B.Com.(Hons.

) Semester-V Commerce

Core Course - XI
PRINCIPLES OF MARKETING
Unit I-V

SCHOOL OF OPEN LEARNING

University of Delhi

Department of Commerce
 CONTENTS

UNIT I
Lesson 1 Marketing Management
Management: Nature and Importance
Lesson 2 Marketing Mix:: Choice of Marketing Methods
Lesson 3 Marketing Environment

UNIT II
Lesson 1 Consumer OR Buyer Behaviour
Lesson 2 Determinations of Buyer Behaviour
Lesson 3 Marketing Segmentation

UNIT III
Lesson 1 Product
UNIT IV
Lesson 1 Pricing
Lesson 2 Channels of Distribution
Lesson 3 Distribution-Wholesaling
Wholesaling and Retailing
Lesson 4 Physical
al Distribution of Goods
UNIT V
Lesson 1 Promotion
Lesson 2 Advertising
Lesson 3 Personal Selling
Lesson 4 Sales Promotion
Lesson 5 Ethical aspects and Consumer Protection in India

Editor
K.B.Gupta

SCHOOL OF OPEN LEARNING

University of Delhi
5, Cavalry Lane, Delhi-110007
Unit-I
 Unit-II
LESSON 1
 LESSON 2
DEfERMINANTS OF BUYER BEHAVIOUR
-Shrl S. S. BalO'O
Buying behaviour is a process. Potentia, customet1 ace subjected lo various 5tlniuU.
The customer is regarded as a black box as wo caoool see what is going on in bis mind. He
responds to the scimuli or inputs and may purcbaso some product of service of interest to the
marlc:ctiog management. The model of buyer l>ehaviour is a stimulus-response model. Reaj,onse
mav be decision to purchase or not to purchase. Under tho systems view of buyer behaviour
we bave-
1. Jnputs 2. Processing 3. Outpu.ts 4. Feedback loop.
The objective of the process is, of course, expected oatisfaction or service.
lnpui. include buying power, marketing.mix and ocher factors. Buying power i1 tho ability
10 partici_pate in the exchange activity. Marketing mix is the marketing effort in product,
price, promotion and distribution appeals. Promotion apJ)Cllls are through advertisins, saleamen,
rd'erencc groups and sales promotion. Other iopuu are intra personal inlluences, inter-penon&l
inllucncea are reflected in motivation, perception, learning, attltudea and pe(liOnality of buyen.
Iotu·penonal inftuenccs arc rcprcscnled by family, social class, reference groups and ctllturo.
Other environmenlal inftucnoea arc general coonomic conditions, pending legislation, fashion
tltllidt, and technological advancers. Outp11U are buyer's attitudes opillicns, feeling,,, and
pcd'crences as affected by buying proeeas and buyer'• actions such •• patronage, brand or store
loyalty, poaitive or negative influencea upon other potential buyers, purchasing responses aro­
cboice of product, brand, dealer, quantitiea ecc·.
Buyet behaviou.r is an orderly proc= whereby the buyer interacts with bis or her
environment for making a purchase decision ,>o prcxlucti.
lntct01I or individual factors arc psychological factors such as;-

1. Motivation 2. Pe.rocption 3. Learning ◄. Attitudes S. Pcraooality.

Socio-cultu.ral facton are-
1. family, 2. .Reference Groups, 3. Social Cass, ◄. Cultu.re.

Enviroruneotal factot1 are-Economic, TcchnoloalcaJ, Legal and Political Facton,

Buyer behaviour ii the coraentone of ma.ruling 11tatel)'-firms must undentand buyer

llcllavioul: to achieve tho obje;cliv� of custoDler 11Usftction. Buyer•, mind ii called the black
1,cg. � are processed in hl1 mind and ,buyer's rcsp�oses become the oulpu!I of the paycbo­
logical' ptcc su The output in tho form of buying a product 11 the objective of marke<er.

CONSUMER BUY�G PROCESS

For mamtina mall8gemcot tbe moat important bebaviou.r on the par! of a prospective
_ buyct or conawne, ii the process of t1cciq whether to buy or not to buy. Let us now
 LESSON 3
MARKET SEGMENTATION
Shri Raman Chawla
Bhagat Singh College (Ej,e.)

