixed without considering the nature and the degree of competition. The
price will tend to reach the upper limit in case of lesser degree of competition, while under conditions
of stiff competition, price will tend to be set at the lowest level.

-Competitors prices and their anticipated reactions must be considered before fixing the price of a
product.

-In addition to price, quality and features of the competitive products must also be examined carefully,
before fixing the price.

For example, pricing of mobiles by Samsung, Motorola, Xiomi etc, is greatly influenced due to stiff
competition from each other.

Government and Legal Regulations : Price is also affected by price control by the government. To
protect public interest against unfair practices, government can intervene and regulate the price of
commodities. Government can declare a product as an essential product and regulate its price.

For example, if a monopolist wants to fix very higher price for its life-saving drug, then government can
intervene by declaring the drug as essential commodity and regulating its price.

Pricing Objectives : The pricing objectives of a firm also influence the price of a product. Generally the
objective of the firm is to maximize the profits.

If the firm aims to maximize profits in the short-run, then it would fix maximum price for its products.

However, if the profits are to be maximized in the long run, then low price is fixed to capture larger
market share and earn greater profits through increased sales.
Apart from profit maximization, the pricing objectives of a firm may include :

Obtaining Market Share Leadership : If the firm aims to capture larger market share, then it will fix low
price to attract large number of people. For example, Jio captured large share in Mobile services due
to its low price policy.

Surviving in a Competitive Market : if a firm faces difficulties in surviving in the market due to intense
competition or introduction of a more efficient substitute by a competitor, then it may resort to offer
discounts on its products or may use other promotional methods to liquidate (clear up) its stock.

Attaining Product Quality Leadership : If the firm aims to attain leadership in product quality (like in
case of Rolls Royce), then firm normally charges higher prices to cover higher quality and higher cost of
Research and Development.

Marketing Methods Used : The pricing decision is also affected by various other elements of
marketing, such as distribution system, quality of salesmen employed, quality and amount of
advertising, sales promotion efforts, type of packaging, product differentiation, credit facility and
customer services provided, etc. For example, if the product enjoys some uniqueness in the market
(due to intensive advertising or any other reason), then the firm may charge higher price.