Professional Documents
Culture Documents
11
Marketing
Learning Objectives Where do Companies do their Business?
In the Markets or in the Society?
After studying this chapter, It is an undisputed fact that a company’s survival
you should be able to: does not depend upon its consumers alone, but a
diverse set of stakeholders like the government,
¾¾ explain the meaning of religious leaders, social activists, NGOs, media,
‘marketing’; etc. Hence, earning the satisfaction of these
segments is also as imperative as they add to the
¾¾ distinguish between power of the brand by word of mouth.
‘marketing’ and The social concern adds to the strength of the
‘selling’; brand. Corporates that embraced the deepest
social values, have been successful in building
¾¾ l i s t o u t i m p o r t a n t powerful brand, and, eventually, robust customer
functions of marketing; relationship. The area of corporate social justice
fall under two broad categories. The issues such
¾¾ examine the role of as the nutrition of children, child care, old-age
marketing in the homes, amelioration of hunger, offering aid to
those affected by natural calamities, etc. needing
development of an
instant attention with humanitarian perspective,
economy in a firm,
comes under the first category.
to the society and to The issues that contribute to making society a
consumers; pleasant place to live in the long run, may be grouped
under the second category. The issues which come
¾¾ explain the elements of under this category are health awareness and aid,
marketing-mix; education, environmental protection, women’s
employment and empowerment, preventing unjust
¾¾ classify products into discriminations (on the basis of caste, community,
different categories; religion, ethnicity, race, and sex), eradication
of poverty through employment, preservation
¾¾ analyse the factors of culture, values, and ethics, contribution to
affecting price of a research, etc.
product; Procter and Gamble’s (P&G) philosophy is that it
should lead the industry in implementing a global
¾¾ l i s t o u t t h e t y p e s environmental programme. P&G is one of the
of channels of first companies in the world to actively study the
distribution; and influence of consumer products on the environment
and introduce concentrated products, recycled
¾¾ e x p l a i n t h e m a j o r plastic bottles, and refill packages to the industry.
tools of promotion, viz. P&G contributes to sustainable development
advertising, personal and addresses environmental and social issues
connected with its products and services.
selling, sales promotion
and publicity. Source: Adapted from ‘Effective Executive’,
Feb. 2006
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Let us consider a typical day in our products. These activities are referred
life. Right from the time we get up in to as marketing activities.
the morning to the time we go to bed, For a proper understanding of
we use number of products to satisfy marketing, number of questions need
our different needs. Beginning with the to be answered. These include: What
breakfast, we take such items as bread, do we mean by a market? What can be
butter, milk, and rice, to satisfy our marketed? Is it products or services or
hunger; use the services of a bus or an something more? Who is a marketer?
auto or a cycle to reach to our school or What is marketing management?
place of work; read books, magazines These points have been taken up for
and newspapers, to keep ourselves discussion in the following sections.
informed and acquire knowledge; use
What is a Market
computers, cell phone, television and
other gadgets for communication/ In the traditional sense, the term
entertainment; and purchase many ‘market’ refers to the place where
other products like gifts, shoes, buyers and sellers gather to enter into
clothing, furniture, etc., from market transactions involving the exchange
to satisfy our different needs. of goods and services. It is in this
Who makes these products and sense that this term is being used
why? These products are manufactured in day to day language, even today.
and marketed by different firms. For The other ways in which this term
example, Lifebouy soap, Closeup is being used is in the context of a
toothpaste, Surf detergent powder are product market (cotton market, gold
manufactured by Hindustan Lever; or share market), geographic market
(national and international market),
Ariel detergent powder by Procter
type of buyers (consumer market and
and Gamble, Dairy Milk Chocolate
industrial market) and the quantity of
by Nestle, Atlas Cycles by Atlas
goods transacted (retail market and
cycle company, Kwality Ice-creams
wholesale market).
by Kwality Walls, LG Televisions by But in modern marketing sense, the
LG Electronics and so on. These term market has a broader meaning. It
firms are called marketers. These refers to a set of actual and potential
firms undertake various activities buyers of a product or service. For
to stimulate the demand for their example, when a fashion designer
products and earn profit by satisfying designs a new dress and offers it for
customer’s needs and wants. People exchange, all the people who are willing
purchase products because these to buy and offer some value for it can be
satisfy some of their needs. stated to be the market for that dress.
Number of activities are performed Similarly, market for fans or bicycles
by the marketers to facilitate exchange or electric bulbs or shampoos refers to
o f go o ds a nd services b etw een all the actual and potential buyers for
producers and the users of such these products.
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“Business is not financial science, it’s about trading, buying and selling. It’s about
creating a product or service so good that people will pay for it.”
— Anta Roddick
“Marketing takes a day to learn. Unfortunately it takes time to master.”