Natatt aDd Slplllcuct of Markt! S�mc•talloa,

Markel segmentation strives for 1uocasful auainment of or¥ani�ational objectives by

identifying and serving groupt of people with similar wants. 11 i1 a compromise between the
inefficiency of trcatins all coosumcn alike and the ioetl!clency of lttatlng caclt one dilfercotty.
Whenever a market for product or aenice coosisll of two or more buyers the market is capabllf
of being segmented. Market 1egmeotatioo is the 1ubdividiag of a marlcet into homogeneous
subsets of cusiomen, where any 1ubset may conceivably be selected as a mark<:! target to ba
re•chcd with a distinct marketing programme. The power of this concept is that in an age of
intense competition for the man market, individual sellers may prosper through creatively
serving ,pociJic market segmet1ts "Nb0$e needs aro imperfectly sal'isfied by the mass market
nlferings.
The concept of market segmentation is based on the fact that markets, rather than bei 11g
homcgcpo:is, arc really heterogeneous. No two buyers or potential buyers of a product �re ever
identical in all respects, However, large groups of potcntia.l buyers share certain charac(crlstica
of d:stio.ctive sigoi6caoce 10 marketing. and each such group constitu1es a market 1qgmeot.
Exittence. of a group or individual with common chatacter· istics, however, does no.t ,,. irsclf
constitute a market 50gmea1. Only wht!I they b3vc common characteristics as buyers ihen it
C011stitutcs a market segment. By grouping such individuals into .market segments, I\ degree of
homogeneity i s altaincd, making it possible to tailor optimal n1arketing strategies ti> cacb
segment.

Segmtatatioo Criterl1
Segmentation strategy uses the following four criteria:
(a) Identity; The marketing man•ge1 interested in segmentation must have, fit�! of all,
some means of identifying members of the segment-some basis for classifying an individual u
being or not being a rru:mber of the segment. That is, there must be some evident want or
desi re, or atlca.st some commo:n ch.ar·actcri1.1jc or behavjour pt?.ttern.
(b) Acusslbillly: Once a segment has been identified, 1hc next question is: Can we
commuoicaie with them 1 The organisarion must be able to focus its marketing efforts 011 the
chc,sen scgmcnr.
(c) Rts�,uiv,ness : If the segment can be identified and communicated wiil, the next
criterioD 10 consider is whether c:>r not the segment will respond to marketing effort. For example,
certain proc1uct·fea1ures, a lower price or more scrvice;may more precisely satisfy the need• .ot
• ,;.... .....,11 than would a gener■l markeUna clfort.
Unit-III
 Unit-IV
LESSON 1
 LESSON 2
CHANNELS OF DISTRIBUTION
-Dr. N. Mishra

lntroductlon
Whatsoever has been produced must be diStributed through appropriate channels. How
efficiently and economically goods arc made a. vailablc to the. consumers depends largely on the
channel ofdistribution selected.
Meaning or Channel or Distribution
Channels ofdistribution, also called marketing channels or trade channels, are used 10 provide
consumers with a convenient means of obtaining the products and sel'.Vices they require. Channels of
distribution refer to various marlcct-ing institutions (middlemen) and the interrelationships engaged in
cffe<:ling the physical and title flow ofgoods and ser;ices from producers to consumers or industrial
users. Thus the route or palh thro11gh which goods move from the place ofproductjon to the place of
consumption is called channel of distribution. Middlemen present in the channel ofdistribution arc
business firms and individuals operating between tlile produces and the consurntr oc industrial purchaser.
Types of Channels of Distribution
Basically !here arc two channcls-dire<:tan.d Indirect. In direct channel there arc no middle:rnffl,
and therefon:. mark�ting functions are performed by the producer. and g�ds directly pass from,the
producer to the consumer. A ltrmatlvely, there can 'be indirect channel wherein one,or more middlemen
may be used in the distribution system linking the producer and 'the consumer. Based on the nature of
the product involved. there are three types of channels. viz .• channels for consumer goods, producer
goods and services as shown below:

'g
0
Producer _______ __________________ Consumer
0 Producer RellUler __________ Consumer
�
Producer ____ _ Wholcsakr ___ Retailer Consumer
Producer _____ Agent ____ Retailer Consu mer
·o
u Producer _____ Agent ____ Wholesaler _ __ Retailer ___ Consumer
Producer ________________________ lndl . User
] Producer
0 Producer
Wholesaler _______ _ lndl. User
_ ____ A gent ____ ________.:___ Indl l}ser

..,.s'j
Producer _____ Agent. ____ Wholesaler ________ fndl Oser
Service Provider ________________ ______ Consumer
or lndl. U'ser
Service Provider __ Agent . _______________ ___ Consumer
or l ndl. User
Fig. 3.1. Alternatlv� Channels of Distribution
 LESSON-3
DISTRIBUTION-WBOLESA.LlNGAND RETAILlNG
-Dr. N. Mlslmz

Wholcullng and Retailing

We have already seen in the preceding unit that wholesalers and retailers fall under the
.c -itegory of merchant middlemen and occupy a predominant po$ition in the channel o(dislribution.
The importance-of these middlemen lies in the fact that they aclllally take o:wnership title to the goods
and effect sales on their own accord. A brief discussion of wholesalers and retaflcrs follows.

Wholesalers.
Wholesalers are merchant middlemen cnpgcd in wholesaling. Wholesaling involves the
activities ofpersons or firms who sell to retailers and other wholesalers or to industrial users, but not .
in significant amounts, to ultimate C011$.UffiCrs. Wholesalers provide an important link between the
producer and the retailer.
lyp�s of Wholesalers
:- �ed on the functions they perform, wholesalers may be of the following types:
(I) l'ure Wllolesaler. Apure wholesaler, also caned wholesaler proper o-r distributor, is engaged
in only buying and selling of goods in large lots, and does not engage himself in such.activities
as 011lnufacturing or retailing as oth_cr wholesalers do.
(ii) Recail Wbolesiller. Such wholesalers combine retailing with their whol.esaling function.
Thus they purchase goods in.large lots frommanufacturcrs and sell them 10 retailers as well
11S consumers.

(Ui) Manufacturer Wbolesaler.Amanufacrurcr wholesalcr engages himselfin the manufacture

of goods besides undertaking wholesaling functions. He may also deal in goods of other
manufacturers with the purpose of ll)CCting the rc1ailcr's demand, increasing his turnover
and thus reducing overhead expenses.
Fu ndioa.s of W\olesalers
Wholesalers provide the f'c!lowing imponant functions:
(l) Buying. The wholesalers anticipate customer demands gather information regarding
alternative sources of supply and putchasc and assemble goods from these sources.
(ii) Selling. The wliolesalers sell goods in large lots to retailers and industrial users.
(iii) Storln1, Wholesalers p�vidc warehousing services at lower cost I� most individ.ual
producers or retai1crs could provide.
(Iv) Transporllng, The wholesalers transport goods.from the place of manufacture to their own
godowns from where they further move the _goods to retailers.
(,•) Grading and Pack.aging. The wholesalers perform grading of the assembled goods according
to certain standards, often give a brand name and unde��e pa�kaging ofgoods to convince
the buyers of the qualil)' of the goods being pur,chascd.
 LESSON-4
PHYSICAL DfSTRIBUTION OFGOODS
-Dr. N. Mf.slrra

1:oday Physical d isinl>ution function is recognized as a 'key line' between production and
marketing functions. Proper planning and designing of physical distribution is highly significant in
today's competitive =rket-it effects savings in cost ofdistribution -and stimulates and creates demand,
These are _achieved by creating place and time utilities 10 the products. Perhaps these may be the
reasons why physical distribution management ha.s established itself as one of the principal branches
of marketmg management.

Concept of Pbyskal DiJtrlbutloo

Physical distribution is the set of activities used to manage the flow of products from
manufacturers to consumers and end users. According to Philip Kotler, "physical distribution involves
planning, implementing and controlling the pbysaical flow of materials and final goods from points of
origin to points of use 10 met customer needs al profit." Pliysical distribution activities can be conducted
by any member of the channel. For instal)ce, raw materials must be moved from their origin to the
production facility, or agricultural produce muS'l be taken to the grain marlcct; raw materials, parts,
semi-finished products, and finished products must be moved within the plant or to and fl'l)m
warehouses; and finished products must be moved from the factories to marketing intermediaries
and on to the final consumer.
As indicated earlier, physical distribution is becoming increasingly important as firms attcmpl
to reduce costs and increase service. An organization can gain a competitive advantage through a
well-designed physical distribution system. By g,etting products 10 the target market on a timely basis
and in proper condition,• company can satisfy hs customers and outsell its competitors. Also, a well­
designed physical distribution system can decrea.se the total cost of distnburion, although tra.deoffs
must be made 10 ensure efficient use of respurces and customer satisfaction use of resou= and'
customer satisfaction.
Objectives of Pbyskal Distribution
The basic objective of physical distribulion is to minimize costs and maximize service, i.e.,
getting the right goods 10 the right places at the right time for the leasl cost. Physical distribution
managers attempt to reduce costs in all areas. including transportation, warehousing and order
processing. However, reducing costs in one area may increase costs in another. For instance, it is
sometimes less cltpensivc lo lease warehouse facilities than to own them. However, leasing could
increase the cost of transportation because products would have 10 be transported from the factory
to the leased warehouse instead of 10 an on-site wareho�. Many manufacturing firms develop
partnerships or alliances wilh organizations that specialize in some physical distribution activity, such
as transportation or warehousing. These partnecships dramatically improve the qualily of customer
service and reduce costs, because each organization is doing what it does best and most efficiently.
By using a total cost approach. o finn views the physical dis1nl>ution system as a whole, as
aseries of unrelated activities. The finn tries t<i reduce the total distribution cost through an integrated
approach to physical distribution. Inst.cad of looking for the lowest possible transpo�tl011 rates or
 Unit-V
LESSON 1
•

LESSON-2
ADVERTISCNG

Natur.e of Advertising
Advertising is an important method of promotion. It provides useful information to a large
number of people at the same time. Advertising has become very significant due to cut throat
competition, fast changes in fashion nnd taste of consumers and technological developments.
Mass selling requires quick and economical ddssemination of information on a large scale 1u
potential customers. Advertising is effective means for this purpose. According to the Amencan
M3rketing Association. Advertising is "advertising corasists of all the acnvities involved in prcsentm�
to a group a non-personal. oral or visual, openly sponsored message regarding a product, service or
idea; this message called an advertisement, is dis_s eminated through one or more media and paid ·o,
by the identified sponsor"
Thus. advertising includes all activities required to prepare-the m�ssagc (advcnisement) unu
to get 11 to the Intended persons 10 induce action in ac,cordancc wilh the intent of the advertiser.
The main features of-advertising are as follows:
(i i It is impersonal form ofpreseotation or promotibn of products, services or ideas. There 1s no
face-to-face contacl with the e.us10111ers.
(ii) It is paid form of communication. The .advertisements are communicated through various
adveFtising media and the advertiser has to·pay for the sp�ce or time hired to the owner of
the. media.
(iii) It' is issued by an identified spon.�or. The-advertisement contains the name of the adveniscr.
(iv) It is a form of mass communication. The me�ge is directed to a larg\! number of persons
simultaneously.
Advertising can be of severa.l type-s
(i) Product Adve.rtisiug: Normal characteristic of advertising is to cre3te primary demand for
a product category rather than for a specific brand. lt is wrongly believed that producr
advertising must stress on brand name. This is basc.d on the feeling tha1 a good image often
enhances the eflectiveness of product advertising. Naturally, the stress is laid on th� brand.
Howev"r, in practice, mosl companies w�rc suc<:essful in making the product image by
using the brand names (t.g., Dalda. Dettol, Elorlicks). In short. where the comp3ny tries lO
sell its product or services through advertising ii may be referred to as product advertising.
(ii) lmli1111im1a/ ;Jdvertisi11g: Where the objcctiw of advertising.is to project the image of a
These
cornpimy or its services, it tai<es 1he form ofan I nstiturional advertising. advertisemdlts
are not 3lways direoled only to consumers. Instead, they may be 3imed at mnny of the
various sets of puhlic (shareholders. creditors, etc.). It is not at all product oriented. but is
designed to enhance the image of the company.
(iii) Primary Oema11d Ad.,eriisi11g: It is intended to stimulate primary demand for a new product
or product category. It is heavily utilized durfng the introduction stage of the product life
cycle.
 LESSON-3