— Philip Kotler
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health tourism). Thus, anything that is the activities which facilitate exchange
of value to the other can be marketed. of goods and services between
It can be a product or a service or a producers and consumers or users
person or a place or an idea or an event of products and services. Thus the
or an organisation or experience or focus of marketing management is on
properties. (see box) achieving desired exchange outcomes
Who is a marketer? Marketer refers with the target markets. Taking a
to any person who takes more active management perspective, the term
part in the process of exchange. marketing has been defined as “the
Normally it is the seller who is more process of planning and executing
active in the exchange process as he/ the conception, pricing, promotion
she analyses the needs of the potential and distribution of ideas, goods and
services to create exchanges that
buyers, develops a market offering
satisfy individual and organisational
and persuades the buyers to buy the
goals” by American Management
product. However, there may be certain
Association, similarly Philip Kotler
situations where the buyer may be
has defined Marketing management as
taking more active role in the exchange
the art and science of choosing target
process. Let us say in situations of
markets and getting, keeping and
rare supply, the buyer may be taking
growing customers through creating,
extra efforts in persuading the seller
delivering and communicating superior
to sell the product to him/her. This
customer values of management.
may be happening in defence deals
A careful analysis of the definition
or take a situation where a country reveals that the process of management
having installed a nuclear plant needs of marketing involves:
the supply of nuclear fuel or ‘Heavy
Water’. It may need to convince the (i) C hoosing a target market, say a
supplier of the products to supply the manufacturer may choose to make
readymade garments for children
same to it, by promising that it will
up to the age of 5 years;
be used for peaceful purposes only.
In this case, the buyer will be treated (ii) In respect of the target market
as the marketer. Thus, any body, who chosen, the focus of the process of
takes more active role in the exchange management is on getting, keeping
process will be taken as the marketer. as well as growing the customers.
That means the marketer has to
Marketing Management create demand for his products so
that the target customers purchase
Marketing management means the product, keep them satisfied
management of the marketing with the firm’s products and also
function. In other words, marketing attract more customers to the
management refers to planning, firm’s products so that the firm can
organising, directing and control of grow; and
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(iii) The mechanism for achieving seasonal products, (say fans, woollen
the objective is through creating, clothes) the marketer’s job is to change
developing and communicating the time pattern of demand through
superior values for the customers. such methods as providing short-term
That means, the primary job incentives, to the buyers. Thus, the
of a marketing manager is to marketing management in not only
create superior values so that concerned with creating demand but
the customers are attracted to with managing the demand effectively,
the products and services and as per the situation in the market.
communicate these values to the
prospective buyers and persuade Marketing and Selling
them to buy these products.
Many people confuse ‘selling’ for
Marketing management involves ‘marketing’. They consider these two
performance of various functions terms as one and the same. Marketing
such as analysing and planning the refers to a large set of activities of which
marketing activities, implementing selling is just one part. For example, a
marketing plans and setting control marketer of televisions, before making
mechanism. These functions are the sale, does a lot of other activities
to be performed in such a way that such as planning the type and model
organisation’s objectives are achieved of televisions to be produced, the
at the minimum cost. price at which it would be sold and
Marketing management generally selecting the distribution outlets at
is related to creation of demand. which the same would be available,
However, in certain situations, the etc. In short, marketing involves whole
manager has to restrict the demand. range of activities relating to planning,
For example, if there is a situation of pricing, promoting and distributing the
‘overfull demand’, i.e., the demand products that satisfy customer’s needs.
being more than what the company The function of selling, on the other
can or want to handle, (like what hand, is restricted to promotion of goods
the situation in our country was and services through salesmanship,
before the adoption of policies of advertising, publicity and short-term
liberalisation and globalisation, in incentives so that title of the product
early 90’s, in most consumer products is transferred from seller to buyer or
be it automobiles or electronics goods in other words product is converted
or other durable products. The job of into cash.
marketing mangers, in these situations The major differences between
would be to find ways to reduce the selling and marketing are listed as
demand temporarily by say reducing below:
the expenditure on promotion or (i) Part of the Process vs Wider Term:
increasing the prices. Similarly, if the Selling is only a part of the process
demand is ‘irregular’, such as in case of of marketing and is concerned
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with promoting and transferring continue even after the product has
possession and ownership of been sold.
goods from the seller to the buyer. (v) Difference in the Emphasis: In
Marketing is a much wider term selling, the emphasis is on bending
consisting of number of activities the customer according to the
such as identification of the product while in marketing, the
customer’s needs, developing the attempt is to develop the product
products to satisfy these needs, and other strategies as per the
fixing prices and persuading the customer needs.
potential buyers to buy the same. (vi) Difference in the Strategies: Selling
Thus, selling is merely a part of involves efforts like promotion
marketing. and persuasion while marketing
(ii) T ransfer of T itle vs Satisfying uses integrated marketing efforts
Customer Needs: The main focus involving strategies in respect of
of selling is on affecting transfer product, promotion, pricing and
of title and possession of goods physical distribution.