PERSONAL SELLING

Meaning ol Personal Selling

Personal selling is the process of assisting and persuading a prospective buyer to buy a
product or service in a face to face situation. It involv�s direct a.nd personal contact between the
sclle,- or his representatives with the prospective buyer for persuading the later to buy the seller's
product or service. Personal selling has �n defined as "the proct'Ss whereby the seller ascertains
and activates the needs or wants of the buye,- and satisfies the needs or wants to mutual continuous
advantage of both the buyer and the seller."
Personal selling is beneficial to both chc seller and the buyer. It increases the sales and
profits for the seller and helps to satisfy the wants of consumers. It is "the 11rt of so presenting an
offering that the prospect appreciates the need for it and th111 a mutually satisfactory sale follows."
The real purpose of personal selling is not simply to sell the present product or service but
winning a regular customer. In the words ofG Blake, "salesmanship consists of winning the buyer's
con6dence for seller's goods and thereby winning a regular and permanent customer." Aggressive
selling or selling by pressurising the customers is unethlcal and -cannot pay in the long run. A good
salesman should assist the customers in satisfying their needs by offering products or-services that
suit their capacity and provide them lasting �fllifactiori.
The foregoing discussion reveals the following characteristics of personal selling:
(i ) Pe,-sonal selling is informative. It provides "information about tile.availability, features and
uses of products or services. 11 tells customers how best they can satisfy their needs. It is an
educative process.
(ii) Personal selling is persuasive. A salesman convinces the people to buy his product. lie
should not pressurise the customer but. provide a solution to his problem. He can win the
buyer's confidence by undcntanding the buyer's point of vie.w. A68.lesman should not only
provide knowledge- but advice and assistance too. He is supposed to act as the friend,
philosopher and guide of customers.
(iit) Personal selling involves direct and personal contact between the buyer and the seller or bis
representative. It is intcrpCTSOlllll procc'ss'.
(i-'). Persoltlll selling is creative. It creates w:ants by showing to prospective buyers how'the new
product or service will benefit them. Foi-��mplc;cvcrybody nceds education but everybody
docs not want education. Personal selling is the ability 10 convert human needs into human
wants.
(v) Pe,-sonal selling is pervasive. It is used notonly in business but in all walksof life. A politician
secIcing vot�. a professor putti�g his ideas across to the class, traffic police creating safety
consciousness among drive,-s and a soci:al service agency requesting people to donate blood
all make use of salesmanship.
 LESSON-4'
SALES PRQMOTION

Used in a broad sense, sales promotion includes all !hose functions

°
which have to do with the
marketing of o product and all other activities designed to increase and expand the market. But it
must be clearly distinguished from advertising and personal selling, though the basic aim of all the
three is one and the same, viz., to increase the volume of sales. It has been aptly remarked by an
advertising manager that •sales promotion moves the product toward the buyer, .while advertising •
moves the buyer toward the product.'

Meaning of Sales PromoUon

The American Marketing Association defines sales pro.motion to include "those marlcrting
activities.other than J)Cl'Sonal selling, advertising and publicity that stimulate consumer-purchasi11g
and dealer effectiveness. They include point-of-purchase display, s.hows and exhibits, demonstrations
and other non-<:WTCnt selling efforts." According to Steven J. Skinner, "Sales promotion is an activity
or material that acts as a direct inducement (offering added value or incentive for a product) to
consumers, sales persons. or resellers." Advertising, publicity and personal selling arc designed to
communicate a message aliout a produci; but sales promotion is used to generate an immediate sale.
Sales promotion is a phrase tliat covers various promotools that areno1 formally classified as advertising,
publicily or personal selling.

Functions or Sales Pr.omotlon

In effect, a major function of sates promotion is to supplement and coordinate efforts relating
to personal selling and advertising. In the process, :sales promotion performs the following other
functions:
{I) Lower unit cost. Sales promotion efforts lead to large.scale operations which produce
lower per uni I cost.
(II) Faster product acceptance. Promotools like contests, coupons, gifts, etc., act faster in
creating product acceptability among the COoswnCTS.
(Ill) Effective sales support. Sales p�motion basically provides sales support to personal
selling as well as impersonal salesmanship like advertising.
(Iv) Better control. The marketing manager can use sales promotion tools for establishing
proper coordination and control among \lllnous promotional efforts.