from sellers to consumers or
users. In contrast, marketing Marketing Management Philosophies
activities put greater thrust on In order to achieve desired exchange
achieving maximum satisfaction of outcomes with target markets, it is
the customer’s needs and wants. important to decide what philosophy
(iii) Profit through Maximising Sales vs or thinking should guide the marketing
Customer Satisfaction: All selling efforts of an organisation. An
activities are directed at maximising understanding of the philosophy or
sales and, thereby, the profits of the the concept to be adopted is important
firm. In other words, the emphasis as it determines the emphasis or the
is on profit maximisation through weightage to be put on different factors, in
maximisation of sales. Marketing, achieving the organisational objectives.
on the other hand, is concerned For example, whether the marketing
with customer satisfaction and efforts of an organisation will focus on
thereby increasing profit in the long the product—say designing its features
run. A marketing organisation, etc or on selling techniques or on
thus, attaches highest importance customer’s needs or the social concerns.
to customer satisfaction as a route The concept or philosophy of
to profit maximisation. marketing has evolved over a period
of time, and is discussed as follows.
(iv) Start and End of the Activities:
Selling activities start after the
The Production Concept
product has been developed while,
marketing activities start much During the earlier days of industrial
before the product is produced and revolution, the demand for industrial
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goods started picking up but the became the key to profit maximisation
number of producers were limited. of a firm, under the concept of product
As a result, the demand exceeded orientation.
the supply. Selling was no problem.
Anybody who could produce the goods The Selling Concept
was able to sell. The focus of business With the passage of time, the marketing
activities was, therefore, on production environment underwent further
of goods. It was believed that profits change. The increase in the scale of
could be maximised by producing business further improved the position
at large scale, thereby reducing the with respect to supply of goods,
average cost of production. It was resulting in increased competition
also assumed that consumers would among sellers. The product quality
favour those products which were and availability did not ensure the
widely available at an affordable price. survival and growth of firms because
Thus, availability and affordability of the large number of sellers selling
of the product were considered to quality products. This led to greater
be the key to the success of a firm. importance to attracting and persuading
Therefore, greater emphasis was customers to buy the product. The
placed on improving the production business philosophy changed. It was
and distribution efficiency of the assumed that the customers would
firms. not buy, or not buy enough, unless
they are adequately convinced and
The Product Concept motivated to do so. Therefore, firms
As a result of emphasis on production must undertake aggressive selling
capacity during the earlier days, the and promotional efforts to make
position of supply increased over customers buy their products. The
period of time. Mere availability and use of promotional techniques such as
low price of the product could not advertising, personal selling and sales
ensure increased sale and as such promotion were considered essential
the survival and growth of the firm. for selling of products. Thus, the focus
Thus, with the increase in the supply of business firms shifted to pushing
of the products, customers started the sale of products through aggressive
looking for products which were selling techniques with a view to
superior in quality, performance and persuade, lure or coax the buyers
features. Therefore, the emphasis to buy the products. Making sale
of the firms shifted from quantity of through any means became important.
production to quality of products. The It was assumed that buyers can be
focus of business activity changed to manipulated but what was forgotten
bringing continuous improvement in was that in the long run what matters
the quality, incorporating new features most is the customer satisfaction,
etc. Thus, product improvement rather than anything else.
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To sum up, the marketing concept is to identify the needs and wants
is based on the following pillars: of the target market and deliver the
(i) I d e n t i f i c a t i o n o f m a r k e t o r desired satisfaction in an effective
customer who are chosen as the and efficient manner so that the long-
target of marketing effort. term well-being of the consumers and
the society is taken care of. Thus,
(ii) Understanding needs and wants
the societal marketing concept is the
of customers in the target market.
extension of the marketing concept
(iii) Development of products or as supplemented by the concern for
services for satisfying needs of the the long-term welfare of the society.
target market. Apart from the customer satisfaction,
(iv) Satisfying needs of target market it pays attention to the social, ethical
better than the competitors. and ecological aspects of marketing.
(v) Doing all this at a profit. There are large number of such issues
that need to be attended.
Thus, the focus of the marketing
concept is on customer needs and the
customer satisfaction becomes the
Functions of Marketing
means to achieving the firms’ objective Marketing is concerned with exchange
of maximising profit. The purpose of of goods and services from producers
marketing is to generate customer to consumers or users in such a way
value at a profit. that maximises the satisfaction of
customers’ needs. From the view point
The Societal Marketing Concept of management function, number of
The marketing concept, as described activities are involved, which have
in the preceeding section cannot be been described as below:
considered as adequate if we look 1. Gathering and Analysing Market
at the challenges posed by social Information: One of the important
problems like environmental pollution, functions of a marketer is to gather
deforestation, shortage of resources, and analyse market information. This
population explosion and inflation. It is is necessary to identify the needs
so because any activity which satisfies of the customers and take various
human needs but is detrimental to the decisions for the successful marketing
interests of the society at large cannot of the products and services. This
be justified. The business orientation is important for making an analysis
should, therefore, not be short-sighted to of the available opportunities and
serve only consumers’ needs. It should threats as well as strengths and
also consider large issues of long-term weaknesses of the organisation and
social welfare, as illustrated above. help in deciding what opportunities
The societal marketing concept can best be pursued by it. For example,
holds that the task of any organisation rapid growth is predicted in several
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refers to designing and developing the Selection of the brand name plays
label to be put on the package. The an important role in the success
label may vary from a simple tag to of a product.
complex graphics. 7. Customer Support Services: A very
Packaging and labelling have important function of the marketing
become so important in modern day management relates to developing
marketing that these are considered customer support services such as
as the pillars of marketing. Packaging after sales services, handling customer
is important not only for protection complaints and adjustments, procuring
of the products but also serves as credit services, maintenance services,
a promotional tool. Sometimes, the technical services and consumer
quality of the product is assessed by information. All these services aim
the buyers form packaging. We have at providing maximum satisfaction
seen that in the success of many of the to the customers, which is the key to
consumer brands in recent times such marketing success in modern days.
as Lays or Uncle Chips potato wafers Customer support services are very
Clinic Plus shampoos, and Colgate effective in bringing repeat sales from
Toothpaste, etc., packaging has played the customers and developing brand
an important role. loyality for a product.
6. Branding: A very important decision 8. Pricing of Product: Price of
area for marketing of most consumer product refers to the amount of money
products is whether to sell the product customers have to pay to obtain a
in its generic name (name of the product. Price is an important factor
category of the product, say Fan, Pen, affecting the success or failure of a
etc.) or to sell them in a brand name product in the market. The demand
(such as Pollar Fan or Rottomac Pen). for a product or service is related to
Brand name helps in creating product its price. Generally lower the price,
differentiation, i.e., providing basis for higher would be the demand for the
distinguishing the product of a firm product and vice-versa. The marketers
with that of the competitor, which in haveto properly analyse the factors
turn, helps in building customer’s determining the price of a product and
loyality and in promoting its sale. take several crucial decisions in this
The important decision areas in respect, including setting the pricing
respect of branding include deciding objectives, determining the pricing
the branding strategy, say whether strategies, determining the price and
each product will be given a separate changing the prices.
brand name or the same brand name 9. Promotion: Promotion of products
will be extended to all products of the and services involves informing the
company, say Phillips bulbs, tubes customers about the firm’s product,
and television or Videocon washing its features, etc. and persuading them
machine, television, and refrigerator. to purchase these products. The four
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or ‘Helpage’ working for the cause can afford. In other words, marketing
of senior citizens. Whether it is a as a business philosophy helps in
profit organisation or a non-profit serving the customers by satisfying
organisation, marketing plays their needs. It is a well known fact
an important role in achieving its that a satisfied customer is the most
objectives. It helps the individual valuable asset of any firm. Thus,
consumers in raising their standard of marketing plays a crucial role in the
living by making available the products survival and growth of a firm.
and services that satisfy their needs
and wants. It also plays a significant Role in the Economy
role in the economic development of Marketing plays a significant role in the
a nation. The role of marketing in development of an economy. It acts as
different situations may be described a catalyst in the economic development
in brief as follows. of a country and helps in raising the
standards of living of the people.
Role in a Firm Development of a nation can be
The modern concept of marketing judged by the level of standard of
plays a significant role in achieving living of its people. Another important
the objectives of a firm. It emphasises criteria, which is related to the first one,
that customer satisfaction is the is the per capita income of an average
key to the survival and growth of an citizen of a country. On this basis,
organisation in the contemporary an underdeveloped country may be
competitive marketing environment. stated to be one which is characterised
By adopting marketing orientation, by factors like poverty, scarcity of
an organisation whether profit making goods and services, predominance of
or non-profit making, can achieve its agriculture, etc.
goals in the most effective manner. It Marketing can play a significant
helps in focusing the activities of an role in the economic development
organisation on the needs and wants of a nation. It can inspire people to
of the customers. For example, what undertake new activities and to set
products or services will be marketed up enterprises for producing goods
by a firm will depend upon what do its that are needed by the customers.
customers need. Thus, an analysis of Marketing can help in overcoming
the needs of the customers shall be obstacles posed by high prices due to
undertaken in order to decide what imbalances in the levels of production
to produce and sell. The product will and consumption. It can also ensure
then be designed according to the smooth flow of goods through efficient
needs of the potential buyers and be physical distribution arrangements.