Objectives or Sales Promotloa

Some of the i(llportant purposes for which sales promotion is used arc as under:
(i) Introduction of new products
(ii) · Winning of new customers
(iii) Increasing current sales; panicularly during slack season
(iv) Providing s�les suppon to dcalCTS and sa.lcsmcn, and
(v ) Increasing the public image of the firm,
 LESSON-5
E1hiCJ1l aspec1s and Consumer Prore�tion in India
£1hlal Asp,cts or Marke!lng
The social and ethical cff,cu ar a(lvonising !\ave become liol 1opic< for crilic,;, How­
ever, those people who have re alised lhc tccbnkal and economic beneJ!t• of advc1ti,ing. Io
fact, the ethical standards vary aillong cuhur81, rcligiou1, racial, age and other groups, Io this
contctt, one should note that hundred yenrs ago. the ethical standards 01· business were differ ent
from tbooe th·at arc considered appropri•te tod1y. Ad9ertiscmenu wilh some deception were
001 unco<nmon : yet they wore r<>ce,ved well by bntb the buyer and seller under the slogan :
"Let the bui•er beware". lo spite of this slosao, &dvertisiog practices have changed con .s,dora•
bly io receni years; for buyers have become more sophisticated, business bas become more
atable nod governmenl bu placed a vari ety of renrictioos on businessmen to pr,olect consum er
interes1s. Social and ethical issues have g•ined importance aide by side with the economic
issues, which have always been rccdving priority over otber issues. The si1uation at present is
tbnt adv · erti<ing practitioners sre mor� interested in improving tbc cffici�ncs1 of their business
than in finding oul how it affects socie&y. But where an inslitulion advertises by stricly adher­
ing to social/moral s1anda1ds, its advertisements do not deceive or manipulale the individual
buyer r.:ir long, even though th.<re may hove been some deception in the beginning. This, and
the .effects oo con$umers. have ofleo been, -referred 10 by ad,-ertising practitioners. Yet
people do complain about a advertising. if not so seriously. It rs aJso observed that
consume, is more likely to rerer an advertis:ment for bis favourite brand as jgforma­
tive or enjoyable; he ls Jess likely 10 call it a-nnoying or offensive. An advertisement is
classified by consumers •• ao annoying one w.hen it contradicts bis experience and knowledge
of the product; and is deemed to be off'ensi,·e when they have moral reservations about lhe
product advertised. So, under varied opinioms of the people and changing socio! aad ccon·omic
conditions, advertising has been critcised on the following grounds.
(1) Deceplioa :
Advertising has been criticised because ft involves the issues of deception ond manJ•
pulation. Although it Is diffieull I() define the word "deception", it leads to :
(a) Fal.se or miskading statements, wbethe r visual or verbal ;
(b) Mitleodiqg price claims ;
(c) Statements, auggestic:ms or pictures wbfoh are offensive to public decency.
Every advertiser 1hould avoid deception io adver1ising 1 and should obstrve the laws and
lega.1 provisions poriainiag to advertising. However. it should be .noted that everyone does .not
cgree oo the d1Bnition or deception. This dls-::igreemeot
· •bout what is deception gives rise to
dilfe1cot problems. For ••ample, who should. decide whether ao advertisement is deccptiveor
misleading? How can dishonest ood car eless advertisers be detected, prosecuted and punished ?
To ·wbat extent can self-r.gula•ion be relied upoo? Tbcse questions and other mske the issue
of d eception a comple� ar,o t'or an advcni,N, the media and tbe government. ll is for this
ve1y reason that o.n odvenisement is judged by the general impression II creates. Yet the total
impression of1be adveriisemeni moy nill be deceptive. In such conditions, instead or disc�rd•
iog campaign torsUy, the measures which nr• clo5oly United wi1h advertising objectiv es nod
ultimate consumer behaviour or oltitude should be laken in10 occonnt with a view 10 deciding
the wortltof odvertlog,