made available through the outlets In other words, marketing can
convenient to customers and be priced help in finding out right type of
at a level which the target customers products and services that a firm
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should manufacture, the places be the name (brand name) of the drink;
where it should make such products at what price it will be sold, (at par with
available for sale, the price at which the price at which other competitive
the products should be sold and the brands are sold or below it or above
channels that should be used for it); what distribution network will be
moving the products to the ultimate used to make the product available
place of consumption or use. This (e.g., hotels, restaurants, groceries
linkage between the business and shops, kiosks selling cigarette, paan,
consumption centres, accelerates the etc.) to the buyers whether the new
economic activity leading to higher soft drink will be promoted by putting
incomes, more consumption and up advertisements in newspaper or
increased savings and investment. magazine or on radio or television; or
say if newspaper, whether in a local
Marketing Mix newspaper or a national daily; whether
As stated in an earlier section, the in a paper of regional language or an
process of marketing involves creating English daily, etc. is decided at the
a market offering, to satisfy the needs level of marketing manager of the firm.
and wants of the present and potential However, there are certain other
buyers. The real question is how to factors which affect the decision but
create a market offering. Let us say a are not controllable at the firm’s
profitable business opportunity is seen level. These are called environmental
by some firm in the field of producing variables. For example, the political
soft drinks. To develop and market a factors such as the government policy
new brand of soft drinks, a number on whether to allow any technical or
of important decisions will have to financial collaboration in the area of
be taken for example whether to go soft drinks, production or economic
for any collaboration with a foreign factors such as rate of inflation
manufacturer of soft drinks, whether prevailing in a given period or a credit
to produce for the local market or for a policy of the central bank affecting
wider market, what will be the features the total availability of money in the
of the new product, and so on. market, all of which affect the sale
There are large number of factors of a particular product but can not
affecting marketing decisions. These be controlled or influenced by the
can broadly be divided into two decisions at the level of a firm. To be
categories: (i) controllable factors, and successful, the decisions regarding
(ii) non-controllable factors. Controllable ‘controllable factors’ are to be taken
factors are those factors which can be keeping the environmental variables
influenced at the level of the firm. In into consideration.
the previous illustration, for example, The controllable variables become
whether the drink will be packed in marketing tools, which are constantly
glass bottles or plastic cans; what will shaped and reshaped by marketing
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Product Price
Product Mix Price Level
Product Quality Margins
New Product Pricing Policy
Design and Development Pricing Strategies
Packaging Price Change
Labelling
Branding
Place Promotion
Channel Strategy Promotion Mix
Channel Selection Advertising
Channel Conflict Personal Selling
Channel Cooperation Sales Promotion
Physical Distribution Publicity
Public Relations
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Products
Classification of Products
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Convenience Products
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Shopping Products
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Speciality Products
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Industrial Goods
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2. Brand Name: That part of a brand, Though branding adds to the cost
which can be spoken, is called a brand e.g., to the cost of packaging, labelling,
name. In other words, brand name is legal protection, and promotion, it
the verbal component of a brand. provides several advantages to the
3. Brand Mark: That part of a brand sellers as well as the consumers.
which can be recognised but which
Advantages to the Marketers
is not utterable is called brand mark.
It appears in the form of a symbol, (i) E n a b l e s M a r k i n g P r o d u c t
design, distinct colour scheme or Differentiation: Branding helps a
lettering. firm in distinguishing its product
4. Trade Mark: A brand or part of a from that of its competitors. This
brand that is given legal protection is enables the firm to secure and
called trademark. The protection is control the market for its products.
given against its use by other firms. (ii) Helps in Advertising and Display
Thus the firm, which got its brand Programmes: A brand aids a firm
registered, gets the exclusive right for in its advertising and display
its use. In that case, no other firm can programmes. Without a brand
use such name or mark in the country. name, the advertiser can only
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should be kept in mind while choosing are added to the product line.
a brand name. (vi) It should be capable of being
(i) The brand name should be registered and protected legally.
short, easy to pronounce, spell,
(vii) C h o s e n n a m e s h o u l d h a v e
recognise and remember e.g.,
staying power i.e., it should not
Ponds, VIP, Rin, Vim, etc.
get out of date.
(ii) A brand should suggest the
product’s benefits and qualities. Packaging
It should be appropriate to the
product’s function. One of the most important
developments affecting the business
(iii) A b r a n d n a m e s h o u l d b e
world in recent years has been in the
distinctive.
area of packaging. Many products,
(iv) The brand name should be which we thought could never lend
adaptable to packing or labelling themselves to packing because of
requirements, to different their nature, have been successfully
advertising media and to different packed e.g., Pulses, Ghee, Milk, Salt,
languages. Cold Drinks, etc. Packaging refers to
(v) T h e b r a n d n a m e s h o u l d the act of designing and producing
be sufficiently versatile to the container or wrapper of a product.
accommodate new products, which Packaging plays a very important role
Levels of Packaging
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of having or using the prdocut and is This includes the cost of producing,
referred to as the price of the product. distributing and selling the product.
Similarly, money paid for the services The cost sets the minimum level or the
such as fare for the transport service, floor price at which the product may
premium for an insurance policy, and be sold. Generally all marketing firms
fee to a doctor for his medical advise strive to cover all their costs, at least
represent the price of these services. in the long run. In addition, they aim
Price may therefore be defined as the at earning a margin of profit over and
amount of money paid by a buyer (or above the costs. In certain circumstance,
received by a seller) in consideration of for example, at the time of introducing
the purchase of a product or a service. a new product or while entering a new
Pricing occupies an important market, the products may be sold
place in the marketing of goods and at a price, which does not cover all
services by a firm. No product can the costs. But in the long run, a firm
be launched without a price tag or cannot survive unless at least all its
at least some guidelines for pricing. costs are covered.
Pricing is often used as a regulator of There are broadly three types of
the demand of a product. Generally, if costs: viz., Fixed Costs, Variable Costs
the price of a product is increased, its and Semi Variable Costs. Fixed costs
demand comes down, and vice-versa. are those costs, which do not vary with
Pricing is considered to be an the level of activity of a firm say with
effective competitive weapon. In the the volume of production or sale. For
conditions of perfect competition, example, rent of a building or salary
most of the firms compete with each of a sales manager remains the same
other on the basis of this factor. It is whether 1000 units or 10 units are
also the single most important factor produced in a week.
affecting the revenue and profits of a Those costs which vary in direct
firm. Thus, most marketing firms give proportion with the level of activity
high importance to the fixation of price are called variable costs. For example,
for their products and services. the costs of raw material, labour and
power are directly related with the
Factors Affecting Price quantity of goods produced. Let us say,
Determination if the cost of wood for manufacturing
one chair comes to Rs.100 the cost of
There are number of factors which wood for 10 chairs would be Rs. 1000.
affect the fixation of the price of a Obviously, there will be no cost of wood
product. Some of the important factors if no chair is produced.
in this regard are discussed as below: Semi variable costs are those costs
1. Product Cost: One of the most which vary with the level of activity
important factor affecting price but not in direct proportion with it.
of a product or service is its cost. For example, compensation of a sales
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person may include a fixed salary of better position to fix higher prices.
say Rs. 10,000 plus a commission of 3. Extent of Competition in the
5 per cent on sales. With an increase Market: Between the lower limit and
in the volume of sales, the total the upper limit where would the price
compensation will increase but not in settle down? This is affected by the
direct proportion with the change in nature and the degree of competition.
the volume of sale. The price will tend to reach the upper
Total Costs are the sum total of the limit in case there is lesser degree of
fixed, variable and semi-variable costs competition while under conditions of
for the specific level of activity, say free competition, the price will tend to
volume of sales or quantity produced. be set at the lowest level.
2. The Utility and Demand: While Competitors’ prices and their
the product costs set the lower limits anticipated reactions must be
of the price, the utility provided by the considered before fixing the price
product and the intensity of demand of of a product. Not only the price but
the buyer sets the upper limit of price, the quality and the features of the
which a buyer would be prepared competitive products must be examined
to pay. In fact the price must reflect carefully, before fixing the price.
the interest of both the parties to the 4. Government and Legal Regulations:
transaction—the buyer and the seller. In order to protect the interest of public
The buyer may be ready to pay up to against unfair practices in the field of
the point where the utility from the price fixing, Government can intervene
product is at least equal to the sacrifice and regulate the price of commodities.
made in terms of the price paid. The Government can declare a product
seller would, however, try to at least as essential product and regulate its
cover the costs. According to the law of price. For example, the cost of a drug
demand, consumers usually purchase manufactured by a company having
more units at a low price than at a monopoly in the production of the same
high price. come to Rs 20 per strip of ten and the
The price of a product is affected buyer is prepared to pay any amount
by the elasticity of demand of the for it, say Rs 200. In the absence of any
product. The demand is said to be competitor, the seller may be tempted to
elastic if a relatively small change in extort the maximum amountof Rs 200
price results in large change in the for the drug and intervene to regulate
quantity demanded. Here numerically, the price. Usually in such a case, the
the price elasticity is greater than one. Government does not allow the firms to
In the case of inelastic demand, the charge such a high price and intervene
total revenue increases when the price to regulate the price of the drug. This can
is increased and goes down when the be done by the Government by declaring
price is reduced. If the demand of a the drug as essential commodity and
product is inelastic, the firm is in a regulating its price.
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directly may not be cost effective and goods or services as it moves from
may be difficult even otherwise. For the producers to the consumers. In
example, a manufacturer of detergent other words, channel refers to a team
powder in Gujarat would find it very of merchants, agents, and business
difficult to directly approach customers, institutions that combine physical
say in Delhi, Thiruvananthapuram, movement and title movement of
Bhuvaneshwar, Hyderabad Srinagar products to reach specific destinations.
and other far off places. Therefore, Mostly goods and services are
he/she would supply a large quantity distributed through a network of
of his/her product to a big merchant, marketing channels. For example we
say in Hyderabad. This big merchant buy merchandise of our need such
would then supply detergent powder as salt, bulb, tea, sugar, soap, paper,
to relatively small sellers in various books, flour, etc., from retail sellers.
towns of Hyderabad. These sellers The channels bring economy of
would, in turn, resell the goods to effort. This can be better understood
customers. In this manner, goods with the help of an example. Let us
are distributed from the place of say you have to buy four things,
production to the place of consumption. viz., Sugar, Bulb, Coffee and Ink.
These people, institutions, merchants, Most probably you would walk into a
and functionaries, who take part General Merchant’s Shop and buy all
in the distribution function, are the articles form one place. Imagine
called ‘Channels of Distribution’. what would happen if there were no
(see figure on channels) middlemen or general merchants
Channels of Distribution are set of available. In that case you would have
firms and individuals that take title, or to buy directly from the manufacturers
assist in transferring title, to particular of these products. You will have to
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Manufacturer Customer
Indirect Channel
Types of Channels
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M C
A U
R
ADVERTISING PERSONAL SELLING
S
K T
E O
PUBLIC RELATIONS SALES PROMOTION
T M
E E
R R Promotion Mix
Marketing Communications
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Personal Selling
‘Most people think ‘selling’ is the same as ‘talking’. But the most effective
salespeople know that listening is the most important part of their job.’
—Roy Bartell
‘You don’t close a sale, you open a relationship if you want to build a long-term,
successful enterprise.’
—Patricia Fripp
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Sales Promotion
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10. Sampling: Offer of free sample of source, e.g., the press in the form of
a product, say a detergent powder or news stories and features, the message
tooth paste to potential customers at has more credibility than if that comes
the time of launch of a new brand. as a sponsored message in advertising.
11. Contests: Competitive events Also, as the message goes in the
involving application of skills or luck, form of a news rather than direct sales
say salving a quiz or answering some communication, it can reach even to
questions. those persons who otherwise may not
pay attention to paid communication.
Publicity However, an important limitation
of publicity is that as a medium of
Publicity is similar to advertising, in promotion, it is not within the control
the sense that it is a non-personal of a marketing firm. The media would
form of communication. However, as cover only those pieces of information,
against advertising it is a non-paid which are news worthy and which
form of communication. Publicity symbolise some achievement in the
generally takes place when favourable field. Thus, a firm can’t use publicity
news is presented in the mass media to actively promote its products.
about a product or service. For
example, if a manufacturer achieves Public Relations
a breakthrough by developing a car
Managing public opinion of an
engine, which runs on water instead
organisation is an important task which
of petrol, and this news is covered by
can be performed by the marketing
television or radio or newspapers in
department. The business needs to
the form of a news item. It would be
communicate effectively to customers,
termed as publicity because the engine
suppliers, and dealers, since they are
manufacturer would benefit from such
instrumental in increasing the sales
dissemination of information about its
and profit. Besides those who come into
achievement by the media but would
direct contact with the organisation or
not bear any cost for the same. Thus,
its products, there are other members
the two important features of publicity
of the general public whose voice
are that:
or opinion is equally important.
(i) P ublicity is an unpaid form of This public may be interested in the
communication. It does not involve company and its product and have
any direct expenditure by the an impact on the business ability to
marketing firm; and achieve its objectives. Thus, it becomes
(ii) There is no identified sponsor for imperative to manage public opinion
the communication as the message and the company’s relation with the
goes as a news item. public on a regular basis. Therefore,
In publicity, as the information public relations involve a variety of
is disseminated by an independent programmes designed to promote or
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The major differences between advertising and personal selling are as follows:
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Key Terms
Marketing Brand Mark Market Packaging
Marketing Management Labelling Marketing Mix
Channels of Distribution Marketing Offering Physical Distribution
Consumer Product Promotion Industrial Product
Promotion Mix Convenience Product Advertising
Shopping Product Personal Selling Speciality Product
Publicity Generic Name Sales Promotion
Brand Brand Name Trade Mark
Summary
In the traditional sense, the term ‘market’ refers to the place where buyers
and sellers gather to enter into transactions involving the exchange of goods
and services. But in modern marketing sense, it refers to a set of actual and
potential buyers of a product or service.
What is Marketing: The term marketing has been described as performance
of business activities that direct the flow of goods and services from producers
to consumers. Marketing is not merely a post-production activity. It includes
many activities that are performed even before goods are actually produced
and continue even after the goods have been sold.
In Modern Times: Marketing is described as a social process by which
individual groups obtain what they need and want through creating offerings
and freely exchanging products and services of value with others. Marketing is
not merely a business phenomena or confined only to business organisations.
Marketing activities are equally relevant to non-profit organisations.
What can be Marketed: Anything that is of value to the other can be marketed.
It can be a product or a service or a person or a place or an idea. It can also be
an experience, properties, events, information or organisation.
Marketing management means management of the marketing function. It refers
to ‘The art and science of choosing target markets and getting, keeping and
growing customers through creating, delivering and communicating superior
customer value of management.’
Marketing and Selling: Many people confuse ‘selling’ for ‘marketing’. However,
selling is only a part of the process of marketing. The main focus of selling
is on affecting transfer of title and possession of goods from sellers to users.
Marketing activities put greater thrust on maximising customer’s satisfaction.
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Those activities, benefits or satisfactions, which are offered for sale, e.g., dry
cleaning, watch repairs, hair cutting, are called services.
Industrial products are those products, which are used as inputs in producing
other products. These are broadly classified in to (i) Materials and Parts, (ii)
Capital Items, and (iii) Supplies and Business Services.
Generic name refers to the name of the whole class of the product. For example,
a book, a wristwatch, and tyre. A brand is a name, term, sign, symbol, design
or some combination of them, used to identify the products—goods or services
of one seller or group of sellers and to differentiate them from those of the
competitors. That part of a brand, which can be spoken, is called a brand name.
That part of a brand which can be recognized but which is not utter able
is called brand mark. Brand mark appears in the form of a symbol, design,
distinct colour scheme or lettering. Brand or part of a brand that is given legal
protection is called trademark.
A good brand name should be short, easy to pronounce, spell, recognize and
remember; Should suggest the product’s benefits and qualities; be distinctive;
be adaptable to packing or labelling requirements; be sufficiently versatile to
accommodate new products; be capable of being registered and protected legally
and have staying power i.e. it should not get out of date.
Packaging: The act of designing and producing the container or wrapper
of a product is referred as packaging. There can be three different levels of
packaging. viz Primary package, Secondary packaged, Transport package.
Packaging performs a number of functions in the marketing of goods. Some
of the important functions, include Product identification; Product protection;
Facilitating the use of the product and Promotion of goods and services.
Labelling: A simple looking but important task in the marketing of goods
relates to designing the label to be put on the package. The label may vary
from a simple tag attached to the product to complex graphics that are part
of the package. The most important functions of labels include i) describing
the product ii) help in identifying the product or brand; iii) help in grading the
products into different categories; and aids in promotion of the products.
Pricing: Price may be defined as the amount of money paid by a buyer or
received by a seller in consideration of the purchase of a product or service.
Generally, if the price of a product is increased, its demand comes down, and
vice-versa. Pricing is considered to be an effective competitive weapon. It is also
the single most important factor affecting the revenue and profits of a firm.
The factors affecting price determination are (i) Product Cost (ii) The Utility
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and Demand (iii) Competition (iv) Government and Legal Regulations and v)
Marketing Methods Used.
Physical Distribution: There are two important decisions relating to this aspect-
one regarding physical movement of goods and two, regarding the channels.
Channels of Distribution are set of firms and individuals that take title, or
assist in transferring title, to particular goods or services as it moves from the
producers to the consumers. Channels of distribution smoothen the flow of
goods by creating possession, place and time utilities. The important functions
performed by middlemen are: (i) Sorting; (ii) accumulation; (iii) allocation; (iv)
assorting; (v) product promotion; (vi) negotiation; and (vii) risk taking:
Types of Channels: (I) Direct distribution channels are those where in the
goods are made directly available by the manufacturers to customers, without
involving any intermediary; include (II) Indirect Distribution Channels include
i. Manufacturer - Retailer – Consumer (One Level Channel) ii. Manufacturer -
Wholesaler - Retailer- Consumer (Two Level Channel) iii. Manufacturer - Agent
- Retailer- Consumer (Three Level Channel) Factors Determining Choice of
Channels include i. Product Related Factors; ii. Company Characteristics iii.
Competitive Factor iv. Market Factor; and v. Environmental Factor.
Physical Distribution Covers all the activities required to physically move
goods from manufacturers to the customers. The main component of physical
distribution are. i. Order Processing; ii. Transportation; iii. Warehousing; and
iv. Inventory Control: Just-in-Time-Inventory.
Promotion: Promotion refers to the use of communication with the twin
objective of informing potential customers about a product and persuading them
to buy it. There are four major tools, or elements of promotion mix, which are —
(i) Advertising, (ii) Personal Selling, (iii) Sales Promotion, and (iv) Publicity. These
tools are used in different combinations to achieve the goals of promotion.
Advertising is the most commonly used tool of promotion. It is an impersonal
form of communication, which is paid for by the marketers (Sponsors) to
promote some goods or service. The merits of advertising, as a medium of
communication, include (i) Mass reach; (ii) Enhancing customer satisfaction
and confidence iii. Expressiveness; and iv. Economy.
The limitations of advertising are that it is (i) less forceful (ii) lacks Feedback (iii)
inflexibility (iv) low effectiveness The most common Objections to Advertising are
that it (i) adds to cost; (ii) undermines social Values; iii. confuses the buyers;
and iv. encourages sale of Inferior Products:
Most of the criticisms against advertising are not fully true. Advertising is
therefore considered an essential function of marketing.
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Exercises
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